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, 1997

     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 Identification 
Incorporation or Organization)                 Number)

          200 Monument Road, Suite 10, Bala Cynwyd, Pennsylvania 19004
               (Address of Principal Executive Offices)(Zip Code)

Issuer's Telephone Number, Including Area Code: (610) 617-0400

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)

(PAGE)

     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 4,585,734 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 15, 1997 was $859,825.00. 

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 October 31, 1997, 
there were outstanding 13,481,687 shares of the issuer's Common Stock, par 
value $.001.

                                      -2-
<PAGE>

                                     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 from 
New Allied Development Corporation and its subsidiary, Tommyknocker Casino 
Corp., 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").  Except as specifically provided elsewhere herein to the 
contrary, New Allied Development Corporation and Tommyknocker Casino Corp. 
will be referred to hereinafter collectively as "New Allied."

     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.  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 shall have 180 
days to provide for the above.

     The Company is confident in the parties' ability to raise such funds, 
however, there can be no assurance that the Company will be able to obtain the 
necessary financing.  In addition, the Company's ability to operate the casino 
will be dependent upon substantial other conditions, including the obtaining 
of licenses and compliance with governmental regulations, grading and 
construction of the casino, obtaining the necessary permits and approvals from 
the City of Black Hawk and other regulatory bodies, procuring gaming equipment 
on satisfactory terms, and accomplishing these objectives in a timely manner.

     In order to begin the process of timely completing its goals the Company 
has contracted with Colorado Gaming Development Company, Inc., Semple Brown 
Roberts, P.C. and PCL Construction Services, Inc., all of Denver, Colorado to 
design and construct the planned casino and hotel complex.  In addition, the 
Company has signed a management agreement with Signature Hospitality 
Resources, Inc. of Denver, Colorado to manage its Radisson Black Hawk Hotel, a 
separate agreement to use the national flag of Radisson on the hotel and a 
management agreement with Luciani & Associates, LLC. and Casino Research and Pla
nning Corp., joint venture of Atlantic City, New Jersey, to manage the casino 
operations.  All parties will assist the architect in design of their 
respective operations.

                                      -3-
<PAGE>

     The Company is engaged in the design, development and construction of the 
Radisson Hotel and Country World Casino (the "Hotel Casino") in Black Hawk, 
Colorado.  The planned Hotel Casino will be a seven story complex, featuring 
five stories of hotel rooms above a two-story, 75,000 square foot casino, and 
an underground parking garage.  Other amenities will include one or more full 
service restaurants, a buffet, entertainment lounge and retail shops.  When 
completed as planned, the Hotel Casino will be largest hotel and casino 
complex in Colorado.  Construction and opening of the Hotel Casino is 
dependent upon the Company's ability to successfully raise the required 
capital.  The Company plans to seek $79,500,000 of debt financing from 
institutional investors through the issuance of notes secured by a first deed 
of trust on the Hotel Casino property and by a security interest in the 
revenues from the operation of the Hotel Casino.  There can be no assurance, 
however, that the Company will be successful in raising such financing or that 
the proceeds of such financing will be sufficient to complete construction and 
provide working capital for the opening and operation of the Hotel Casino.

     The casino level of the project, at approximately 75,000 square feet, 
will be the largest in Colorado and will be capable of accommodating 1,800 
slot machines and 32 gaming tables.  The Company will open the facility with 
1,000 slot machines, 20 blackjack tables and 12 poker tables, and may add up 
to 800 additional slot machines if management determines that the additional 
gaming devices will produce equal per square foot revenue and will not create 
excess capacity.  The Company expects that slot machines will be the greatest 
source of its gaming revenues.  Slot machines are less labor intensive and 
require less square footage than table games, and also generate higher profit 
margins. 

     The Country World Casino's atmosphere will feature a country western 
music theme similar to the rock and roll music theme successfully employed by 
the Hard Rock Cafe.  The Casino decor will include memorabilia from the great 
country singers, both past and present, with a star walk of their own.  The 
country western music theme has not been established in the Black Hawk/Central 
City, Colorado gaming market, and therefore will give the Country World Casino 
its own unique identity.  Management believes that as casinos have become more 
numerous, the gaming industry has begun to recognize that popular themes and 
amenities such as quality dining and hotel accommodations play an important 
role in attracting customers to casinos.  The theme is intended to appeal to 
the Hotel Casino's target customer base, which consists primarily of residents 
of the Denver metropolitan area as well as other Colorado communities located 
within driving distance of Black Hawk.

     The Radisson Black Hawk Hotel will provide overnight accommodations with 
290 standard rooms and 35 suites, making it the first destination resort of 
its kind in Black Hawk.  Complimenting both the casino and hotel will be a 
three story underground parking facility for 865 cars featuring both valet and 
self parking options, and the only covered on-site bus turnaround currently 
available in Black Hawk for the convenience of day trip customers.

