SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 1999
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 0-22450
COUNTRY WORLD CASINOS, INC.
(Name of Small Business Issuer in its charter)
Nevada 13-3140389
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
200 Monument Road, Suite 10, Bala Cynwyd, Pennsylvania 19004
(Address of Principal Executive Offices)(Zip Code)
Issuer's Telephone Number, Including Area Code: (610) 617-9990
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$.001 Par Value Common Stock
(Title of Class)
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Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or the
Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB.
State the issuer's revenues for its most recent fiscal year. $ None
The aggregate market value of the approximately 12,551,234 shares of the
Company's voting stock held by non-affiliates, computed at the average bid and
asked prices of such stock in the over-the-counter market, as quoted on the
Electronic Bulletin Board on September 20, 1999 was approximately $1,192,367.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports to be filed
by Section 12, 13 or 5(d) of the Exchange Act of the distribution of
securities under a plan confirmed by a court.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At September 30, 1999,
there were outstanding 54,331,687 shares of the issuer's Common Stock, par
value $.001.
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PART I
DESCRIPTION OF BUSINESS
ITEM 1
GENERAL DEVELOPMENT OF BUSINESS
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 large, full service, first class casino in Black
Hawk, Colorado. In August 1993, the Company completed the acquisition 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. Despite
commitments made by various parties throughout 1997 and 1998, none were able
to provide the required financing timely and all contracts to do so were
terminated prior to June 1999.
In June 1999, the Company signed a Letter of Intent with Beverly
Hillbillies Gaming Company Inc. and Beverly Hillbillies Gaming Entertainment
LLC to enter into a joint venture to finalize development of and finance its
Black Hawk, Colorado Casino and Hotel project.
The new entity will be titled, "Jethro's Beverly Hillbillies Mansion and
Casino", and will be redesigned around the characters, settings, events and
theme of the 1960's and '70's television sitcom, The Beverly Hillbillies.
Max Baer, Jr., the founder and chairman of Beverly Hillbillies Gaming
Entertainment, LLC successfully secured the exclusive master licenses from CBS
and Viacom, Inc. to exploit the Beverly Hillbillies theme in connection with
gaming and other entertainment venues. Mr. Baer, who is best known for his
portrayal of "Jethro Bodine" during the nine year run of the television
series, is also planning a facility in Reno.
Under the terms of the joint venture, named "Jethro's Black Hawk, LLC,"
the parties will enter into an operating agreement with each party's
participation to be established and set forth in accordance with an equity
ownership formula. Beverly Hillbillies Gaming Entertainment, LLC will provide
management services for the facility.
Financing, financial advisory services and placement agent services will be
provided by Westwood Capital, LLC of New York City, New York who is an
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investment banking firm specializing in structured debt financing and merger
and acquisition transactions for companies in the financial services and real
estate industries. Additionally, Westwood Capital provides project and
corporate financing for companies in the gaming and hospitality industries.
During September 1999, the Company completed its final review of an
Admission and Operating Agreement securing the commitment of all parties to
bring the project to fruition. Under the aforementioned agreements' terms,
Jethro's Black Hawk, LLC will assume all existing secured indebtedness of the
Company, begin making the required interest payments as of September 30, 1999,
and make full payment of all such indebtedness by March 31, 2000.
All parties acknowledge their responsibility to be approved by the
Colorado Gaming Commission and will proceed to do so prior to project
completion.
It is anticipated that construction will begin in early 2000 with an
opening set for early 2001.
Although the Company is confident in the abilities of all parties to
provide financing and accomplish all the above mentioned goals, there can be
no assurance that any of these items will be provided or completed immediately
or in the future.
Black Hawk is a picturesque mountain town approximately 40 miles west of
Denver. In the past year, July 1998 through June 1999, Black Hawk hosted
approximately 3 million visitors and generated over 60% of the state's gaming
revenues. The Hotel Casino, on the northern most end of the Black Hawk gaming
district, will be in a most highly visible location as it is in a direct line
of site to all visitors approaching Black Hawk's Gregory Street intersection
on State Highway 119. The Black Hawk and nearby Central City casino market
includes many small, privately held gaming facilities that the Company
believes offer limited amenities and are characterized by a shortage of
convenient on-site parking. There are a few large facilities currently
operating with varying levels of services and amenities, as well as new
facilities planned. The theme, hospitality, ample parking, modern hotel
accommodations and a full line of amenities, will set it apart from, and
should give it a competitive advantage over, the other casinos in the Black
Hawk/Central City market.
The Hotel Casino complex will be designed and constructed pursuant to a
guaranteed maximum price agreement which is to be finalized prior to
construction. The design and construction team consists of Semple Brown
Roberts, P.C., a Denver based architectural firm (the "Architect") and PCL
Construction Services, Inc., a multi-million dollar North American
construction firm with U.S. headquarters located in Denver. The Architect is
the designer of Fitzgerald's Casino in Black Hawk, while the Contractor's
gaming credits include the MGM Grand Hotel Casino and Stratosphere Tower in
Las Vegas, Nevada, as well as the Chinook Winds Gaming and Convention Center
in Lincoln City, Oregon.
COLORADO GAMING REGULATIONS
The State of Colorado created the Division of Gaming (the "Division")
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within the Department of Revenue to license, implement, regulate and supervise
the conduct of limited gaming under the Colorado Limited Gaming Act and the
regulations promulgated thereunder (the "Colorado Gaming Act"). The Director
of the Division, under the supervision of a five-member Colorado Limited
Gaming Control Commission (the "Colorado Gaming Commission"), has been granted
broad power to ensure compliance with the Colorado Gaming Act. The Director
may inspect, without notice, impound or remove any gaming device. He may
examine and copy any licensee's records, may investigate the background and
conduct of licensees and their employees, and may bring disciplinary actions
against licensees and their employees. He also may conduct detailed
background investigations of persons who loan money to the Company.
