SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-KSB/A-1
(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, 2000
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 9, 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 59,329,632 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 30, 2000 was approximately $1,186,593.
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, 2000,
there were outstanding 61,581,687 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.
Financing, financial advisory services and placement agent services would
have been 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 and October 1999, the Company completed 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 would have assumed 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.
As of March 31, 2000, the parties had not yet signed such agreements and no
debts were assumed as Beverly Hillbillies Gaming Entertainment LLC had
experienced problems in closing on its property for the Reno project. The
Company had been advised, by Beverly Hillbillies Gaming that a resolve to
their Reno property issue has been delayed until at least July at which time
the companies will meet to establish a new schedule. Additionally, they
advised that they and Westwood Capital remain committed to the project,
despite their Reno property acquisition delay.
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As of July 31, 2000, the Company has had no further communications with
Beverly Hillbillies Gaming and it is assumed that all past and future hope for
this project with this group are terminated. Despite the ongoing relationship
with Beverly Hillbillies Gaming throughout the year July 1999 to June 2000,
the Company continued to research other means of bringing the project to
fruition. To that effect, in December 1999, the Company signed a short term
agreement with a Florida lending group to secure the necessary funds for the
project. As of March 31, 2000, no results were attained for this source and
all agreements were terminated.
In July 2000, the Company signed a memorandum of understanding with
Dartmouth General Capital Management, Ltd. (Dartmouth) to acquire certain
revenue producing assets, retire the outstanding debts of Country World and
provide $80 million in financing to finalize development of its Black Hawk,
Colorado casino and hotel project.
Under the terms of the understanding, Dartmouth General will provide
capital of approximately $15 million to pay the secured and unsecured debt of
the Company within 45 days. Further, Dartmouth General will furnish and
supply Country World with five year interest free corporate bonds for an
additional $65 million issued by Dartmouth Generale Equity Securities Trust
S.A., or its assigns, as securitization for the necessary financing to
finalize development and construct the casino/hotel complex.
In exchange for Dartmouth General's contribution, Country World will
issue the balance of its authorized but unissued shares of common and
preferred Series B stock to Dartmouth General (approximately 13.4 and 3.9
million respectively) and company shareholders will contribute 6 million
shares of common stock and 500,000 shares of Series B preferred stock to
Dartmouth General. With completion of the aforementioned transactions,
Dartmouth General will have acquired approximately 50.6% of the voting stock
of the Company.
In November 2000, the Company signed a contractual agreement with
Dartmouth and in December 2000, the Company received a senior subordinated
guarantee note to begin the draw down of the first $15,000,000. It is
anticipated that the funding of this instrument with be completed by January
15, 2001.
In March 2000, the Company was made aware of a listing problem with the
OTC Bulletin Board, due to the lack of an unqualified auditor's opinion letter
being a part of its June 30, 1999 10-KSB filing with the Securities and
Exchange Commission. The Company's stock listing was moved to the pink sheets
effective April 4, 2000 as a market maker in the Company's stock filed for
listing accordingly. The Company must remain a pink sheet listing for at
least 30 days, at which time if the Company's filings have been brought to an
acceptable level, can apply to be re-listed on the OTC Bulletin Board.
In order to accomplish this task, the Company must pay its current
auditors a sum of approximately $55,000 for past services rendered and
contract with a new firm for which a $30,000 fee is required. This process
began upon closing of the agreement with Dartmouth.
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In March 2000, the Company's Chairman and CEO, Mr. Larry Berman resigned
his position citing a conflict of interest with regard to extensive loans made
to the Company, as well as personal issues.
Although the Company is confident in the abilities of Dartmouth to
provide financing to accomplish the aforementioned 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")
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.
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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 and its Officers 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
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
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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,
maybe 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 Colorado Gaming Commission also has the right to request information
from any person directly or indirectly interested in, or employed by, a
licensee, and to investigate the moral character, honesty, integrity, prior
activities, criminal record, reputation, habits and associations of (i) all
persons licensed pursuant to the Colorado Limited Gaming Act, (ii) all
officers, directors and stockholders of a licensed privately held corporation,
(iii) all officers, directors and stockholders holding either a 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."
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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.
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,
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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.
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
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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.
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, Natio
nal 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.
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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 32 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 200+ rooms of the Isle of Capri in Black Hawk and 118-room
Harvey's Wagon Wheel located in Central City. In contrast, 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 includes 1,000 gaming devices and parking for 280 cars with provision
for a 50 room hotel.
The Company hopes to attain a competitive advantage over the established
casinos by offering superior lodging, an entertainment lounge, in-door
self-parking, and dining facilities. 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 Company plans to build 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. The Company will also sponsor charter bus
services from the Denver metropolitan area as a promotional consideration.
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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 continued as the
Company 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.
In October 1999, the Company signed a settlement agreement and mutual
release finalizing the balance of all ongoing disputes with New Allied
Development Corporation and Tommy Knocker Casinos Corporation. Under the
terms of the agreement, New Allied and Tommy Knocker converted 2,250,000
shares of Preferred A stock into 2,250,000 shares of common stock and agreed
to dismiss all pending appeals in exchange for the company dismissing all
pending litigation and appeals.
The Company has no outstanding litigation at this time.
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
Until April 2000, the Company's Common Stock was traded in the
over-the-counter market and was quoted and was listed on the Electronic
Bulletin Board under the symbol, "CWRC". Currently, the Company's common
stock is listed in the pink sheets under the same symbol. 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, 1999 and 2000. The listing represents inter-dealer quotations without
retail markups, markdowns or commissions and may not represent actual
transactions.
Quarter Ended High Low
September 30, 1998 .16 .06
December 31, 1998 .14 .06
March 31, 1999 .21 .06
June 30, 1999 .20 .05
September 30, 1999 .11 .06
December 31, 1999 .07 .06
March 31, 2000 .11 .01
June 30, 2000 .10 .01
At June 30, 2000, there were approximately 1,119 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.
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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.
Financing, financial advisory services and placement agent services would
have been 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 and October 1999, the Company completed 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 would have assumed 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.
As of March 31, 2000, the parties had not yet signed such agreements and no
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debts were assumed as Beverly Hillbillies Gaming Entertainment LLC had
experienced problems in closing on its property for the Reno project. The
Company had been advised, by Beverly Hillbillies Gaming that a resolve to
their Reno property issue has been delayed until at least July at which time
the companies will meet to establish a new schedule. Additionally, they
advised that they and Westwood Capital remain committed to the project,
despite their Reno property acquisition delay.