                                      -4-
<PAGE>

     Black Hawk is a picturesque mountain town approximately 40 miles west of 
Denver.  In the past year, Black Hawk hosted approximately 3 million visitors 
and generated almost 60% of the state's gaming revenues.  The 112,000 square 
foot Hotel Casino site on the northern most end of the Black Hawk gaming 
district is in a most highly visible location as it is in a direct line of 
site to all visitors approaching Black Hawk's main intersection on State 
Highway 119.  The seven story structure will tower high above all existing 
facilities.  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 
Country World Casino's country western music theme, country 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-billion 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.

     Gaming operations at the Country World Casino will be under the 
management of a joint venture between Luciani & Associates, LLC and Casino 
Research and Planning Corp. of Atlantic City, New Jersey (the "Casino 
Manager"), who are leaders in casino design, management and security 
services.  

     Hotel operations will be under the management of Signature Hospitality 
Resources, Inc. of Denver, Colorado (the "Hotel Manager'), which provides a 
full range of hotel and resort support services including operations, sales, 
marketing, food, beverage, human resources, MIS and technical services.  

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 

                                      -5-
<PAGE>

conduct of licensees and their employees, and may bring disciplinary actions 
against licensees and their employees.  He also may conduct detailed 
background investigations of persons who loan money to the Company. 

     The Colorado Gaming Commission is empowered to issue five types of gaming 
and gaming related licenses. The licenses are revocable and 
non-transferrable.  The failure or inability of the Company or the Casino 
Manager to obtain and maintain the necessary gaming licenses could prevent the 
Company from operating the Casino and could have a material adverse effect on 
the Company.  All persons employed by the Company and the Casino Manager and 
involved, directly or indirectly, in gaming operations in Colorado also are 
required to obtain a Colorado gaming license.  All licenses must be renewed 
annually.

     The Company's President, Roger Leclerc currently holds a key employee 
license which entitles him to operate a casino in the State of Colorado.  The 
Company, its Chairman and Chief Executive Officer, Larry Berman, and its 
Secretary/Treasurer, William Patrowicz will apply for their respective 
licenses in January 1998 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 

                                      -6-
<PAGE>

licensee or of a publicly traded company affiliated with a licensee; or (ix) a 
person owns less than five percent (5%) of the voting securities of the 
publicly traded licensee or publicly traded company affiliated with a 
licensee. Hence, the Company's and its stockholders' business opportunities in 
Colorado are limited to such interests that comply with the statute and 
Commission's rule.

     Although attorneys for the Colorado legislature initially expressed 
concern that the promulgation of the above-described regulation was beyond the 
Colorado Gaming Commission's statutory delegated authority, they appear to 
have retreated from this position. Therefore, unless the Colorado legislature 
repeals the regulation, it is likely that it will continue in effect.

     In addition, pursuant to the Colorado Gaming Act, no manufacturer or 
distributor of slot machines may have an interest in any casino operator, 
allow any of its officers to have such an interest, employ any person if such 
person is employed by a casino operator, or allow any casino operator or 
person with a substantial interest therein to have an interest in a 
manufacturer's or distributor's business.  The Colorado Gaming Commission has 
ruled that a person does not have a "substantial interest" if it directly or 
indirectly has less than five percent (5%) of such voting securities of a 
licensee.

     Under the Colorado Gaming Act, any person or entity having any direct or 
indirect interest in a gaming licensee or an applicant for a gaming license, 
including, but not limited to, the Company and stockholders of the Company, 
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 
associated person investigation fee currently is $48 per hour. 

     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 

                                      -7-
<PAGE>

(5%) or greater interest or a controlling interest in a licensed publicly 
traded corporation, (iv) all general partners and all limited partners of a 
licensed partnership, (v) all persons which have a relationship similar to 
that of an officer, director or stockholder of a corporation (such as members 
and managers of a limited liability company), (vi) all persons supplying 
financing or loaning money to any licensee connected with the establishment or 
operation of limited gaming, and (vii) all persons having a contract, lease or 
ongoing financial or business arrangement with any licensee, where such 
contract, lease or arrangement relates to limited gaming operations, 
equipment, devices or premises.  For purposes of the Colorado Gaming Act, a 
note secured by a deed of trust on casino property is considered a "lease." 