The Colorado Gaming Commission is empowered to issue five types of gaming
and gaming related licenses. The licenses are revocable and
non-transferrable. The failure or inability of the Company or the Casino
Manager to obtain and maintain the necessary gaming licenses could prevent the
Company from operating the Casino and could have a material adverse effect on
the Company. All persons employed by the Company and the Casino Manager and
involved, directly or indirectly, in gaming operations in Colorado also are
required to obtain a Colorado gaming license. All licenses must be renewed
annually.
The Company's President, Roger Leclerc currently holds a key employee
license. The Company, its Chairman and Chief Executive Officer, Larry Berman,
and its Secretary/Treasurer, William Patrowicz will apply for their respective
licenses at the conclusion of financing to coincide with the start of
construction.
As a general rule, under the Colorado Gaming Act, it is a criminal
violation for any person to have a legal, beneficial, voting or equitable
interest, or right to receive profits, in more than three retail gaming
licenses in Colorado. The Colorado Gaming Commission has ruled that a person
does not have an interest in a licensee for purposes of the multiple-license
prohibition if: (i) such person has less than a five percent (5%) interest in
an institutional investor which has an interest in a publicly traded licensee
or publicly traded company affiliated with a licensee (such as the Company);
(ii) a person has a five percent (5%) or more financial interest in an
institutional investor, but the institutional investor has less than a five
percent (5%) interest in a publicly traded licensee or publicly traded company
affiliated with a licensee; (iii) an institutional investor has less than a
five percent (5%) financial interest in a publicly traded licensee or publicly
traded company affiliated with a licensee;(iv) an institutional investor
possesses securities in a fiduciary capacity for another person, and does not
exercise voting control over five percent (5%) or more of the outstanding
voting securities of a publicly traded licensee or of a publicly traded
company affiliated with a licensee; (v) a registered broker or dealer retains
possession of securities of a publicly traded licensee or of a publicly traded
company affiliated with a licensee for its customers in street name or
otherwise, and exercises voting rights for less than five percent (5%) of the
publicly traded licensee's voting securities or of a publicly traded company
affiliated with a licensee; (vi) a registered broker or dealer acts as a
market maker for the stock of a publicly traded licensee or of a publicly
traded company affiliated with a licensee and possesses a voting interest in
less than five percent (5%) of the stock of the publicly traded licensee or of
a publicly traded company affiliated with a licensee; (vii) an underwriter is
holding securities of a publicly traded licensee or of a publicly traded
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company affiliated with a licensee as part of an underwriting for no more than
90 days if it exercises voting rights of less than five percent (5%) of the
outstanding securities of a publicly traded licensee or of a publicly traded
company affiliated with a licensee; (viii) a stock clearinghouse holds voting
securities for third parties, if it exercises voting rights with respect to
less than five percent (5%) of the outstanding securities of a publicly traded
licensee or of a publicly traded company affiliated with a licensee; or (ix) a
person owns less than five percent (5%) of the voting securities of the
publicly traded licensee or publicly traded company affiliated with a
licensee. Hence, the Company's and its stockholders' business opportunities in
Colorado are limited to such interests that comply with the statute and
Commission's rule.
Although attorneys for the Colorado legislature initially expressed
concern that the promulgation of the above-described regulation was beyond the
Colorado Gaming Commission's statutory delegated authority, they appear to
have retreated from this position. Therefore, unless the Colorado legislature
repeals the regulation, it is likely that it will continue in effect.
In addition, pursuant to the Colorado Gaming Act, no manufacturer or
distributor of slot machines may have an interest in any casino operator,
allow any of its officers to have such an interest, employ any person if such
person is employed by a casino operator, or allow any casino operator or
person with a substantial interest therein to have an interest in a
manufacturer's or distributor's business. The Colorado Gaming Commission has
ruled that a person does not have a "substantial interest" if it directly or
indirectly has less than five percent (5%) of such voting securities of a
licensee.
Under the Colorado Gaming Act, 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, mayb
e required to supply the Colorado Gaming Commission with substantial
information, including, but not limited to, background information, source of
funding information, a sworn statement that such person or entity is not
holding his interest for any other party, and finger prints. Such information,
investigation and licensing as an "associated person" automatically will be
required of all persons (other than certain institutional investors discussed
below) which directly or indirectly own ten percent (10%) or more of a direct
or indirect legal, beneficial or voting interest in the Company. Such persons
must report their interest and file appropriate applications within 45 days
after acquiring such interest. Persons directly or indirectly having a five
percent (5%) or more interest (but less than 10%) in the Company, must report
their interest to the Colorado Gaming Commission within ten (10) days after
acquiring such interest and may be required to provide additional information
and to be found suitable. If certain institutional investors provide certain
information to the Colorado Gaming Commission, such investors, at the Colorado
Gaming Commission's discretion, may be permitted to own up to 14.99% of the
Company, before being required to be found suitable. All licensing and
investigation fees will have to be paid for by the person in question. The
associated person investigation fee currently is $48 per hour.
The Colorado Gaming Commission also has the right to request information
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from any person directly or indirectly interested in, or employed by, a
licensee, and to investigate the moral character, honesty, integrity, prior
activities, criminal record, reputation, habits and associations of (i) all
persons licensed pursuant to the Colorado Limited Gaming Act, (ii) all
officers, directors and stockholders of a licensed privately held corporation,
(iii) all officers, directors and stockholders holding either a five percent
(5%) or greater interest or a controlling interest 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. For purposes of the Colorado Gaming Act, a
note secured by a deed of trust on casino property is considered a "lease."
In addition, under the Colorado Gaming Act 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 Colorado Gaming Commission or the Director,
promptly must provide to the Colorado 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
Colorado Gaming Commission. Failure to provide all information requested
constitutes sufficient grounds for the Director or the Colorado Gaming
Commission to require a licensee or applicant to terminate its "gaming
contract" (as defined below) with any person who failed to provide the
information requested. In addition, the Director or the Colorado 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.