As of July 31, 2000, the Company has had no further communications with
Beverly Hillbillies Gaming and it is assumed that all past and future hope for
this project with this group are terminated. Despite the ongoing relationship
with Beverly Hillbillies Gaming throughout the year July 1999 to June 2000,
the Company continued to research other means of bringing the project to
fruition. To that effect, in December 1999, the Company signed a short term
agreement with a Florida lending group to secure the necessary funds for the
project. As of March 31, 2000, no results were attained for this source and
all agreements were terminated.
In July 2000, the Company signed a memorandum of understanding with
Dartmouth General Capital Management, Ltd. (Dartmouth) to acquire certain
revenue producing assets, retire the outstanding debts of Country World and
provide $80 million in financing to finalize development of its Black Hawk,
Colorado casino and hotel project.
Under the terms of the understanding, Dartmouth General will provide
capital of approximately $15 million to pay the secured and unsecured debt of
the Company within 45 days. Further, Dartmouth General will furnish and
supply Country World with five year interest free corporate bonds for an
additional $65 million issued by Dartmouth Generale Equity Securities Trust
S.A., or its assigns, as securitization for the necessary financing to
finalize development and construct the casino/hotel complex.
In exchange for Dartmouth General's contribution, Country World will
issue the balance of its authorized but unissued shares of common and
preferred Series B stock to Dartmouth General (approximately 13.4 and 3.9
million respectively) and company shareholders will contribute 6 million
shares of common stock and 500,000 shares of Series B preferred stock to
Dartmouth General. With completion of the aforementioned transactions,
Dartmouth General will have acquired approximately 50.6% of the voting stock
of the Company.
In November 2000, the Company signed a contractual agreement with
Dartmouth and in December 2000, the Company received a senior subordinated
guarantee note to begin the draw down of the first $15,000,000. It is
anticipated that the funding of this instrument with be completed by January
15, 2001.
In March 2000, the Company was made aware of a listing problem with the
OTC Bulletin Board, due to the lack of an unqualified auditor's opinion letter
being a part of its June 30, 1999 10-KSB filing with the Securities and
Exchange Commission. The Company's stock listing was moved to the pink sheets
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effective April 4, 2000 as a market maker in the Company's stock filed for
listing accordingly. The Company must remain a pink sheet listing for at
least 30 days, at which time if the Company's filings have been brought to an
acceptable level, can apply to be re-listed on the OTC Bulletin Board.
In order to accomplish this task, the Company must pay its current
auditors a sum of approximately $55,000 for past services rendered and
contract with a new firm for which a $30,000 fee is required. This process
began upon closing of the agreement with Dartmouth.
In March 2000, the Company's Chairman and CEO, Mr. Larry Berman resigned
his position citing a conflict of interest with regard to extensive loans made
to the Company, as well as personal issues.
Although the Company is confident in the abilities of Dartmouth to
provide financing to accomplish the aforementioned 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.
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
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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 was not paid and was extended by its new assignee
Norlar, Inc., 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 annual rate of interest is 36% for the life of the loan. The Note
is secured by a first deed of trust on the Property. Norlar, Inc. is a
corporation beneficially owned by the Company's former Chairman and CEO, Mr.
Larry Berman and his wife.
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 2000, 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 2000, 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 2000, 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 2000, 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 2000, the Company owed $600,000 on 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 June 2000, the Company owed $1,000,000 on the Sixth Norlar
Note. No further deeds of trust will be issued at this time and the total
amount due as of June 30, 2000 is $5,598,358. 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 the Company's
former Chairman and CEO, Larry Berman and his wife. 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 2000, the Company owes PCL Construction
approximately $1,400,000, 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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In October 1998, the Company converted $250,000 of debt to the Company's
officers into Series B Preferred stock. In October 1999, half of the October
1998 issuance was converted into common stock in accordance with its terms.
In September 1999, the Company requested credit against outstanding
invoices from its architectural and engineering firm in the approximate amount
of $447,003 for prepayments made, interest charges assessed and engineering
charges yet to be documented. Negotiations on the disputed amounts will occur
directly following the first funding by Dartmouth.
In October 1999, the Company signed a settlement agreement and mutual
release finalizing the balance of all ongoing disputes with New Allied
Development Corporation and Tommy Knocker Casinos Corporation. Under the
terms of the agreement, New Allied and Tommy Knocker converted 2,250,000
shares of Preferred A stock into 2,250,000 shares of common stock and agreed
to dismiss all pending appeals in exchange for the company dismissing all
pending litigation and appeals.
In December 1999, in accordance with a development contract with the
Company, Western Equities accumulated progressive payments totaling
$1,975,003.00 from July 1997 to March 1998 which was contingent upon project
financing. The Company requested that Western Equities acknowledge
cancellation of this outstanding liability as the contingency clause for
funding had not been fulfilled, was not expected to be, and the required work
was never performed and therefore the services would not be required in the
future. Western Equities agreed with the Company's request and this matter
was closed and credited accordingly.
In April 2000, the Board of Directors was advised of a possible gain from
a buy and sell of stock by one of the Company's Directors. In June 2000,
after review by corporate S.E.C. counsel, said director reimbursed the Company
$39,524 through reduction of debt to said individual.
In April 2000, the Company converted $125,000 of debt to one of 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 $200,000 per month to service the assigned
Kennedy Funding Note to Norlar, Inc. and other ongoing obligations such as
rent and utilities for the Company's corporate office. The Company applied
credits against its accounts payable in excess of $2,000,000 during the
current fiscal year for architectural and development fees. These amounts
reduced the construction in progress account accordingly. See Item 12,
Certain Relationships and Related Transactions. 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 - F22 for audited financials which fairly represent
the Company's status for the year ended June 30, 2000.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On November 13, 2000, the Company filed a Form 8-K with The Securities
and Exchange Commission with regard to a change in auditing firms to be used
by the Company. The new firm is Stefanou & Company, LLP of McLean, Virginia.
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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 currently serve as officers and directors or the
Company:
Name Position
William H. Patrowicz CEO, Secretary, Treasurer and Director
Roger D. Leclerc President and Director
The following is brief biographical information concerning the Company's
officers, directors and significant employees:
William H. Patrowicz, age 52, has served as Secretary, Treasurer for the
Company since April 1995 and was formerly President of Holly Holdings, Inc.
from June 1992 to March 1998. In March 2000, Mr. Patrowicz was appointed CEO
upon the resignation of Mr. Berman. From 1982 to December 1991, Mr. Patrowicz
was employed by Gunnebo Fastening Corp., as Senior Vice President of
Operations.
Roger D. Leclerc, age 50, 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.
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, 2000. The Company is unaware of the compliance of its 10%
shareholders and its former officers and directors.
In March 2000, the Company's Chairman and CEO, Mr. Larry Berman resigned
his position citing a conflict of interest with regard to extensive loans made
to the Company, as well as personal issue.