     In addition, under the Colorado Gaming Act regulations, every person who 
is a party to a "gaming contract" with an applicant for a license, or with a 
licensee, upon the request of the Colorado Gaming Commission or the Director, 
promptly must provide to the Colorado Gaming Commission or Director all 
information which may be requested concerning financial history, financial 
holdings, real and personal property ownership, interests in other companies, 
criminal history, personal history and associations, character, reputation in 
the community, and all other information which might be relevant to a 
determination whether a person would be suitable to be licensed by the 
Colorado Gaming Commission.  Failure to provide all information requested 
constitutes sufficient grounds for the Director or the Colorado Gaming 
Commission to require a licensee or applicant to terminate its "gaming 
contract" (as defined below) with any person who failed to provide the 
information requested. In addition, the Director or the Colorado Gaming 
Commission may require changes in "gaming contracts" before an application is 
approved or participation in the contract is allowed.  A "gaming contract" is 
defined as an agreement in which a person does business with or on the 
premises of a licensed entity.  

     An application for licensure or suitability may be denied for any cause 
deemed reasonable by the Colorado Gaming Commission or the Director, as 
appropriate. Specifically, the Colorado Gaming Commission and the Director 
must deny a license to any applicant who (i) fails to prove by clear and 
convincing evidence that the applicant is qualified; (ii) fails to provide 
information and documentation requested; (iii) fails to reveal any fact 
material to qualification, or supplies information which is untrue or 
misleading as to a material fact pertaining to qualification; (iv) has been, 
or has any director, officer, general partner, stockholder, limited partner or 
other person who has a financial or equity interest in the applicant who has 
been, convicted of certain crimes, including the service of a sentence upon 
conviction of a felony in a correctional facility, city or county jail, or 
community correctional facility or under the state board of parole or any 
probation department within ten years prior to the date of the application, 
gambling-related offenses, theft by deception or crimes involving fraud or 
misrepresentation, is under current prosecution for such crimes (during the 
pendency of which license determination may be deferred), is a career offender 
or a member or associate of a career offender cartel, or is a professional 
gambler; or (v) has refused to cooperate with any state or federal body 
investigating organized crime, official corruption or gaming offenses.

     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. 
 
                                      -8-
<PAGE>

     The Colorado Gaming Commission does not need to approve in advance a 
public offering of securities, but rather requires a filing of notice and 
additional documents with regard to such public offering prior to such public 
offering.  Under the regulations, the Colorado Gaming Commission may, in its 
discretion, require additional information and prior approval of such public 
offering.

     In addition, the Colorado Gaming Act regulations prohibit a licensee or 
affiliated company thereof, such as the Company, from paying dividends, 
interest or other remuneration to any unsuitable person, or recognizing the 
exercise of any voting rights by any unsuitable person. Further, the Company 
may repurchase the shares of anyone found unsuitable at the lesser of the cash 
equivalent to the original investment in the Company or the current market 
price. Further, the regulations require anyone with a material involvement 
with a licensee, including a director or officer of a holding company, such as 
the Company, to file for a finding of suitability if required by the Colorado 
Gaming Commission.

     In addition to its authority to deny an application for a license or 
suitability, the Colorado Gaming Commission has jurisdiction to disapprove a 
change incorporate position of a licensee and may have such authority with 
respect to any entity which is required to be found suitable by the Colorado 
Gaming Commission. The Colorado Gaming Commission has the power to require the 
Company to suspend or dismiss managers, officers, directors and other key 
employees or sever relationships with other persons who refuse to file 
appropriate applications or whom the authorities find unsuitable to act in 
such capacities, and may have such power with respect to any entity which is 
required to be found suitable.

     Once the Company obtains the required gaming licenses, a person or entity 
will not be permitted to sell, lease, purchase, convey or acquire a 
controlling interest in the Company without the prior approval of the Colorado 
Gaming Commission, and the Company will be prohibited from selling any 
interest in the Casino without the prior approval of the Colorado Gaming 
Commission. 

       The Casino may operate only between 8:00 am. to 2:00 am., and may 
permit only individuals 21 years or older to gamble.  Only slot machines, 
blackjack and poker, with a maximum single bet of $5.00, are permitted.  A 
Colorado casino may not provide credit to its gaming patrons.  The Casino must 
not exceed certain gaming square footage limits as a total of each floor and 
the full building.

GAMING TAXES

     The Colorado Constitution permits a gaming tax of up to 40% on adjusted 
gross gaming proceeds.  The Colorado Gaming Commission has set a gaming tax 
rate of 2% on adjusted gross gaming proceeds of up to and including $2 
million, 4% from $2 million to $4 million, 14% from $4 million to $5 million, 
18% from $5 million to $10 million, and 20% above $10 million for the fiscal 

                                      -9-
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year ending September 30, 1997.  The Colorado Gaming Commission also has 
imposed an annual device fee of $75 per gaming device.  The Colorado Gaming 
Commission may revise the gaming tax rate and device fee from time to time.  
Black Hawk has imposed an annual device fee of $700 per gaming device and may 
revise the same from time to time.