An application for licensure or suitability may be denied for any cause
deemed reasonable by the Colorado Gaming Commission or the Director, as
appropriate. Specifically, the Colorado Gaming Commission and the Director
must deny a license to any applicant who (i) fails to prove by clear and
convincing evidence that the applicant is qualified; (ii) fails to provide
information and documentation requested; (iii) fails to reveal any fact
material to qualification, or supplies information which is untrue or
misleading as to a material fact pertaining to qualification; (iv) has been,
or has any director, officer, general partner, stockholder, limited partner or
other person who has a financial or equity interest in the applicant who has
been, convicted of certain crimes, including the service of a sentence upon
conviction of a felony in a correctional facility, city or county jail, or
community correctional facility or under the state board of parole or any
probation department within ten years prior to the date of the application,
gambling-related offenses, theft by deception or crimes involving fraud or
misrepresentation, is under current prosecution for such crimes (during the
pendency of which license determination may be deferred), is a career offender
or a member or associate of a career offender cartel, or is a professional
gambler; or (v) has refused to cooperate with any state or federal body
investigating organized crime, official corruption or gaming offenses.
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If the Colorado Gaming Commission determines that a person or entity is
unsuitable to own interests in the Company, then the Company may be
sanctioned, which may include the denial or revocation of the approvals and
licenses required to operate the Casino.
The Colorado Gaming Commission does not need to approve in advance a
public offering of securities, but rather requires a filing of notice and
additional documents with regard to such public offering prior to such public
offering. Under the regulations, the Colorado Gaming Commission may, in its
discretion, require additional information and prior approval of such public
offering.
In addition, the Colorado Gaming Act regulations prohibit a licensee or
affiliated company thereof, such as the Company, from paying dividends,
interest or other remuneration to any unsuitable person, or recognizing the
exercise of any voting rights by any unsuitable person. Further, the Company
may repurchase the shares of anyone found unsuitable at the lesser of the cash
equivalent to the original investment in the Company or the current market
price. Further, the regulations require anyone with a material involvement
with a licensee, including a director or officer of a holding company, such as
the Company, to file for a finding of suitability if required by the Colorado
Gaming Commission.
In addition to its authority to deny an application for a license or
suitability, the Colorado Gaming Commission has jurisdiction to disapprove a
change incorporate position of a licensee and may have such authority with
respect to any entity which is required to be found suitable by the Colorado
Gaming Commission. The Colorado Gaming Commission has the power to require the
Company to suspend or dismiss managers, officers, directors and other key
employees or sever relationships with other persons who refuse to file
appropriate applications or whom the authorities find unsuitable to act in
such capacities, and may have such power with respect to any entity which is
required to be found suitable.
Once the Company obtains the required gaming licenses, a person or entity
will not be permitted to sell, lease, purchase, convey or acquire a
controlling interest in the Company without the prior approval of the Colorado
Gaming Commission, and the Company will be prohibited from selling any
interest in the Casino without the prior approval of the Colorado Gaming
Commission.
The Casino may operate only between 8:00 am. to 2:00 am., and may
permit only individuals 21 years or older to gamble. Only slot machines,
blackjack and poker, with a maximum single bet of $5.00, are permitted. A
Colorado casino may not provide credit to its gaming patrons. The Casino must
not exceed certain gaming square footage limits as a total of each floor and
the full building.
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OTHER REGULATIONS
The sale of alcoholic beverages is subject to licensing, control and
regulation by the Colorado Liquor Agencies. All persons who directly or
indirectly own 10% or more of the Company must file applications and possibly
be investigated by the Colorado Liquor Agencies. The Colorado Liquor Agencies
also may investigate those persons who, directly or indirectly, loan money to
or have any financial interest in liquor licensees. All licenses are
revocable and not transferable. The Colorado Liquor Agencies have the full
power to limit, condition, suspend or revoke any such license and any such
disciplinary action could (and revocation would) have a material adverse
effect upon the operations of the Company. No person with an interest in any
holder of a hotel and restaurant liquor license can have an interest in a
liquor licensee which holds anything other than a hotel and restaurant liquor
license, and specifically cannot have an interest in an entity which holds a
gaming tavern license.
The Company's operations will be subject to a wide variety of other
federal, state and local laws and government regulations that could increase
its costs of construction and its operating expenses. Such regulations
include architectural and requirements, building codes, health and safety
laws, environmental laws, minimum wage and employment laws, and laws such as
the Americans With Disabilities Act that require public facilities such as the
Company's Hotel and Casino to be assessable and usable by people in wheel
chairs.
Slot machines are the most popular gaming devices in Colorado, and 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. Slot
machines in Colorado permit play in denominations of nickels, quarters, half
dollars, dollars and five dollars. Casinos are permitted to provide
"progressive jackpots" that increase with continued play at the designated
slot machines. Slot machines come in both the mechanical spinning reels
variety and video slot machines.
Twenty-five varieties of poker are authorized for play in Colorado
casinos. Sixteen varieties of poker are "traditional" games in which the
players play against each other to win a "pot" built upon their own wagers.
These games include a variety of five-card draw, five-card and seven-card
stud, and "hold 'em" games. In those games, the casino takes a fee or "rake"
from each pot. Nine other poker games the players play against the casino to
win payout. The casino does not take a "rake" from the pot in those games,
but rather retains players' losses.