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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. Patrowicz spends substantially all of his
time in management activities relating to the Company. Mr. Patrowicz, although
holding an employment contract, has received no 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,
2000 and information as of June 30, 2000 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
* William H. Patrowicz 1,600,000 2.6%
* Roger D. Leclerc 0 0%
Western Equities, Inc. 16,000,000 26.0%
* Larry S. Berman 17,280,000 28.1%
The TIP Living Trust 7,250,453 11.8%
All Officers and Directors 1,600,000 2.6%
as a Group (2 Persons)
___________
* Collectively, these individuals hold ownership to 1,100,000 shares of Series
B preferred stock which if converted to common stock would equate to
11,000,000 shares or 6.5% to the total outstanding stock.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The former 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 October 1999, the Preferred A stock was converted
to common stock and said Series A preferred was retired accordingly. 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.
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. 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. As of June 30, 2000, there are
1,100,000 shares outstanding.
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 was not paid and was extended by its new assignee
Norlar, Inc., 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 annual rate of interest is 36% for the life of the loan. The Note
is secured by a first deed of trust on the Property. Norlar, Inc. is a
corporation beneficially owned by the Company's former Chairman and CEO, Mr.
Larry Berman and his wife.
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 2000, the
Company owed $600,000 on the First Norlar Note. In October 1997, the Company
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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 2000, 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 2000, 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 2000, 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 2000, the Company owed $600,000 on 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 June 2000, the Company owed $1,000,000 on the Sixth Norlar
Note. No further deeds of trust will be issued at this time and the total
amount due as of June 30, 2000 is $5,598,358. 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 the Company's
former Chairman and CEO, Larry Berman and his wife. 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 2000, the Company owes PCL Construction
approximately $1,400,000, 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. In October 1999, half of the October
1998 issuance was converted into common stock in accordance with its terms.
In September 1999, the Company requested credit against outstanding
invoices from its architectural and engineering firm in the approximate amount
of $447,003 for prepayments made, interest charges assessed and engineering
charges yet to be documented. Negotiations on the disputed amounts will occur
directly following the first funding by Dartmouth.
In October 1999, the Company signed a settlement agreement and mutual
release finalizing the balance of all ongoing disputes with New Allied
Development Corporation and Tommy Knocker Casinos Corporation. Under the
terms of the agreement, New Allied and Tommy Knocker converted 2,250,000
shares of Preferred A stock into 2,250,000 shares of common stock and agreed
to dismiss all pending appeals in exchange for the company dismissing all
pending litigation and appeals.
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In December 1999, in accordance with a development contract with the
Company, Western Equities accumulated progressive payments totaling
$1,975,003.00 from July 1997 to March 1998 which was contingent upon project
financing. The Company requested that Western Equities acknowledge
cancellation of this outstanding liability as the contingency clause for
funding had not been fulfilled, was not expected to be, and the required work
was never performed and therefore the services would not be required in the
future. Western Equities agreed with the Company's request and this matter
was closed and credited accordingly.
In April 2000, the Board of Directors was advised of a possible gain from
a buy and sell of stock by one of the Company's Directors. In June 2000,
after review by corporate S.E.C. counsel, said director reimbursed the Company
$39,524 through reduction of debt to said individual.
In April 2000, the Company converted $125,000 of debt to one of the
Company's officers into Series B preferred stock.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
1.Form 8-K, as filed with the Securities and Exchange Commission on March 6,
2000 with regard to the resignation of the Company's Chairman and Chief
Executive Officer, Mr. Larry Berman.
2.Form 8-K, as filed with the Securities and Exchange Commission on November
13, 2000 with regard to change in auditing firms to be used by the Company.
The Company's auditors are now Stefanou & Company, LLP of McLean,
Virginia.
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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: January 10, 2001 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: January 10, 2001 /s/ Roger D. Leclerc
Roger D. Leclerc, President and Director
Dated: January 10, 2001 /s/ William H. Patrowicz
William H. Patrowicz, CEO, Secretary,
Treasurer and Director
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FINANCIAL STATEMENTS AND SCHEDULES
JUNE 30, 2000 AND 1999
FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
COUNTRY WORLD CASINOS, INC
<PAGE>
COUNTRY WORLD CASINOS, INC.
Index to Financial Statements
Page No
Report of Independent Certified Public Accountants F-3
Balance Sheet at June 30, 2000 and 1999 F-4
Statements of Losses for the two years ended June 30, 2000
and 1999, and for the period November 9, 1982 (date of
inception) to June 30, 2000 F-5
Statements of Stockholders' Equity for the period November
9, 1982 (date of inception) to June 30, 2000 F-6 to F-7
Statements of Cash Flows for the two years ended June 30,
2000 and 1999, and for the period November 9, 1982 (date
of inception) to June 30, 2000 F-8
Notes to Financial Statements F-9 to F-22
<PAGE>
STEFANOU & COMPANY, LLP
Certified Public Accountants
1360 Beverly Road
Suite 305
McLean, VA 22101-3621
703-448-9200
703-448-3515 (fax)
Philadelphia, PA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Country World Casinos, Inc
Bala Cynwyd, PA
We have audited the accompanying balance sheet of Country World
Casinos, Inc. (a development stage Company) as of June 30, 2000 and 1999
and the related statements of losses, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility
of the company's management. Our responsibility is to express an opinion
