U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 2001
Commission file number 0-22450
COUNTRY WORLD CASINOS, INC.
(Name of Small Business Issuer in its charter)
Nevada 13-3140389
(State of jurisdiction of incorporation) (IRS Employer I.D. Number)
200 Monument Road, Suite 9, Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices)
Registrant's telephone number (856) 222-9611
Check whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act during the past 12 months (or for such shorter
period as the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's
class of common stock. The Registrant had 75,000,000 shares of
its common stock outstanding as of March 31, 2001.
COUNTRY WORLD CASINOS, INC.
(A Development Stage Company)
INDEX
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet as of March 31, 2001 Statements of Losses
for the three months ended March 31, 2001 and 2000 and nine
months ended March 31, 2001 and 2000 and for the period from
November 9, 1982 Date of Inception) through March 31,2001 Statements
of cash flows for the nine months ended March 31, 2001 and 2000 and
for the period from November 9, 1982 Date of Inception)
through March 31, 2001
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
BALANCE SHEET
UNAUDITED
March 31, June 30,
2001 2000
ASSETS
CURRENT ASSETS:
Cash $ 383 -
Prepaid Interest 91,935 91,935
Total Current Assets 92,318 91,935
Property, Plant & Equipment, Net 20,412,051 18,220,670
OTHER ASSETS
Deposits 35,000 35,000
$20,539,369 18,347,605
LIABILITIES
CURRENT LIABILITIES
Accounts Payable and Accrued
Liabilities $3,359,534 $2,551,057
Due to Officers and Parent 1,103,418 958,594
Other Liabilities 83,032 42,946
Note Payable 998,000 998,000
Note Payable Related Parties 11,199,262 9,699,137
Total Current Liabilities 16,743,246 14,249,734
COMMITMENTS & CONTINGENCIES
STOCKHOLDER'S EQUITY
Series A Preferred Stock, par value - -
$.001 per share, 25,000,000 shares
authorized, 2,250,000 shares
outstanding at March 31, 2001 and
June 30, 2000
Series B Preferred Stock, par value 1,250,000 275,000
$.25 per share, 5,000,000 shares
authorized, 5,000,000 shares
outstanding at March 31, 2001 and
100,000 at June 30, 2000
Common Stock, par value $.001 per 75,000 61,582
share, 75,000,000 shares authorized
75,000,000 shares outstanding at
March 31, 2001 and 54,331,687 at
June 30, 2000
Additional Paid In Capital 10,381,367 11,296,311
Deficiency accumulated during
development stage (7,910,244) (7,535,022)
Total Stockholder's Equity 3,796,123 4,097,871
$20,539,369 18,347,605
See accompanying footnotes to the unaudited financial statements
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
STATEMENTS OF LOSSES
For the Period
from November 9,
1982 (Date of
Three Months Ending Nine Months Ending Inception)
March 31, March 31, through March 31,
2001 2000 2001 2000 2001
Expenses
Research & Development $ - $ - $ - $ $ 122,000
General and Administrative 110,270 113,743 363,403 485,801 7,433,710
Depreciation - - - - 50,419
Interest Expense 11,982 54,560 11,982 54,560 336,409
Total Expenses 122,252 168,303 375,385 540,361 7,942,538
Net Ordinary Income (122,252) (168,303) (375,385) (540,361) (7,942,538)
Other Expense & Income
Interest Income 113 - 163 - 109,653
Other Income - - - - 735
Rental Income - - - - 45,126
Loss on Non-Marketable
Securities - - - - (85,000)
Loss on Disposal of
property, improvements &
equipment - - - - (15,533)
Write Off of Loan
Receivable - - - - (90,000)
Forfeited Deposit - - - - (100,000)
Net Other Income 113 - 163 - (135,019)
Loss from continuing (122,139) (168,303) (375,222) (540,361) (8,077,557)
operations before
extraordinary item and
income taxes
Provision from income - - - - -
taxes (benefit)
Loss from continuing (122,139) (168,303) (375,222) (540,361) (8,077,557)
operations before
extraordinary item
Extraordinary Item
Extraordinary Gain on
Forgiveness of Debt,
Primarily Related Party - - - - 167,152
Net Income (Loss) $(122,139) $(168,303) $(375,222) $(540,361) $(7,910,405)
Loss per common share $(0.00) $(0.00) $(0.01) $(0.01) $(0.25)
(basic and assuming
dilution)
Weighted average common
shares outstandin 75,000,000 61,581,690 75,000,000 61,581,690
See accompanying footnotes to the unaudited financial statements
COUNTRY WORLD CASINOS, INC.
