Form 10-QSB/A-1
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 September 30, 1998
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 September 30, 1998.
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of September, 1998 (Unaudited) . . . . . . . 1
Statements of Operations for the three months ended
September 30, 1998 and 1997 and for the period from
November 9, 1982 (Date of Inception) through
September 30, 1998 (Unaudited). . . . . . . . . . . . . . . 3
Statements of Stockholders' Equity (Unaudited). . . . . . . . 4
Statements of Cash Flows for the three months ended
September 30, 1998 and 1997 and For the period from
November 9, 1982 (Date of Inception) through
September 30, 1998 (Unaudited). . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Part II: OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 13
Item 3. Defaults upon Senior Securities. . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 13
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF SEPTEMBER 30, 1998 (UNAUDITED)
ASSETS:
CURRENT ASSETS:
Cash $ 208
Prepaid Interest 61,290
Due From Parent 13,233
Due From Officers 93,000
TOTAL CURRENT ASSETS 167,731
PROPERTY AND EQUIPMENT:
Land 7,475,475
Casino Under Development 10,274,531
Furniture and Fixtures 38,888
Total 17,788,894
Less Accumulated Depreciation 24,755
Total Property and Equipment 17,764,139
OTHER ASSETS
Deposits 15,630
TOTAL ASSETS $ 17,967,500
See Notes to Financial Statements
1
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET AS OF SEPTEMBER 30, 1998 (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable $ 3,524,725
Payroll and Property Taxes Payable 169,252
Accrued Expenses 56,170
Note Payable - Stockholder 725,000
Accrued Interest 336,435
Notes Payable 2,814,550
Other Current Liabilities 13,756
TOTAL CURRENT LIABILITIES 7,639,888
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 54,332
Convertible Preferred Stock, Class B, $.25
Par Value, 5,000,000 Shares Authorized,
100,000 Shares Issued and Outstanding 25,000
Additional Paid-in Capital 11,176,473
Deficit Accumulated During the Development Stage (5,930,443)
TOTAL STOCKHOLDERS' EQUITY 5,327,612
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,967,500
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)
THREE MONTHS ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998
COSTS AND EXPENSES:
Research and Development Costs $ -- $ -- $ 122,000
Professional Fees - Due to Bankruptcy -- -- 514,756
Management Fee - Related Party -- -- 416,321
General and Administrative Expenses 301,665 273,538 4,620,967
Depreciation 1,400 1,581 51,819
TOTALS 303,065 275,119 5,725,863
OTHER INCOME (EXPENSE):
Interest Income -- 11 109,490
Interest Expense (48,853) (33,600) (252,082)
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 (48,853) (56,672) (271,731)
(Loss) from Continuing Operations
Before Discontinued Operations
and Extraordinary Item (351,918) (331,791) 5,997,594
DISCONTINUED OPERATIONS:
Gain on Disposal of Subsidiaries -- -- 389,286
(Loss from Discontinued Operations -- -- (389,286)
Total Discontinued Operations -- -- --
(LOSS) BEFORE EXTRAORDINARY ITEM (351,918) (331,791) (5,997,594)
EXTRAORDINARY ITEM:
Extraordinary Gain on Forgiveness
of Debt -- -- --
NET (LOSS) $(351,918) $( 331,791) $(5,997,594)
PER SHARE DATA:
Net (Loss) Per Common Share $ (.01) $ (.03)
WEIGHTED AVERAGE NUMBER OF SHARES 54,331,687 13,128,932
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 53,566,687 $54,332 -- $ -- $11,177,473 $(5,578,524) $5,653,532
Net Loss for the
Three Months Ended
September 30, 1998 -- -- -- -- -- -- -- -- -- (351,918) (351,918)
Balance - September
30, 1998 2,250,000 2,250 100,000 25,000 53,566,687 54,332 -- -- 11,177,473 (5,930,442) 5,304,114
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)
THREE MONTHS ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998
OPERATING ACTIVITIES:
Continuing Operations:
(Loss) Before Extraordinary Item $(351,918) $(331,791) $(6,087,594)
Adjustments to Reconcile Net
(Loss to Net Cash)
(Used for) Operating Activities:
Depreciation 1,400 1,581 51,819
Amortization of Discount -- 30,000 60,000
Common Stock Issued for Interest -- -- 14,451
Common Stock Issued for Services -- 22,544 862,500
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 15,000 36,039 (733,790)
Due From Parent -- -- (13,233)
Increase (Decrease) in:
Accounts Payable 213,629 304,975 3,524,725
Payroll and Property Taxes Payable 14,800 14,504 169,252
Accrued Interest 46,853 27,134 336,435
Accrued Expenses 34,571 722,163 60,750
Discontinued Operations:
Net (Loss) -- -- --
Adjustment to Reconcile Net (Loss)
to Net Cash (Used for) Operating
Activities:
Gain on Disposal of Assets -- -- --
Total Adjustments 326,253 1,138,940 4,692,575
NET CASH USED FOR OPERATING
ACTIVITIES - FORWARD $(25,665) $807,149 $(1,405,019)
See Notes to Financial Statements
8
<PAGE>
FOR THE PERIOD FROM
NOVEMBER 9,1982
(DATE OF INCEPTION)
THREE MONTHS ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998
NET CASH USED FOR OPERATING
ACTIVITIES - FORWARDED $(25,665) $807,149 $(1,405,019)
INVESTING ACTIVITIES:
Purchase of Land and Payment of