Five varieties of blackjack or "21" are authorized for play in Colorado
casinos. Under Colorado rules, dealer must draw to hands of 16 or less and
must stand on hands of 17 or higher. Players are allowed to split pairs,
double down (doubling the wager after seeing the first two cards, but drawing
not more than one additional card) and purchase "insurance". An "insurance"
wager may be made when the dealer's face up card is an ace. The insurance
wager is up to 50% of the original wager and entitles the player to 2 to 1
payout if the dealer has a 10 or face card in the whole (a natural 21), but
the insurance wager is lost if the dealer's whole card has a value other than
10.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company's Property is located in the town of Black Hawk. The town of
Black Hawk is part of the Central City and Black Hawk National historic
Landmark, established in 1989 by the United States Department of Interior,
National Park Service. In conformance with this designation, the town of
Black Hawk in October 1990 established the Architectural and Design Review
Guidelines, authorizing the town to regulate historical and architectural
matters within the town. These guidelines are used by Black Hawk's Historic
Architectural Review Commission ("HARC") to evaluate and approve all
applications for construction.
Furthermore, the amendment to the Colorado Constitution authorizing
limited stakes gaming provides that such gaming shall be conducted in
structures which conform, as determined by the respective municipal governing
body, to the architectural styles and designs common to the area prior to
World War I and which conform to the requirements of applicable respective
municipal ordinances, regardless of the age of the structure. Accordingly,
the Company is designing its building in conformance with the requirements of
HARC, and the building design will reflect the architectural style consistent
with the guidelines.
The site is located on Colorado State Highway 119, approximately
one-quarter mile past the Gregory Street turn-off that leads to Central City
through Black Hawk. As such, the Company's casino facility will not be
contiguous to the many casinos which are located on Gregory Street and Main
Street in Black Hawk. The facility will be designed to allow for a maximum
exposure to approaching traffic, and will be in a direct site line from the
turn from the Highway into the town of Black Hawk. The Company believes that
it is this ability, and ease of access that should provide the Company a
competitive benefit as compared to the other casinos which are located in the
central portion of town. Moreover, many casinos in Black Hawk/Central City
lack contiguous or convenient parking and, as a result, have had difficulty in
attracting and retaining customers. In contrast, the Company's site will
offer convenient valet and self parking to its customers, as well as a covered
on-site bus turnaround for the convenience of day trip customers.
COMPETITION
Most of the casinos in the Black Hawk/Central City market are small
facilities that provide limited or no parking and do not provide hotel
accommodations. Presently, the largest hotel in the Black Hawk/Central City
market is the 118 room Harvey's Wagon Wheel located in Central City, which has
on-site parking for 195 cars. The Company's Hotel Casino will have 200+/-
hotel rooms and suites and will have a parking garage that can accommodate
approximately 1,000 cars. Several of the larger casinos are planning to
expand their facilities to provide additional casino space, hotel rooms and
parking, and several new casinos are either planned, under construction, or
recently opened, including the Black Hawk/Jacobs Casino which will include
1,000 gaming devices and parking for 280 cars with provision for a 50 room
hotel. The Isle of Capri opened this year and has more than 1,100 slot
machines, 24 card tables (for blackjack and poker) and a parking garage for
1,000 cars. The Isle of Capri Casino did not initially provide any hotel
accommodations, although it begun construction of a hotel on top of the
casino. Riviera Holdings Corporation has recently broke ground to construct a
large casino with 1,000 slot machines and parking for 500 cars.
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Guests will be able to access the Company's Hotel Casino directly from
State Highway 119, without having to drive through Main Street or Gregory
Street, which are the two main streets that comprise the town of Black Hawk.
The location of the Hotel Casino at the north end of the town will enable
guests to avoid traffic congestion on the two main streets of the town. There
is presently a shortage of parking space in Black Hawk and Central City,
especially parking spaces located close to the casinos. The Company's Hotel
Casino will have an underground parking garage that will be sheltered from
inclement weather and will permit customers to quickly park and retrieve their
cars. Valet parking will also be provided. In addition, the facility will
have a covered bus stop and turn-around that will facilitate access to the
Hotel Casino by customers on one-day, over-night or weekend excursions.
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ITEM 3. 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 Judgement was
granted in favor of the Company in October 1998. New Allied and TKCC appealed
the Court's ruling in July 1999.
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. In June
1999, the Tenth Circuit Court of Appeals ruled in favor of the Company in two
of the three appeal issues raised. As the matters were unopposed by New
Allied and TKCC, the matter has been referred back to the Bankruptcy Court for
a final determination as to the amount New Allied and TKCC must return to the
Company. The Company believes it is entitled to in excess of $1,000,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fiscal year covered by this Report
to a vote of security holders.
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PART II
ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market and
is quoted and is listed on the Electronic Bulletin Board under the symbol,
"CWRC". The market for the Company's Common Stock must be characterized as a
limited market due to the relatively low trading volume. Set forth in the
following table are high and low bid quotations for the Company's common stock
for the fiscal years ended June 30, 1998 and 1999. The quotations represent
inter-dealer quotations without retail markups, markdowns or commissions and
may not represent actual transactions.
Quarter Ended High Low
September 30, 1997 .15 .13
December 31, 1997 .34 .25
March 31, 1998 .24 .11
June 30, 1998 .19 .10
September 30, 1998 .16 .06
December 31, 1998 .14 .06
March 31, 1999 .21 .06
June 30, 1999 .20 .05
At June 30, 1999, there were approximately 1,000 record holders of the
Company's Common Stock.
The Company has not paid or declared cash distributions or dividends on
its common stock and does not intend to pay cash dividends in the foreseeable
future. Future cash dividends will be determined by the Company's Board of
Directors based on the Company's earnings (if any), financial condition,
capital requirements and other relevant factors. The Company may not pay
dividends on its common stock without the consent of the holders of at least a
majority of the outstanding Series A preferred stock. In addition, the
holders of the Series A preferred stock shall be entitled to receive
dividends, when and if declared by the Board of Directors of the Company, on
an equal share-per-share basis with all outstanding shares of the Company's
common stock.
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ITEM 6. 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 has entered into three separate agreements to
provide the necessary financing, of which all terminated during the first half
of 1999.