on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Country World
Casinos, Inc. as of June 30, 2000 and 1999, and the results of its
operations and its cash flows for the two years ended, in conformity with
generally accepted accounting principles. We express no opinion on the
cumulative period from inception through June 30, 2000.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note J to the
financial statements, the Company has suffered recurring losses from
inception and has a deficit in working capital of $ 14,157,799, which raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note J.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ STEFANOU & COMPANY, LLP
Stefanou & Company, LLP
McLean, Virginia
December 15, 2000
F-3
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
BALANCE SHEET
June 30, 2000 and 1999
2000 1999
ASSETS
CURRENT ASSETS:
Cash - -
Prepaid Interest 91,935 91,935
Total current assets 91,935 91,935
Property, Plant &
Equipment, Net (Note B) 18,220,670 18,299,38
OTHER ASSETS
Deposits 35,000 35,000
$18,347,605 $18,426,316
LIABILITIES
CURRENT LIABILITIES
Accounts payable and
accrued liabilities $ 2,551,057 $ 4,092,644
Due to officers (Note H) 958,594 677,000
Other liabilities 42,946 34,870
Note payable (Note C) 998,000 998,000
Notes payable- related
parties (Note D) 9,699,137 7,853,392
Total current
liabilities 14,249,734 13,655,906
COMMITMENTS & CONTINGENCIES (NOTE G)
STOCKHOLDER'S EQUITY (NOTE F)
Series A Preferred
Stock, par value $.001
per share, 25,000,000
shares authorized, none
outstanding at June 30,
2000; 2,250,000 shares
outstanding at June 30,
1999 - 2,250
Class B Preferred
Stock, par value $.25
per share, 5,000,000
shares authorized,
1,100,000 shares
outstanding at June 30,
2000 and June 30, 1999 275,000 275,000
Common Stock, par value
$.001 per share,
75,000,000 shares
authorized 61,581,687
shares outstanding at
June 30, 2000 and
54,331,687 at June 30,
1999 61,582 54,332
Additional Paid In
Capital 11,296,311 11,176,311
Deficiency accumulated
during development
stage (7,535,022) (6,737,483)
Total stockholder's
equity 4,097,871 4,770,410
$18,347,605 $18,426,316
See accompanying notes to financial statements
F-4
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
STATEMENTS OF LOSSES
For the
Year Year period from
Ended Ended November 9,
June June 1982 (Date of
30, 30, Inception)
2000 1999 through June
30, 2000
Costs and Expenses:
Research & Development $ - $ - $122,000
General and Administrative 711,726 1,101,442 7,070,307
Depreciation - - 50,419
Interest Expense 85,812 35,386 324,427
Total costs and expenses 797,538 1,136,828 7,567,153
Operating loss (797,538) (1,136,828) (7,567,153)
Other Expenses and Income
Interest Income - - 109,490
Other Income - - 735
Rental Income - - 45,126
Loss on Non-Marketable
Securities - - (85,000)
Loss on Disposal of property,
improvements & equipment - (15,533) (15,533)
Write Off of Loan Receivable - - (90,000)
Forfeited Deposit - - (100,000)
Net other income (expenses) - (15,533) (135,182)
Loss from continuing operations
before extraordinary item and
income taxes (797,538) (1,152,361) (7,702,335)
Provision form income taxes
(benefit) - - -
Loss from continuing operations
before extraordinary item (797,538) (1,152,361) (7,702,335)
Extraordinary Item:
Extraordinary Gain on
Forgiveness of Debt,
Primarily Related Party - - 167,152
Net Loss $(797,538) $(1,152,361) $(7,535,183)
Loss per common share (basic
and assuming dilution) $ (0.01) $ (0.02) $ (0.80)
Weighted average common shares
outstanding 59,329,632 54,331,687 9,476,509
See accompanying notes to financial statements
F-5
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
STATEMENTS STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Additional Deficit Total
Series A Class B Subscribed Paid In During Stockholder's
Shares Amount Shares Amount Shares Amount Shares Amount Capital Development Equity
Stage
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 9, 1982 - - - - - - - - - - -
(Date of Inception)
Issuance of shares - - - - 2,971 15 - - 1,510 - 1,525
for Cash
Issuance of Common - - - - 1,474 8 - - 644,992 - 645,001
Stock pursuant to
private placement, net
Deferred offering costs - - - - - - - - (115,690) - (115,690)
Cancellation of common - - - - (800) (4) - - 4 - -
stock
Issuance of shares in - - - - 85,714 429 - - 14,571 - 15,000
exchange for services
Issuance of shares for - - - - 1,339,212 6,696 - - 13,304 - 20,000
cash
Capital contribution - - - - - - - - 2,850 - 2,850
Net loss of the period - - - - - - - - - (221,169) (221,169)
ended June 30, 1992
Balance at June 30, 1992 - - - - 1,428,571 7,144 - - 561,541 (221,169) 347,517
Issuance of shares in - - - - 714,287 3,571 - - 8,929 - 12,500
exchange for services
Net loss of the year - - - - - - - - - (373,401) (373,401)
ended June 30, 1993
Balance at June 30, 1993 - - - - 2,142,858 10,715 - - 570,470 (594,570) (13,384)
Adjustment for change - - - - - (8,572) - - 8,572 - -
in par value from
$.005 to $.001
Issuance of stock for - - - - 1,500,000 1,500 - - 1,498,500 - 1,500,000
cash
Issuance of 2,250,000 2,250 - - - - - - 2,247,750 - 2,250,000
Convertible
Preferred Stock
in exchange for
Land
Issuance of Common - - - - 600,000 600 - - 599,400 - 600,000
Stock for cash
Issuance of Common - - - - 250,000 250 - - 249,750 - 250,000
Stock for Cash and
Services Pursuant
to Exercise of
Options
Acquisition and - - - - (125,000) (125) - - (124,875) - (125,000)
cancellation of
Treasury Stock
Issuance of Stock - - - - 140,000 140 - - 349,860 - 350,000
for Cash
Issuance of Stock - - - - 60,662 60 - - 149,941 - 150,000
for Cash
Issuance of Common - - - - 250,000 250 - - 249,750 - 250,000
Stock in exchange
for Land
Issuance of Common - - - - 95,000 95 - - 237,405 - 237,500
Stock for Cash and
Services Pursuant to
Exercise of Options
Issuance of Common - - - - 200,000 200 - - 499,800 - 500,000
Stock in exchange
for services
Issuance of Common - - - - - - 262,667 263 787,737 - 788,000
Stock Pursuant to
Private Placement
Net Loss of the - - - - - - - - - (1,490,785) (1,490,785)
Period Ending
June 30, 1994
Balance at 2,250,000 2,250 - - 5,113,520 5,113 262,667 263 7,324,060 (2,085,355) 5,246,331
June 30, 1994
Issuance of common - - - - 460,000 460 - - 1,229,040 - 1,229,500
stock pursuant to
Private Placement
offering
Issuance of common - - - - 262,667 263 (262,667) (263) - - 0
stock subscribed
Issuance of Stock to - - - - 5,000,000 5,000 - - 1,009,451 - 1,014,451
Parent in exchange
for debt
Net Loss for year - - - - - - - - - (757,659) (757,659)
ended June 30, 1995
Balance at 2,250,000 2,250 - - 10,836,187 10,836 - - 9,562,550 (2,843,014) 6,732,623
June 30, 1995
Net loss for year - - - - - - - - - (416,440) (416,440)
ended June 30, 1996
Balance at 2,250,000 2,250 - - 10,836,187 10,836 - - 9,562,551 (3,259,454) 6,316,183
June 30, 1996
See accompanying notes to financial statements
F-6
</TABLE>
<PAGE>
<TABLE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
STATEMENTS OF STOCKHOLDERS' EQUITY
(continued)
Preferred Stock Common Stock Additional Deficit Total