Casino Development Costs (316,658)(1,079,918) (10,100,531)
(Purchase) Disposal of Furniture
and Fixtures -- 5,209 (52,197)
Investment in Patents -- -- (62,000)
Deposits and Other -- -- (35,630)
(Increase) Decrease in Restricted Cash -- -- --
NET CASH USED FOR INVESTING
ACTIVITIES (316,658)(1,074,709) (10,250,358)
FINANCING ACTIVITIES:
Payment of Capital Lease Obligation -- -- (4,233)
Proceeds from Long-Term Borrowings -- 419,581 6,034,224
Advances to/from Parent -- -- 740,746
Advances to/from Related Party (342,350) (111,796) 2,859,550
Repayments on Long-Term Borrowings
- Subject to Compromise -- -- (3,450,000)
Proceeds from Stock and Warrant
Issuance -- -- 5,472,448
Capital Contribution -- -- 2,850
NET CASH (USED FOR) PROVIDED FOR
FINANCING ACTIVITIES 342,350 307,785 11,655,585
Net (Decrease) Increase in Cash 27 40,225 208
Cash - Beginning of Period 181 4,961 --
Cash - End of Periods $ 208 $ 45,186 $ 208
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the three months ended September 30, 1998 and 1997
was $0 and $0 respectively, net of interest capitalized. No income taxes
were paid during the three months ended September 30, 1998 and 1997.
See Notes to Financial Statements
9
<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 has entered into three separate agreements to
provide the necessary financing. Although the Company is confident in the
abilities of these three organizations to provide the necessary capital, there
can be no assurance that any funds will be provided immediately or in the
future.
Each of the three agreements, which are strictly confidential until
completed, obligates the respective parties to provide at least $80 million
for the development and construction of the project. Each agreement provides
for distinctly different means of raising the required funds, as well as
distinctly different means of repayment and different levels of equity
participation.
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. In
addition, 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. All parties assisted the architect in design of
their respective operations. The Agreement with Luciani & Associates, LLC has
expired and they advised the Company of such in writing in February 1998.
Once financing has been secured, the Company will attempt to negotiate a new
agreement, either with Luciani & Associates or others yet be determined.
The Company is engaged in the design, development and construction of the
Radisson Hotel and Country World Casino (the "Hotel Casino") in Black Hawk,
Colorado. The revised plan for the Hotel Casino will be an eight level
complex, featuring three stories of hotel rooms above a two-story, 75,000
square foot casino, and a three story parking garage. Other amenities will
include one or more full service restaurants, a buffet, entertainment lounge
and retail shops. When completed as planned, the Hotel Casino will be
10
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
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 75,000 square feet,
will be the largest in Colorado and will be capable of accommodating 1,800
slot machines and 32 gaming tables. The Company will open the facility with
1,000 slot machines, 20 blackjack tables and 12 poker tables, and may add up
to 800 additional slot machines if management determines that the additional
gaming devices will produce equal per square foot revenue and will not create
excess capacity. 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.
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 September 1998,
11
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
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 September 1998, 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 September 1998, 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 September 1998, the Company owed $177,773 on the Fourth
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 1997, the Company issued 1,000,000 shares of its common stock to
Eastern Equities Consultants, Ltd. as full and final compensation for the
placement of financing.
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 1998, the Company owes PCL Construction
approximately $1,075,000, including interest.
In September 1997, the Company issued 395,000 shares of common stock to
Sommer & Schneider LLP, its securities attorneys, for payment of legal fees
and a six month retainer.
In March 1998, the Company issued 850,000 shares for the same purpose as
described above.
In May 1998, The Company issued 100,000 shares of Series B preferred stock to
Gold Coast Consortium in exchange for $25,000 and services provided. Gold
Coast Consortium is a company owned by the spouse of Mr. Roger Leclerc, the
Company's President.
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.
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 to
Kennedy Funding, Inc. 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.
12
<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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
13
<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: December 29, 1998
14
<PAGE>
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