In June 1999, the Company signed a Letter of Intent with Beverly
Hillbillies Gaming Company Inc. and Beverly Hillbillies Gaming Entertainment
LLC to enter into a joint venture to finalize development of and finance its
Black Hawk, Colorado Casino and Hotel project.
The new entity will be titled, "Jethro's Beverly Hillbillies Mansion and
Casino", and will be redesigned around the characters, settings, events and
theme of the 1960's and '70's television sitcom, The Beverly Hillbillies.
Max Baer, Jr., the founder and chairman of Beverly Hillbillies Gaming
Entertainment, LLC successfully secured the exclusive master licenses from CBS
and Viacom, Inc. to exploit the Beverly Hillbillies theme in connection with
gaming and other entertainment venues. Mr. Baer, who is best known for his
portrayal of "Jethro Bodine" during the nine year run of the television
series, is also planning a facility in Reno.
Under the terms of the joint venture, named "Jethro's Black Hawk, LLC,"
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<PAGE>
the parties will enter into an operating agreement with each party's
participation to be established and set forth in accordance with an equity
ownership formula. Beverly Hillbillies Gaming Entertainment, LLC will provide
management services for the facility.
Financing, financial advisory services and placement agent services will
be provided by Westwood Capital, LLC of New York City, New York who is an
investment banking firm specializing in structured debt financing and merger
and acquisition transactions for companies in the financial services and real
estate industries. Additionally, Westwood Capital provides project and
corporate financing for companies in the gaming and hospitality industries.
During September 1999, the Company is completing final review of an
Admission and Operating Agreement securing the commitment of all parties to
bring the project to fruition. Under the aforementioned agreements' terms,
Jethro's Black Hawk, LLC will assume all existing secured indebtedness of the
Company, begin making the required interest payments as of September 30, 1999,
and make full payment of all such indebtedness by March 31, 2000.
All parties acknowledge their responsibility to be approved by the
Colorado Gaming Commission and will proceed to do so prior to project
completion.
It is anticipated that construction will begin in early 2000 with an
opening set for early 2001.
Although the Company is confident in the abilities of all parties to
provide financing and accomplish all the above mentioned goals, there can be
no assurance that any of these items will be provided or completed immediately
or in the future.
Black Hawk is a picturesque mountain town approximately 40 miles west of
Denver. In the past year, July 1998 through June 1999, Black Hawk hosted
approximately 3 million visitors and generated over 60% of the state's gaming
revenues. The Hotel Casino, on the northern most end of the Black Hawk gaming
district, will be in a most highly visible location as it is in a direct line
of site to all visitors approaching Black Hawk's Gregory Street intersection
on State Highway 119. The Black Hawk and nearby Central City casino market
includes many small, privately held gaming facilities that the Company
believes offer limited amenities and are characterized by a shortage of
convenient on-site parking. There are a few large facilities currently
operating with varying levels of services and amenities, as well as new
facilities planned. The theme, hospitality, ample parking, modern hotel
accommodations and a full line of amenities, will set it apart from, and
should give it a competitive advantage over, the other casinos in the Black
Hawk/Central City market.
The Hotel Casino complex will be designed and constructed pursuant to a
guaranteed maximum price agreement which is to be finalized prior to
construction. The design and construction team consists of Semple Brown
Roberts, P.C., a Denver based architectural firm (the "Architect") and PCL
Construction Services, Inc., a multi-million dollar North American
construction firm with U.S. headquarters located in Denver. The Architect is
the designer of Fitzgerald's Casino in Black Hawk, while the Contractor's
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<PAGE>
gaming credits include the MGM Grand Hotel Casino and Stratosphere Tower in
Las Vegas, Nevada, as well as the Chinook Winds Gaming and Convention Center
in Lincoln City, Oregon.
LIQUIDITY & CAPITAL RESOURCES
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. Such loan has been extended by its assignee, pending completion
of the newest financing effort. 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 June 1999, the
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
June 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 June 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 June 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 June 1999, the Company owed $600,000 of the Fifth Norlar
Note. In July 1999, the Company issued a sixth promissory note (Sixth Norlar
Note) and eighth deed of trust on the property to Norlar, Inc. for
$1,000,000. As of September 1999, the Company owed approximately $700,000 of
the Sixth 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 September and October of 1997, PCL Construction Services, Inc.
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<PAGE>
advanced the Company $998,000 to begin the development and design process in
advance of funding. As of June 1999, the Company owes PCL Construction
approximately $1,200,000, including interest.
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
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 $100,000 per month to service the debt of the
Kennedy Loan and other ongoing obligations such as rent and utilities for the
Company's corporate office. This loss of $1,143,455 in the fiscal year ended
June 30, 1999 compares to a loss of operations of $1,238,679 for the year
ended June 30, 1998. 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.
ITEM 7. FINANCIAL STATEMENTS
See attached pages F1 - F9 for financials which fairly represent the
Company's status for the year ended June 30, 1999.
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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<PAGE>
PART 111
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
COMPANY; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following persons serve as officers and directors or the Company:
Name Position
Larry S. Berman Chairman of the Board and Chief Executive Officer
Roger D. Leclerc President and Director
William H. Patrowicz Secretary, Treasurer and Director
The following is brief biographical information concerning the Company's
officers, directors and significant employees:
Larry S. Berman, age 63, has served as Chief Executive Officer of the
Company since June 1995. Mr. Berman served as Chairman of the Board of
Directors and Secretary of Holly Holdings, Inc. from June 1992 until December
1997. Since 1982, Mr. Berman has been Vice President of Coastal Leasing and
Investment, Inc. where he is responsible for restructuring and otherwise
assisting companies to raise debt and equity funds.