Series A Class B Subscribed Paid In During Stockholder's
Shares Amount Shares Amount Shares Amount Shares Amount Capital Development Equity
Stage
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Preferred - $ - 4,000,000 $1,000,000 - $ - - $ - $ - $ - $1,000,000
Stock - Class B in
exchange for debt
to Parent
Common Stock Issued - - - - 1,250,000 1,250 - - 248,750 - 250,000
in Exchange for
Parent Debt
Warrant to purchase - - - - - - - - 60,000 - 60,000
common stock issued
in exchange for services
Net loss for the year - - - - - - - - - (1,080,391) (1,080,391)
ended June 30, 1997
Balance at 2,250,000 2,250 4,000,000 1,000,000 12,086,187 12,086 - - 9,871,301 (4,339,845) 6,545,792
June 30, 1997
Issuance of Common - - - - 1,000,000 1,000 - - 199,000 - 200,000
Stock in exchange
for services
Issuance of Common - - - - 395,500 396 - - 73,761 - 74,157
Stock in exchange
for debt and services
Issuance of Common - - - - 850,000 850 - - 72,250 - 73,100
Stock for in exchange
for debt and services
Issuance of Stock - - 100,000 25,000 - - - - - - 25,000
in exchange for services
Conversion of Preferred - -(4,000,000)(1,000,000) 40,000,000 40,000 - - 960,000 - -
Stock to Common Stock
Net Loss of Period - - - - - - - - - (1,245,439) (1,245,439)
Ended June 30, 1998
Balance at 2,250,000 $2,250 100,000 $25,000 54,331,687 $54,332 - $ - $11,176,312 $(5,585,284) $5,672,610
June 30, 1998
Preferred Stock - - 1,000,000 250,000 - - - - - - 250,000
issued in
Exchange for Debt
Miscellaneous adjustment - - - - - - - - - 163 163
Net Loss of Period - - - - - - - - - (1,152,361) (1,152,361)
Ended June 30, 1999
Balance at
June 30, 1999 2,250,000 $2,250 1,100,000 $275,000 54,331,687 $54,332 - $ - $11,176,311 $(6,737.482) $4,770,410
Conversion of
preferred to
common stock
(Note F) (2,250,000) (2,250) - - 2,250,000 2,250 - - - - -
Conversion of
preferred stock to
common stock - - (500,000) (125,000) 5,000,000 5,000 - - 120,000 - -
Preferred Stock
Issued in
Exchange for debt
and services - - 500,000 125,000 - - - - - - 125,000
Net Loss for
Period ended
June 30, 2000 - - - - - - - - - (797,538) (797,538)
Balance at
June 30, 2000 - $ - 1,100,000 $275,000 61,581,687 $61,582 - $ - 11,296,311 $(7,535,020) $4,097,872
See accompanying notes to financial statements
F-7
</TABLE>
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
STATEMENTS OF CASH FLOWS
Year Year For the period
Ended Ended from November 9,
June 30, June 30, 1982 (Date of
2000 1999 Inception)
through June 30,
2000
Cash flows from operating activities:
Net income from operating
activities $(797,539) $(1,152,361) $(7,702,336)
Adjustments to reconcile net
income to net cash:
Depreciation - - 59,867
Common stock issued in
exchange for interest - - 14,451
Common stock issued in
exchange for services - - 1,184,757
Preferred stock issued in
exchange for services 125,000 250,000 400,000
Loss on Nonmarketable
Securities - - (85,000)
Write off of loan
receivable - - (90,000)
Extraordinary Item,
primarily related party - - 167,152
Allocation of management
fees - related party - - 408,000
Change in:
Prepaid expenses
and other assets - (30,645) (779,435)
Accounts payable
and accrued expenses,
net (1,251,917) 868,341 2,918,936
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
Net cash from operating
activities (1,924,456) (64,665) (3,503,608)
Cash flows used in investing activities:
(Acquisition) disposal of
property, plant and
equipment, net 78,711 (850,500) (10,603,890)
Investment in patent - - (62,000)
Deposits and other - 630 (35,000)
Net cash used in investing
activities 78,711 (849,870) (10,700,890)
Cash flows (used in)/provided by
financing activities:
Payment of capital lease
obligation - - (4,233)
Proceeds from long-term
borrowings, net 1,845,745 914,355 8,985,046
Proceeds from stock and -
warrant issuance - - 5,220,835
Capital contribution - - 2,850
Net cash provided by
financing activities 1,845,745 914,355 14,204,498
Net increase in cash and cash
equivalents - (180) -
Cash and cash equivalents at
beginning of period - 180 -
Cash and cash equivalents at end
of period $ - $ - $ -
Supplemental Disclosure of Cash Flow:
Cash paid during the period for
interest - - 5,761
Cash paid during the period for
taxes - - -
Common stock issued for property - - 250,000
Preferred stock issued for
property - - 2,250,000
Common shares issued for services
and debt - - 1,184,757
Preferred shares issued for
services and debt 125,000 250,000 400,000
Non cash acquisition of property,
improvements, and equipment 78,711 850,500 4,801,001
Non cash proceeds from notes
payable 1,845,745 914,355 3,420,126
See accompanying notes to financial statements
F-8
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE A-SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in
the preparation of the accompanying financial statements
follows.
Business and Basis of Presentation
Country World Casinos, Inc., (the "Company" or "Country
World") is incorporated under the laws of the state of
Nevada. The Company is engage in the development of a full
service hotel and casino in Blackhawk, Colorado. As of June
30, 2000, the Company has not commenced construction of the
planned casino, nor has it realized any revenues from its
planned operations. Accordingly, the Company is considered to
be in the development stage.
The Company was a majority owned subsidiary of Holly
Holdings, Inc. ("Parent") until May 1997.
Certain prior year amounts have been reclassified for
comparative purposes.
Revenue Recognition
Casino revenues will consist of the net win from gaming
activities, which is the difference between gaming wins and
losses. Revenues exclude the retail value of complimentary
food, beverages and hotel services furnished to customers.
All revenues will be recognized as occurred.
Advertising
The Company follows the policy of charging the costs of
advertising to expenses incurred. The Company did not incur
any advertising costs during the years ended June 30, 2000
and 1999.
Income Taxes
Income taxes are provided based on the liability method for
financial reporting purposes in accordance with the
provisions of Statements of Financial Standards No. 109,
"Accounting for Income Taxes". Under this method deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be removed or settled. The
effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the statements of operations in
the period that includes the enactment date.
F-9
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE A-SUMMARY OF ACCOUNTING POLICIES (continued)
Cash Equivalents
For purposes of the Statements of Cash Flows, the Company
considers all highly liquid debt instruments purchased with a
maturity date of three months or less to be cash equivalents.
Property and Equipment
For financial statement purposes, property and equipment are
depreciated using the straight-line method over their
estimated useful lives of the related assets ranging from
three to seven years. An accelerated method of depreciation
is used for tax purposes.