(A developmental stage company)
STATEMENTS OF CASH FLOWS
For the
Period from
November 9,
1982 (Date of
Inception)
Nine Months ending through
March 31, March 31,
2001 2000 2001
Cash flows from operating activities:
Net income from operating activities $(375,222) $(540,360) $(8,077,558)
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 - - 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 - - (779,435)
Accounts payable and accrued expenses 848,563 833,407 3,767,499
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 473,341 293,047 (3,030,267)
Cash flows used in investing activities:
Acquisition of Property, improvements
and equipment (2,191,381) (1,690,242) (12,795,271)
Deposits & Other - - (62,000)
(Increase) Decrease in Restricted Cash - - (35,000)
Net cash used in investing activities (2,191,381) (1,690,242) (12,892,271)
Cash flows (used in)/provided by financing
activities:
Payment of Capital Lease Obligation - - (4,233)
Proceeds from Long-Term Borrowings, net 1,644,949 1,397,195 10,629,995
Proceeds from Stock and Warrant Issuance 73,474 - 5,294,309
Capital Contribution - - 2,850
Net cash used in financing activities 1,718,423 1,397,195 15,992,921
Net increase in cash and cash equivalents 383 - 383
Cash and cash equivalents at July 1 - - -
Cash and cash equivalents at December 31 $ 383 $ - $ 383
Supplemental Disclosure of Cash Flow:
Interest Paid - - 5,761
Common Shares issued for property - - 250,000
Preferred Shares issued for property - - 2,250,000
Common Shares issued for services and debt - - 1,184,757
Preferred Shares issued for services and debt - - 400,000
Non Cash Acquisition of property, improvements,
and equipment 2,191,391 - 6,288,850
Non Cash Proceeds from Notes Payable 1,644,694 - 4,564,820
See accompanying footnotes to the unaudited financial statements
COUNTRY WORLD CASINOS, INC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB, and
therefore, do not include all the information necessary for a fair
presentation of financial position, results of operations and cash flows
in conformity with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended March
31, 2001 are not necessarily indicative of the results that may be
expected for the year ended June 30, 2001. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated June 30, 2000 financial statements and footnotes thereto
included in the Company's SEC Form 10KSB/A.
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 March 31, 2001, 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 period amounts have been reclassified for comparative
purposes
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere
within this Report.
DESCRIPTION OF THE COMPANY
The Company is engage in the development of a full service hotel and
casino in Blackhawk, Colorado. Black Hawk is a picturesque mountain town
approximately 40 miles west of Denver. The Company's planned
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 planned 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.
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.
FORWARD LOOKING STATEMENTS
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.
PLAN OF OPERATION
The Company is still in the development stage and is yet to earn revenues
from operations. The Company may experience fluctuations in operating
results in future periods due to a variety of factors including, but not
limited to, the Company's obtaining additional financing for the planned
Casino/ Hotel complex, the securing licenses and compliance with
governmental regulations, grading and construction of the planned
Casino/Hotel site, obtaining the necessary permits and approvals from the
City of Black Hawk for construction of the planned Casino/Hotel, and
other regulatory bodies, procuring gaming equipment on satisfactory
terms, and accomplishing these objectives in a timely manner..
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
RESULTS OF OPERATIONS
The Company has generated no revenues from operations from its
inception. The ability of the Company to generate revenues in the future
will be dependent upon realization of its plans to develop a planned
Casino/Hotel complex. The Company continues to incur losses of
approximately $200,000 per month to service the Company's debt secured by
the real property and improvements in addition to ongoing obligations
such as rent and utilities for the Company's corporate office.
LIQUIDITY & CAPIRAL RESOURCES
As of March 31, 2001, the Registrant had a deficit in working capital of
$16,650,928. As a result of the Company's operating losses from its
inception through March 31, 2001, the Registrant generated a cash flow
deficit of $3,030,267 from operating activities. Cash flows used in
investing activities was $12,892,271 during the period November 9, 1982
through March 31, 2001. The Company met its cash requirements during this
period through the private placement of $5,340,835 of the Company's
common and preferred stock and loan proceeds of $9,775,895.
In July 2000, the Company signed a memorandum of understanding with
Dartmouth General Capital Management, Ltd. (Dartmouth), amended in
November 2000, which, if consummated, provide will provide capital of
approximately $15 million to pay the secured and unsecured debt of the
Company and an aggregate of $80 million in financing to begin development
and construction of its planned Black Hawk, Colorado Casino/Hotel
project.
It is anticipated that funding will commence in May or June 2001.
In exchange for Dartmouth's contribution, the Company has issued the
balance of its authorized but unissued shares of common and preferred
Series B stock to Dartmouth (approximately 13.4 and 3.9 million shares,
respectively) and certain existing Company shareholders contributed 6
million shares of common stock and 500,000 shares of Series B preferred
stock to Dartmouth. Although issued, the Company retains voting rights of
such stock until funded by Dartmouth. If the transaction is consummated,
Dartmouth will have accumulated approximately 50.6% of the voting stock
of the Company.
While Dartmouth is confident in its abilities to provide the financing
described above, there can be no assurance that the transaction and
related financing will be consummated.
While the Company has raised capital to meet its working capital and
financing needs in the past, additional financing is required in
order to meet the Company's current and projected cash flow deficits
from operations and development. The Company is seeking financing
in the form of equity and debt in order to provide the necessary
working capital and construction financing. The Company currently
has the Dartmouth commitment for financing. There are no assurances
the Company will be successful in raising the funds required.
PRODUCT RESEARCH AND DEVELOPMENT
Company-sponsored research and development costs related to both
present and future products are expended in the period incurred.