Roger D. Leclerc, age 49, has served as President of the Company since
December 1994. Prior thereto Mr. Leclerc served as the Company's project
manager for its proposed facility since May 1994. Prior to his involvement
with the Country World Casino project, Mr. Leclerc was the General Manager for
the Bull Durham Casino in Black Hawk. Immediately prior thereto, he served as
a General Manager of the Miner's Pick Casino in Central City. From March 1990
to June 1992, he was the General Manager of A&L Enterprises Inc. in Deadwood,
South Dakota, which operated Ms. Kitty's Wilderness Edge Casino and Days Inn
Hotel and Casino.
William H. Patrowicz, age 51, has served as Secretary, Treasurer or the
Company since April 1995 and was formerly President of Holly Holdings, Inc.
from June 1992 to March 1998. From 1982 to December 1991, Mr. Patrowicz was
employed by Gunnebo Fastening Corp., as Senior Vice President of Operations.
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership to the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by the regulations of the
Commission to furnish the Company with copies of all Section 16(a) reports
received by it, the Company believes that all filing requirements applicable
to its current officers and directors were complied with for the fiscal year
ended June 30, 1998. The Company is unaware of the compliance of its 10%
shareholders and its former officers and directors.
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<PAGE>
ITEM 10.EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Company
to each Executive Officer whose total annual salary and bonus exceeded
$100,000, including all cash compensation paid the Company's Chief Executive
Officer.
Name and Principal Fiscal Salary Other Annual
Position Year $ Bonus Compensation
None
The Company has no stock option, defined benefit or restricted stock
award plans.
The Company estimates that Mr. Berman and Mr. Patrowicz spend
substantially all of their time in management activities relating to the
Company. Neither party, although holding employment contracts, has received
any payment for current or previously rendered services to date.
Consideration for remuneration will be addressed after completion of the
Company's financing activities.
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the persons known to the Company to own
beneficially more than 5% of the outstanding share of common stock on June 30,
1999 and information as of June 30, 1999 with respect to the ownership of
common stock by each director of the Company and by all officers and directors
as a group.
Name of Shares Beneficially
Beneficial Owner Owned Percent
Western Equities, Inc. 16,000,000 29.4%
Holly Holdings, Inc. 8,850,453 16.3%
Larry S. Berman 19,380,000 35.7%
Roger D. Leclerc 0 0%
William H. Patrowicz 4,120,000 7.6%
All Officers and Directors 23,500,000 43.3%
as a Group (3 Persons)
___________
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<PAGE>
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sole holder of the Company's Series A Convertible Preferred stock,
New Allied, acquired its shareholdings in connection with a sale to the Company
in August 1993, of the Property upon which the Company proposes to construct
its casino and hotel complex. New Allied also received cash and a promissory
note (secured by a deed of trust on the Property) in connection with this
transaction. In June 1994, the Company completed the acquisition of an
additional 375,000 square feet of vacant land located in close proximity to
the land which is the site for the proposed casino and hotel complex. The
Company paid $200,000 to New Allied, delivered a promissory note in the amount
of $725,000 and issued 250,000 shares of its common stock. In April 1997, the
Company elected and New Allied has accepted a return of the property for the
balance due on the note as it is of no value to the Company within its current
plans. In July 1998, such transaction was completed.
During the fiscal year ended June 30, 1995, the Company borrowed
$1,000,000 from Holly, which indebtedness plus accrued interest was then
canceled by the issuance to Holy of 5,000,000 shares of the Company's common
stock. The Company also agreed with Holly that Holly would have the right to
purchase up to an additional 20,000,000 shares of common stock at $0.20 per
share if additional funding were provided within a reasonable time and
progress continued to be made concerning financing for the proposed casino and
hotel complex. In April 1997 Holly exercised its right under said agreement
and converted $250,000 of its debt into 1,250,000 shares of the Company's
common stock.
Holly had continually provided advances to the Company throughout the
bankruptcy proceedings. Prior to the conversion of debt to equity by Holly
and assumption of certain parties' debt by the Company, the Company was
indebted to Holly in the amount of approximately $1,449,588. In May 1997, the
Company eliminated $1,000,000 of its debt to its shareholder, Holly Holdings,
Inc. in an exchange of debt with two directors of the Company and a
non-affiliate of the Company. As of June 1998, the Company is no longer
indebted to Holly.
In April 1997, the Company filed with the State of Nevada, under Section
78.1055, a Designation of Rights Privileges and Preferences for 5,000,000
shares of Class B preferred stock. In May 1997, the Company issued 4,000,000
shares to two directors and a non-affiliate of the Company in exchange for
$1,000,000 in debt to the parties. The terms of the class B preferred stock
rank it junior to all classes of the Company's stock now issued and on parity
with any class of capital stock hereafter created. The Class B preferred
stock shall be voted with the common stock as a single class and shall not be
entitled to vote as a separate class nor shall the Class B preferred be
entitle to receive dividends of any kind. Each share of Class B preferred
stock can be converted into common stock of the corporation one year after the
date of issuance at the rate for 10 for 1 and the holders are entitled to vote
the underlying shares as if converted. In May 1998, all such shares were
converted to common stock.
In March 1996, the Company borrowed $5 million from Kennedy Funding,
Inc. The Company delivered to the lender 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
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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. Such loan has been extended by its assignee pending
completion of the newest financing effort. 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 June 1999, the
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
June 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 June 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 June 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 June 1999, the Company owed $600,000 of the Fifth Norlar
Note. In July 1999, the Company issued a sixth promissory note (Sixth Norlar
Note) and eighth deed of trust on the property to Norlar, Inc. for
$1,000,000. As of September 1999, the Company owed approximately $700,000 of
the Sixth 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 September and October of 1997, PCL Construction Services, Inc.
advanced the Company $998,000 to begin the development and design process in
advance of funding. As of June 1999, the Company owes PCL Construction
approximately $1,200,000, including interest.
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
taxes due.
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<PAGE>
In October 1998, the Company converted $250,000 of debt to the Company's
officers into Series B Preferred stock.