The Company incurred no depreciation expense for the years
ended June 30, 2000 and 1999.
Costs incurred in connection with the acquisition,
development and preparation of the Company's land are
capitalized and stated at cost. In addition, interest on
borrowings incurred during the preparation period related to
acquisition and development of the land are capitalized.
The Company reviews the carrying value of the property for
impairment whenever events and circumstances indicate that
the carrying value of the asset may not be recoverable from
the estimated future cash flows expected to result from its
use and eventual disposition. In the case where undiscounted
expected future cash flows are less than the carrying value,
an impairment loss is recognized equal to an amount by which
the carrying value exceeds the fair value of assets.
Long-Lived Assets
The Company has adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121). The Statement requires that
long-lived assets and certain identifiable intangibles held
and used by the Company be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS No. 121 also
requires assets to be disposed of be reported at the lower of
the carrying amount or the fair value less costs to sell.
F-10
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE A-SUMMARY OF ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly actual results
could differ from those estimates.
Concentrations of Credit Risk
Financial instruments and related items which potentially
subject the Company to concentrations of credit risk consist
primarily of cash, cash equivalents and trade receivables.
The Company places its cash and temporary cash investments
with high credit quality institutions. At times, such
investments may be in excess of the FDIC insurance limit.
Stock Based Compensation
The Company accounts for stock transactions in accordance
with APB Opinion 25, "Accounting for Stock Issued to
Employees." In accordance with statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company has adopted the proforma
disclosure requirements.
Liquidity
As shown in the accompanying financial statements, the
Company incurred a net loss of $ 797,538 during the year
ended June 30, 2000 and $ 1,152,361 during the year ended
June 30, 1999. The Company's current liabilities exceeded
its current assets by $ 14,157,799 as of June 30, 2000.
Substantially all the Company's assets are illiquid.
Comprehensive Income
The Company does not have any items of comprehensive income
in any of the periods presented.
F-11
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE A-SUMMARY OF ACCOUNTING POLICIES (continued)
Segment Information
The Company adopted Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS 131) in the year
ended June 30, 1998. SFAS establishes standards for
reporting information regarding operating segments in annual
financial statements and requires selected information for
those segments to be presented in interim financial reports
issued to stockholders. SFAS 131 also establishes standards
for related disclosures about products and services and
geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete
financial information is available for evaluation by the
chief operating decision maker, or decision making group, in
making decisions how to allocate resources and assess
performance. The information disclosed herein, materially
represents all of the financial information related to the
Company's principal operating segment.
Net Loss Per Share
The Company has adopted Statement of Financial Accounting
Standard No. 128, "Earnings Per Share," specifying the
computation, presentation and disclosure requirements of
earnings per share information. Basic earnings per share has
been calculated based upon the weighted average number of
common shares outstanding. Stock options and warrants have
been excluded as common stock equivalents in the diluted
earnings per share because they are either antidilutive, or
their effect is not material. There is no effect on earnings
per share information for the year ended June 30, 1998
relating to the adoption of this standard.
New Accounting Pronouncements
The Company adopted Statement of Financial Accounting
Standards No. 132, Employers' Disclosures about Pension and
Other -Post Employment Benefits (SFAS 132) in the year
ended June 30, 1998. SFAS No. 132 establishes disclosure
requirements regarding pension and post employment
obligations. SFAS No. 132 does not effect the Company as of
June 30, 2000.
In March 1998, Statement of Position No. 98-1 was issued,
which specifies the appropriate accounting for costs incurred
to develop or obtain computer software for internal use. The
new pronouncement provides guidance on which costs should be
capitalized, and over what period such costs should be
amortized and what disclosures should be made regarding such
costs. This pronouncement is effective for fiscal years
beginning after December 15, 1998, but earlier application is
acceptable. Previously capitalized costs will not be
adjusted. The Company believes that it is already in
substantial compliance with the accounting requirements as
set forth in this new pronouncement, and therefore believes
that adoption will not have a material effect on financial
condition or operating results.
F-12
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE A-SUMMARY OF ACCOUNTING POLICIES (continued)
In April 1998, Statement of Position No. 98-5 was issued
which requires that company's expense defined previously
capitalized start-up costs including organization costs and
expense future start-up costs as incurred. Adoption of this
statement does not have an effect on financial condition or
operating results.
The Company adopted Statement of Financial Standards No. 133,
Accounting for Derivative Instruments and for Hedging
Activities (SFAS No. 133) in the year ended June 30, 1998.
SFAS No. 133 requires that certain derivative instruments be
recognized in balance sheets at fair value and for changes in
fair value to be recognized in operations. Additional
guidance is also provided to determine when hedge accounting
treatment is appropriate whereby hedging gains and losses are
offset by losses and gains related directly to the hedged
item. SFAS No. 133's impact on the Company's consolidated
financial statements is not expected to be material as the
Company has not historically used derivative and hedge
instruments.
In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 ( SAB 101),
Revenue Recognition in Financial Statements, which will
become effective December 31, 2000. The Company does not
expect the standard to have a material effect on its
financial position or results of operations.
In March 2000, the Financial Accounting Standards Board
issued FIN No. 44, Accounting for Certain Transactions
Involving Stock Compensation, an interpretation of Accounting
Principles Board No. 25 for (a) the definition of an employee
for purposes of applying APB No. 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option
or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 was
effective July 1, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998, or
January 12, 2000. Management does not anticipate that this
interpretation will have a material impact on the Company's
consolidated financial statements.
In September 2000, The Financial Accounting Standards Board
issued SFAS No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, a
replacement of SFAS Statement No. 125. SFAS No. 140 revises
the standards for accounting for securitizations and other
transfers of financial assets and collateral and require
certain disclosures, but carries over most of the provisions
of SFAS No. 125 without reconsideration. SFAS No. 140 is
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001
and is effective for recognition and reclassification of
collateral and for disclosures relating to securitization
transactions and collateral for the fiscal years ending after
December 15, 2000. Management does not anticipate that this
interpretation will have a material impact on the Company's
consolidated financial statements.
F-13
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE B- PROPERTY AND EQUIPMENT, NET
Property and equipment at June 30 were as follows:
2000 1999
Land and improvements $18,220,670 $18,299,381
Interest capitalized during the years ended June 30, 2000 and
1999 amounted to $ 2,302,230 and $ 1,549,666, respectively.
In July 1998, the Company executed and delivered a deed for
the real property in lieu for foreclosure to the holders of
the $ 725,000 mortgage note.