Total expenditures on research and product development for the
period November 9, 1982 (date of inception) through March 31, 2001
were approximately $ 122,000.
The Company does not anticipate incurring product research costs,
but will however incur development costs during the next 12 months
if the Dartmouth funding is provided.
ACQUISITION OR DISPOSITION OF PLANT AND EQUIPMENT
The Company does anticipate the sale of any significant property,
plant or equipment during the next twelve months. The Company does
not anticipate the acquisition of any significant property, plant or
equipment during the next 12 months, other than computer equipment
and peripherals used in the Company's day-to-day operations. The
Company believes it has sufficient resources available to meet these
acquisition needs.
NUMBER OF EMPLOYEES
During the period ended March 31, 2001, the Company had two (2)
employees. In order for the Company to attract and retain quality
personnel, the Company anticipates it will have to offer competitive
salaries to current and future employees. Subject to obtaining
financing for the construction of the planned Casino/Hotel complex,
the Company anticipates increasing its employment base to ten (10)
to fifteen (15) employees during the next 12 months. As the Company
continues to expand, the Company will incur additional costs for
personnel. This projected increase in personnel is dependent upon
the Company generating revenues and obtaining sources of financing.
There are no assurances the Company will be successful in raising
the funds required or generating revenues sufficient to fund the
projected increase in the number of employees.
TRENDS, RISKS AND UNCERTAINTIES
The Company has sought to identify what it believes to be the most
significant risks to its business, but cannot predict whether or to
what extent any of such risks may be realized nor can there be any
assurances that the Company has identified all possible risks that
might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to the
Company's stock.
LIMITED OPERATING HISTORY; ANTICIPATED LOSSES; UNCERTAINTY OF FUTURE RESULTS
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The
Company's prospects must be evaluated with a view to the risks
encountered by a company in an early stage of development,
particularly in light of the uncertainties relating to the
construction and development of the Casino/Hotel complex intends to
complete and operate and the acceptance of the Company's business
model. The Company will be incurring costs to develop, introduce
and enhance its interactive website, to establish marketing
relationships, to acquire and develop products that will compliment
each other and to build an administrative organization. To the
extent that such expenses are not subsequently followed by
commensurate revenues, the Company's business, results of operations
and financial condition will be materially adversely affected.
There can be no assurance that the Company will be able to generate
sufficient revenues from the operation of the planned Casino/Hotel.
The Company expects negative cash flow from operations to continue
for the next 12 months as it continues to seek financing for the
planned Casino/Hotel complex. If cash generated by operations is
insufficient to satisfy the Company's liquidity requirements, the
Company may be required to sell additional equity or debt
securities. The sale of additional equity or convertible debt
securities would result in additional dilution to the Company's
stockholders.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results may fluctuate
significantly in the future as a result of a variety of factors,
most of which are outside the Company's control, including but not
limited to, financing of the planned Casio/Hotel facility,
construction of the facility, obtaining necessary licenses and
permits for development and construction, competing entertainment
products and locations; seasonal trends; the amount and timing of
capital expenditures and other costs relating to the planned
development of the Company's Casino/Hotel facility; price
competition or pricing changes in the industry; technical
difficulties or system downtime; general economic conditions, and
economic conditions specific to the gaming and hospitality industry.
The Company's quarterly results may also be significantly impacted
by the impact of the accounting treatment of acquisitions, financing
transactions or other matters. Particularly at the Company's early
stage of development, such accounting treatment can have a material
impact on the results for any quarter. Due to the foregoing
factors, among others, it is likely that the Company's operating
results will fall below the expectations of the Company or investors
in some future quarter.
LIMITED PUBLIC MARKET, POSSIBLE VOLATILITY OF SHARE PRICE
As of March 31, 2001, the Company's Common Stock is quoted on the
National Quotation Bureau, or the "Pink Sheets" under the ticker
symbol "CWRC" and there are 75,000,000 shares of Common Stock
outstanding. There can be no assurance that a trading market will
be sustained in the future. Factors such as, but not limited to,
financing of the planned Casio/Hotel facility, construction of the
facility, obtaining necessary licenses and permits for development
and construction, acquisitions or strategic alliances entered into
by the Company or its competitors, failure to meet security
analysts' expectations, government regulatory action, and market
conditions for gaming and hospitality stocks in general could have a
material effect on the volatility of the Company's stock price.
In January 2001, the Company file amended 10-KSB's for the years
ended June 30, 1998, June 1999 and June 2000. Additionally, the
Company filed an amended 10-QSB for the period ended September 30,
2000.
Following filing with The Securities and Exchange Commission, the
Company made contact with a market maker who accordingly filed the
appropriate documentation for re-listing on the OTC Bulletin Board.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2 - Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K filed during the nine months ended
March 31, 2001.
Form 8-K, as filed with the Securities and
Exchange Commission in November 2000 with regard to a
change in auditing firms to be used by the Company.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Country World Casinos, Inc.
Registrant
May 15, 2001 By: /s/ William Patrowicz
Date William Patrowicz
President and
Chief Executive Officer