ITEM 13.EXHIBITS AND REPORTS ON FORM 8-K
None
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<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:September 30, 1999 By: /s/ Roger D. Leclerc
Roger D. Leclerc, President
In accordance with the Securities Exchange Act of 1934, as amended, this
Report has been signed below by the following persons on behalf of the
Registrant and int he capacities and on the dates indicated.
Dated: September 30, 1999 /s/ Larry S. Berman
Larry S. Berman, Chairman & CEO
Dated: September 30, 1999 /s/ Roger D. Leclerc
Roger D. Leclerc, President and
Director
Dated: September 30, 1999 /s/ William H. Patrowicz
William H. Patrowicz, Secretary,
Treasurer and Director
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<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF JUNE 30, 1999
Assets:
Current Assets:
Cash 0
Prepaid Expenses 91,935
Due From Shareholder 15,000
Total Current Assets 106,935
Property and Equipment:
Land 6,750,475
Casino Under Development 11,487,616
Furniture and Equipment 38,888
Total 18,276,979
Less: Accumulated Depreciation (38,888)
Total Property and Equipment 18,238,091
Other Assets:
Deposits 35,000
Total Assets 18,380,026
The Accompanying Notes are an Integral Part of these Financial Statements.
F-1
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF JUNE 30, 1999
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable 3,821,295
Payroll and Property Taxes Payable 162,887
Accrued Expenses 21,600
Notes Payable 3,851,392
Accrued Interest 692,734
Other Current Liabilities 44,042
Total Current Liabilities 8,593,950
Long-Term Debt:
Total Long-Term Debt 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
Convertible Preferred Stock, Class B, $.25
Par Value, 5,000,000 Shares Authorized,
100,000 Shares Issued and Outstanding 54,331
Common Stock, $.001 Par Value, 75,000,000
Shares Authorized, 54,331,687 Issued and
Outstanding 275,000
Additional Paid-in Capital 11,176,474
Deficit Accumulated During the Development Stage (6,721,979)
Total Stockholders' Equity 4,786,076
Total Liabilities and Stockholders' Equity 18,380,026
The Accompanying Notes are an Integral Part of these Financial Statements.
F-2
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the period from
November 9, 1982
(Date of Inception)
Years ended through June 30,
June 30, 1 9 9 9
1 9 9 9 1 9 9 8 (Unaudited)
<C> <S> <S> <S>
Costs and Expenses:
Research and Development Costs $ -- $ -- $ 122,000
Professional Fees - Due to Bankruptcy -- 23,082 514,756
General and Administrative Expenses 898,832 1,082,265 5,218,134
Management Fee - Related Party -- 8,321 416,321
Depreciation Expense 15,533 7,905 65,952
Totals 914,365 1,121,573 6,337,163
Other Income (Expense):
Interest Income -- 14,678 109,400
Interest Expense (167,170) (279) (171,380)
Interest Expense - Related Party -- (131,505) (199,019)
Rental Income -- -- 45,126
Loss on Non-Marketable Securities -- -- (85,000)
Write off of Assets (61,920) -- (151,920)
Forfeited Deposit -- -- (100,000)
Other Income -- -- 735
Totals (229,090) (117,106) (551,968)
(Loss) from Continuing Operations
Before Discontinued Operations and
Extraordinary Item (1,143,455) (1,238,679) (6,889,131)
Discontinued Operations:
Gain on Disposal of Subsidiaries -- -- 389,286
(Loss) from Discontinued Operations -- -- (389,286)
Total Discontinued Operations -- -- --
(Loss) Before Extraordinary Item (1,143,455) (1,238,679) (6,889,131)
Extraordinary Item:
Extraordinary Gain on Forgiveness
of Debt, Primarily Related Party -- -- 167,152
Net (Loss) $(1,143,455) $(1,238,679) $(6,721,979)
Per Share Data:
(Loss) Per Share Before
Extraordinary Item $ (.02) $ (.06)
Extraordinary Item Per Share -- --
Net (Loss) Per Common Share $ (.02) $ (.06)
Weighted Average Number of Shares 54,331,687 44,331,687
The Accompanying Notes are an Integral Part of these Financial Statements.
</TABLE>
F-3
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS 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)
Change in Par Value
from $.005 to $.001 -- -- -- -- -- (8,572) -- -- 8,572 -- --
Issuance of Stock for
Cash September 1993
($1.00 Per Share) -- -- -- -- 600,000 600 -- -- 599,400 -- 600,000
Issuance of Stock
for Cash August 1993
($1.00 Per Share) -- -- -- -- 1,500,000 1,500 -- -- 1,498,500 -- 1,500,000
</TABLE>
F-4
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS 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>
Issuance of Convertible
Preferred Stock for
Acquisition of Land
Valued at $1.00 Per
Share Issued August
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
and $2.47 Per Share,
Respectively -- -- -- -- 200,000 200 -- -- 499,800 -- 500,000
Issuance 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
</TABLE>
F-5
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS 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>
Issuance of Common
Stock Pursuant to
Private Placement
Offering - December
1994 ($2.67 Per Share) -- -- -- -- 460,000 460 -- -- 1,229,040 -- 1,229,500
Convert Subscribed Stock
to Common and Record
Fees - December 1994 -- -- -- -- 262,667 263 (262,667) (263) -- -- --
Issuance of Stock to
Parent for Outstanding
Note issued April 20,
1995 ($.20 Per Share) -- -- -- -- 5,000,000 5,000 -- -- 1,009,451 -- 1,014,451
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 Parent
Debt ($.25 Per Share)
April 1997 -- -- 4,000,000 1,000,000 -- -- -- -- -- -- 1,000,000
Common Stock Issued in
Exchange for Parent
Debt ($.20 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
$.20 per Share,
July 1997 -- -- -- -- 1,000,000 1,000 -- -- 199,000 -- 200,000
The Accompanying Notes are an Integral Part of these Financial Statements.