NOTE C -NOTES PAYABLE
Notes payable at June 30, 2000 and 1999 are as follows:
2000 1999
Mortgage note payable in monthly
installments of interest only at
the bank prime rate + 3%;
payable on demand and secured by
a third deed of trust on real
property and improvements. The
Company is in default under the
terms of the mortgage note. $ 998,000 $ 998,000
----------- -----------
$ 998,000 $ 998,000
F-14
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE D-NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at June 30, 2000 and 1999
are as follows:
2000 1999
Mortgage note payable to an entity
controlled by a significant stockholder of
the Company, payable in monthly
installments of interest only at 24% per
annum; payable on demand and secured by a
first deed of trust on real property and
improvements. The Company is in default
under the terms of the mortgage note (see
Note F). 5,000,000 5,000,000
Mortgage note payable to an entity
controlled by a significant stockholder of
the Company, payable in monthly
installments of interest only at 12 % per
annum; payable on demand due and secured
by a second deed of trust on real property
and improvements. The Company is in
default under the terms of the mortgage
note (see Note F). 600,000 600,000
Mortgage note payable to an entity
controlled by a significant stockholder of
the Company, payable in monthly
installments of interest only at 12 % per
annum; payable on demand due and secured
by a fourth deed of trust on real property
and improvements. The Company is in
default under the terms of the mortgage
note (see Note F). 600,000 600,000
Mortgage note payable to an entity
controlled by a significant stockholder of
the Company, payable in monthly
installments of interest only at 12 % per
annum; payable on demand due and secured
by a fifth deed of trust on real property
and improvements. The Company is in
default under the terms of the mortgage
note (see Note F). 600,000 600,000
Mortgage note payable to an entity
controlled by a significant stockholder of
the Company, payable in monthly
installments of interest only at 12 % per
annum; payable on demand due and secured
by a sixth deed of trust on real property
and improvements. The Company is in
default under the terms of the mortgage
note (see Note F). 600,000 600,000
Mortgage note payable to an entity
controlled by a significant stockholder of
the Company, payable in monthly
installments of interest only at 12 % per
annum; payable on demand due and secured
by a seventh deed of trust on real
property and improvements. The Company is
in default under the terms of the mortgage
note (see Note F). 600,000 453,392
Mortgage note payable to an entity
controlled by a significant stockholder of
the Company, payable in monthly
installments of interest only at 12 % per
annum; payable on demand due and secured
by a eighth deed of trust on real property
and improvements. The Company is in
default under the terms of the mortgage
note (see Note F). 1,699,137 -
----------- ----------
$9,699,137 $7,853,392
F-15
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE E-INCOME TAXES
Financial Accounting Standard No. 109 requires the
recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been
included in the financial statement or tax returns. Under
this method, deferred tax liabilities and assets are
determined based on the difference between financial
statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the
differences are expected to reverse. Temporary differences
between taxable income reported for financial reporting
purposes and income tax purposes are insignificant.
At June 30, 2000, the Company has available for federal
income tax purposes a net operating loss carryforward of $
7,500,000 expiring through the year 2020, that may be used to
offset future taxable income. The Company has provided a
valuation reserve against the full amount of the net
operating loss benefit, since in the opinion of management
based upon the earnings history of the Company, it is more
likely than not that the benefits will not be realized. Due
to significant changes in the Company's ownership, the
Company's future use of its existing net operating losses may
be limited.
Components of deferred tax assets as of June 30, 2000 are as
follows:
Non current:
Net operating loss carryforward $ 2,550,000
Valuation allowance (2,550,000)
------------
Net deferred tax asset $ -
NOTE F-CAPITAL STOCK
Preferred Stock
The Company is authorized to issue 25,000,000 shares of
preferred stock, $.001 par value, with certain rights,
preferences and designations, to be issued in a manner to be
determined by the Company's Board of Directors.
Series A Convertible Preferred Stock
The Company's preferred stock includes Series A Convertible
Preferred ("Convertible Preferred") stock valued at $1.00 per
share. The maximum issuable shares under the series are
2,250,000 shares. Holders of the Convertible Preferred
shares shall be entitled to dividends as declared by the
Board of Directors.
F-16
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE F-CAPITAL STOCK (continued)
The Convertible Preferred stockholders, in the event of
liquidation of the Company, will receive an amount equal to
$3.33 per share plus declared and unpaid dividends before any
holder of common stock. A sale, lease, or transfer of all or
substantially all of the Company's assets shall be deemed to
be a liquidation for purposes of the liquidation preference.
Each Convertible Preferred share is convertible into one
share of common stock at any time or automatically upon the
conversion of the majority of the Convertible Preferred stock
or in the event of a public offering of the Company's common
stock at not less than $6.66 per share.
During the year ended June 30, 2000, the Company settled a
lawsuit with the holders of the Company's 2,250,000 shares of
Series A Convertible Preferred Stock (see Note G). In
connection with the settlement, the preferred shareholders
exchanged their shares for 2,250,000 shares of the Company's
common stock.
As of June 30, 1999, there were no shares of the Series A
Convertible Preferred Stock issued and outstanding.
Class B Convertible Preferred Stock
In April 1997, the Board of Directors created a series of
Class B convertible preferred stock ("Class B") valued at
$.25 per share. The maximum issuable shares under the Class
B preferred stock is 5,000,000 shares. The holders of the
Class B shares are not entitled to receive dividends, and the
shares are entitled to vote with the common stock as a single
class. In the event of liquidation of the Company, the
holders of the Class B shares will receive an amount per
share equal to the sum of $0.25 for each outstanding share of
Class B preferred stock.
F-17
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE F-CAPITAL STOCK (continued)
Each share of Class B preferred stock is convertible into
common stock at the rate of ten shares of common stock for
each share of Class B Preferred. Each share of Class B may
be converted one year following the date of issuance at the
election of the holder. The Company is not required to
reserve and keep available out of its authorized but unissued
shares of common stock, common stock sufficient to effect the
conversion of the Class B. In the event that the number or
authorized share of common stock is not sufficient to effect
the conversion of the outstanding shares of Class B, the
Company will increase the number authorized but unissued
shares of common stock.
During the year ended June 30, 2000, the Company converted
500,000 shares of its Class B shares to 5,000,000 shares of
its Common Stock.
During the year ended June 30, 1999, the Company issued
1,000,000 shares of its Class B Convertible Preferred Stock
in exchange for $ 250,000 owed to its officers in the form of
cash advances to the Company, and unpaid services and
expenses.
During the year ended June 30, 2000, the Company issued
500,000 shares of its Class B Convertible Preferred Stock in
exchange for $ 125,000 owed to its officers in the form of
cash advances to the Company, and unpaid services and
expenses.
As of June 30, 2000, there were 1,100,000 shares of the Class
B Convertible Preferred Stock issued and outstanding.
Common Stock
The Company is authorized to 75,000,000 shares of common
stock having a par value of $ .001 per share. At June 30,
1999, there were 61,581,687 shares of common stock
outstanding.
F-18
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE F-CAPITAL STOCK (continued)
Warrants to Purchase Common Stock
As of June 30, 2000, the Company had outstanding 1,000,000
warrants to purchase 1,000,000 shares of the Company's common
stock at $.06 per share with no expiration. The warrants were
issued as compensation for financial consulting services to
an entity controlled by a family member of the Company's
Chairman of the Board.
As of June 30, 2000, the Company had outstanding 21,000,000
warrants to purchase 21,000,000 shares of the Company's
common stock at $.20 per share with no expiration. The
warrants were issued as additional consideration to an entity
controlled by the Company's Chairman of the Board which
advanced the Company funds in the form of mortgage notes
payable secured by deeds of trust on the Company's land and
improvements (see Note D).
The Company is not required to reserve and keep available out
of its authorized but unissued shares of common stock, common
stock sufficient to effect the conversion of the warrants to
common stock. In the event that the number or authorized
share of common stock is not sufficient to effect the
conversion of the outstanding warrants, the Company will
increase the number authorized but unissued shares of common
stock.
NOTE G-COMMITMENTS AND CONTINGENCIES
Lease Commitments
Beginning in 1999, the Company utilized office space on a
month to month basis from an entity whose principal owner is
a significant shareholder of the Company. During the years
ended June 30, 2000 and 1999, the Company incurred rental
expense of $18,367 and $ 34,258, respectively.
Employment and Consulting Agreements
The Company has employment agreements with the Company's
Executive Chairman and Vice Chairman. In addition to salary
and benefit provisions, the Agreements include defined
commitments should the Company terminate the employment of
the Executives without cause.
The Company had consulting agreements with outside
contractors. The Agreements are generally for a term of 12
months from inception and renewable automatically from year
to year unless either the Company or Consultant terminates
such engagement by written notice.
F-19
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE G- COMMITMENTS AND CONTINGENCIES (continued)
Litigation
In June 1995, Tommyknocker Casino Corp. and New Allied
Development Corporation ("Tommyknocker") filed a counterclaim
against the Company in the District Court of the state of
Colorado. The counterclaim alleged the non-payment of
principal and interest of amounts owed by the Company in
connection with a mortgage loan agreement by and between the
Company and Tommyknocker Casino Corp. and New Allied
Development Corporation. In October 1999, the Company settled
the lawsuit with Tommyknocker at no cost to the Company. In
connection with the settlement, the Company issued 2,250,000
shares of Company common stock to Tommyknocker in exchange
for 2,250,000 shares of Series A Convertible Preferred stock
held by Tommyknocker (see Note F).
In 1995, James Hamilton, a private investor, filed a
complaint against the Company and Robert Todd Financial
Corporation in the District Court of Travis County, Texas.
The Complaint alleges Robert Todd Financial Corporation, and
its agents and/or employees, made misrepresentations
regarding the Company's common stock, and allegedly induced
the Plaintiff to purchase the stock The Plaintiff alleges the
Company is liable for the wrongful conduct of the Company.
The Company denies liability in all respects and vigorously
intends to defend. In 1996 the Company moved to dismiss the
action. No decision has been reached by the Court on the
pending motion. While the ultimate outcome of the litigation
cannot be ascertained at this time, based upon current
knowledge of applicable law and facts and taking into
consideration the opinion of the Company's general counsel
that the Plaintiff's claims lack merit and the Company should
prevail ultimately in this litigation, management believes
the lawsuit should not have a material adverse effect on the
financial position, results of operations or cash flows of
the Company.
Environmental Indemnification
The Company has entered into an environmental indemnity
agreement with the holder of the $5,000,000 mortgage loan
payable (see Note D) pursuant to which the Company will
defend and hold harmless the Lender from any environmental
claims connected to the property which secures the loan. The
Company through independent environmental consultants has
conducted environmental examinations on the property and has
made environmental remediation pursuant to an administrative
consent order with the U.S. Environmental Protection Agency.
The remediation was performed in accordance with the approved
work plan. Based upon the work performed, the Company does
not believe that further remedial activity will be required.
However, there can be no assurance what costs, if any, the
Company might incur in the future in connection with
environmental matters related to the property.
F-20
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE H-RELATED PARTY TRANSACTIONS
Due to Officers
The amount due to the Company's officers at June 30, 2000 and
1999 represents aggregate advances to the Company (net of
repayments). No formal agreements or repayment terms exist.
NOTE I-LOSSES PER SHARE
The following table presents the computation of basis and
diluted loss per share:
2000 1999
Net (loss) available for common shareholders $ (797,539) $(1,152,361)
Basic and fully diluted loss per share $ (.01) $ (.02)
----------- ------------
Weighted average common shares outstanding 59,329,632 54,331,687
Net loss per share is based upon the weighted average of
shares of common stock outstanding June 30, 2000 and 1999.
NOTE J- GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles,
which contemplates continuation of the Company as a going
concern and realization of assets and settlement of
liabilities and commitments in the normal course of business.
The Company has suffered recurring losses since inception and
has a working capital deficit of approximately $ 14,157,799
as of June 30, 2000. These factors, among others, raise
substantial doubt about Country World Casinos, Inc.'s ability
to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability
and classification of recorded asset or liability amounts,
which might be necessary should the Company be unable to
continue in existence.
Continuation of the business is dependent upon the Company's
obtaining additional financing for the planned casino and
hotel complex. The Company is actively pursing additional
equity and debt financing through discussions with investment
bankers and private investors. There can be no assurance the
Company will be successful in its effort to secure additional
financing
F-21
<PAGE>
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 and 1999
NOTE J- GOING CONCERN (continued)
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
for construction of the casino, and other regulatory bodies,
procuring gaming equipment on satisfactory terms, and
accomplishing these objectives in a timely manner.
If operations and cash flows continue to improve through
these efforts, management believes that the Company can
continue to operate. However, no assurance can be given that
management's actions will result in profitable operations or
the resolution of its liquidity problems.
There can be no assurance, that the Company's plans for
financing will be successful or that the proceeds of such
financing will be sufficient to complete construction and
provide working capital for the opening and operation of the
planned casino and hotel complex.
NOTE K- SUBSEQUENT EVENTS
In July 2000, the Company signed a memorandum of
understanding with Dartmouth General Capital Management, Ltd.
(Dartmouth) to acquire certain Company assets, retire the
outstanding debts of Country World and provide $80 million in
financing to begin construction and development of its Black
Hawk, Colorado casino and hotel project. Subject to certain
conditions, the Dartmouth will commence funding the
commitment on or before January 15, 2001.
F-22
<PAGE>