</TABLE>
F-6
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accumulated Total
Preferred Stock Common Stock Additional During the Stock-
Series A Series B Subscribed Paid-In Development holders'
Shares Amount Shares Amount Shares Amount Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common
Stock in Exchange
for Debt and Services
to be Rendered
($.1875 Per Share)
September 1997 -- -- -- -- 395,500 396 -- -- 73,761 -- 74,157
Issuance of Common
Stock for Services
Rendered and Debt
Exchange ($.086
Per Share)
March 1998 -- -- -- -- 85,000 850 -- -- 72,413 -- 72,263
Net Loss for Year
Ended June 30. 1998 -- -- -- -- -- -- -- -- -- (1,238,679) (1,238,679)
Issuance of Stock for
Services March 1998 -- -- 100,000 25,000 -- -- -- -- -- -- --
Convert Preferred Stock
to Common Stock
- April 1998 -- --(4,000,000)(1,000,000)40,000,000 40,000 -- -- 960,000 -- --
Balance - June
30, 1998 2,250,000 2,250 100,000 25,000 44,331,687 $54,332 -- -- 11,176,474 (5,578,525) 5,679,530
Preferred Stock issued
in Exchange for Debt
($.25 per Share)
October 1998 -- -- 1,000,000 250,000 -- -- -- -- -- -- 250,000
Net Loss for the Year
Ended June 30, 1999 -- -- -- -- -- -- -- -- -- (1,143,455) (1,143,455)
Balance - June
30, 1999 2,250,000 2,250 1,100,000 275,000 54,331,687 54,332 -- -- 11,176,474 (6,721,979) 4,786,076
The Accompanying Notes are an Integral Part of these Financial Statements.
</TABLE>
F-7
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the period from
November 9, 1982
(Date of Inception)
Years ended through
June 30, June 30,
1 9 9 9 1 9 9 8 1 9 9 8
(Unaudited)
<S> <C> <C> <C>
Operating Activities:
Continuing Operations:
(Loss) Before Extraordinary Item $(1,143,455) $ (1,236,679) $(6,889,131)
Adjustments to Reconcile Net
(Loss) to Net Cash (Used for)
Operating Activities:
Depreciation 15,533 7,905 65,952
Amortization of Discount - Related Party -- 45,000 60,000
Common Stock Issued for Interest -- -- 14,451
Preferred Stock Issued for Services 225,000 25,000 1,087,500
Loss on Nonmarketable Securities -- -- (85,000)
Write off of Loan Receivable -- -- (90,000)
Extraordinary Item, Primarily Related Party -- -- 167,152
Accrued Interest - Related Party -- -- 52,514
Allocation of Management Fees - Related
Party -- -- 408,000
Due from Officers -- (93,000) (93,000)
Due from Shareholder -- (13,233) (13,233)
Changes in Assets and Liabilities:
(Increase) Decrease in:
Prepaid Interest (91,935) (11,850) (840,715)
Increase (Decrease) in:
Accounts Payable 510,199 3,372,981 3,821,295
Payroll and Property Taxes Payable 8,435 58,991 162,887
Accounts Payable - Liabilities
Subject to Compromise -- -- --
Accrued Interest 403,152 113,639 692,734
Accrued Interest - Liabilities
Subject to Compromise -- -- --
Accrued Expenses (4,583) (2,609) 21,596
Accrued Expenses - Subject to Compromise -- -- --
Discontinued Operations:
Net (Loss) -- -- (389,286)
Adjustments to Reconcile Net (Loss)to Net Cash
(Used for) Operating Activities:
Gain on Disposal of Assets
-- -- 389,286
Total Adjustments 1,065,801 3,502,824 5,432,133
Net Cash Provided (Used) by Operating
Activities - Forward $ (77,654) $2,264,145 $(1,456,998)
The Accompanying Notes are an Integral Part of these Financial Statements.
F-8
</TABLE>
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the period from
November 9, 1982
(Date of Inception)
Years ended through
June 30, June 30,
1 9 9 9 1 9 9 8 1 9 9 8
(Unaudited)
<S> <C> <C> <C>
Net Cash Used for Operating Activities -
Forward $ (77,654) $2,264,145 $(1,456,998)
Investing Activities:
Purchase of Land and Payment of
Casino Development Costs (804,743) (4,569,002) (10,588,616)
Purchase of Furniture and Equipment -- 5,209 (52,197)
Investment in Patent -- -- (62,000)
Deposits and Other -- (35,000) (35,630)
(Increase) Decrease in Restricted Cash -- -- --
Net Cash Used for Investing Activities (804,743) (4,598,793) (10,738,183)
Financing Activities:
Payment of Capital Lease Obligation -- -- (4,233)
Proceeds from Long-Term Borrowings -- 34,224 6,034,224
Advances from Parent -- -- 1,254,003
Disbursement to Parent -- (196,878) (513,257)
Proceeds from Related Party Notes -- 2,317,200 3,149,146
Repayments on Long-Term Borrowings -- -- (3,450,000)
Proceeds from Stock and Warrant Issuance 250,000 251,613 5,722,448
Capital Contribution -- -- 2,850
Net Cash Provided by (Used for)
Financing Activities (882,216) 2,406,159 12,195,181
Net (Decrease) Increase in Cash (181) (4,780) --
Cash - Beginning of Periods 181 4,961 --
Cash - End of Periods $ -- $ 181 $ --
Supplemental Disclosure of Cash Flow Information:
F-9
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 106,935
<PP&E> 18,238,091
<DEPRECIATION> 15,533
<TOTAL-ASSETS> 18,380,026
<CURRENT-LIABILITIES> 8,593,950
<BONDS> 0
0
3,350,000
<COMMON> 54,331,687
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,380,026
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 914,365
<OTHER-EXPENSES> 229,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167,170
<INCOME-PRETAX> (1,143,455)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,143,455)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,143,455)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