OTHER REGULATIONS

     The sale of alcoholic beverages is subject to licensing, control and 
regulation by the Colorado Liquor Agencies. All persons who directly or 
indirectly own 10% or more of the Company must file applications and possibly 
be investigated by the Colorado Liquor Agencies. The Colorado Liquor Agencies 
also may investigate those persons who, directly or indirectly, loan money to 
or have any financial interest in liquor licensees.  All licenses are 
revocable and not transferable.  The Colorado Liquor Agencies have the full 
power to limit, condition, suspend or revoke any such license and any such 
disciplinary action could (and revocation would) have a material adverse 
effect upon the operations of the Company.  No person with an interest in any 
holder of a hotel and restaurant liquor license can have an interest in a 
liquor licensee which holds anything other than a hotel and restaurant liquor 
license, and specifically cannot have an interest in an entity which holds a 
gaming tavern license.

     The Company's operations will be subject to a wide variety of other 
federal, state and local laws and government regulations that could increase 
its costs of construction and its operating expenses.  Such regulations 
include architectural and requirements, building codes, health and safety 
laws, environmental laws, minimum wage and employment laws, and laws such as 
the Americans With Disabilities Act that require public facilities such as the 
Company's Hotel and Casino to be assessable and usable by people in wheel 
chairs.

     Slot machines are the most popular gaming devices in Colorado, and the 
Company expects that slot machines will be the greatest source of its gaming 
revenues. Slot machines are less labor intensive and require less square 
footage than table games, and also generate higher profit margins.  Slot 
machines in Colorado permit play in denominations of nickels, quarters, half 
dollars, dollars and five dollars.  Casinos are permitted to provide 
"progressive jackpots" that increase with continued play at the designated 
slot machines.  Slot machines come in both the mechanical spinning reels 
variety and video slot machines.

     Twenty-five varieties of poker are authorized for play in Colorado 
casinos.  Sixteen varieties of poker are "traditional" games in which the 
players play against each other to win a "pot" built upon their own wagers.  
These games include a variety of five-card draw, five-card and seven-card  
stud, and "hold 'em" games. In those games, the casino takes a fee or "rake" 
from each pot.  Nine other poker games the players play against the casino to 
win payout.  The casino does not take a "rake" from the pot in those games, 
but rather retains players' losses.

     Five varieties of blackjack or "21" are authorized for play in Colorado 
casinos. Under Colorado rules, dealer must draw to hands of 16 or less and 

                                      -10-
<PAGE>

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, 
National Park Service.  In conformance with this designation, the town of 
Black Hawk in October 1990 established the Architectural and Design Review 
Guidelines, authorizing the town to regulate historical and architectural 
matters within the town.  These guidelines are used by Black Hawk's Historic 
Architectural Review Commission ("HARC") to evaluate and approve all 
applications for construction.

     Furthermore, the amendment to the Colorado Constitution authorizing 
limited stakes gaming provides that such gaming shall be conducted in 
structures which conform, as determined by the respective municipal governing 
body, to the architectural styles and designs common to the area prior to 
World War I and which conform to the requirements of applicable respective 
municipal ordinances, regardless of the age of the structure.  Accordingly, 
the Company is designing its building in conformance with the requirements of 
HARC, and the building design will reflect the architectural style consistent 
with the guidelines.

     The site is located on Colorado State Highway 119, approximately 
one-quarter mile past the Gregory Street turn-off that leads to Central City 
through Black Hawk.  As such, the Company's casino facility will not be 
contiguous  to the many casinos which are located on Gregory Street and Main 
Street in Black Hawk.  The facility will be designed to allow for a maximum 
exposure to approaching traffic, and will be in a direct site line from the 
turn from the Highway into the town of Black Hawk.  The Company believes that 
it is this ability, and ease of access that should provide the Company a 
competitive benefit as compared to the other casinos which are located in the 
central portion of town.  Moreover, many casinos in Black Hawk/Central City 
lack contiguous or convenient parking and, as a result, have had difficulty in 
attracting and retaining customers.  In contrast, the Company's site will 
offer convenient valet and self parking to its customers, as well as the only 
covered on-site bus turnaround to date for the convenience of day trip 
customers.

     The Company's Property was acquired in August 1993 from New Allied.  The 
Company paid to New Allied $550,000 in cash, delivered a promissory note in 
the amount of $3,450,000 and issued 2,250,000 shares of newly created Series A 
Preferred Stock, which is convertible to Common Stock on a one-for-one basis.  
The Company also obligated itself to file a Registration Statement to cover 
the distribution of the Series A Preferred Stock to the shareholders of New 
Allied.

                                      -11-
<PAGE>

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, largest hotel in the Black Hawk/Central City 
market is the 118 room Harvey's Wagon Wheel located in Central City, which has 
on-site parking for only 195 cars.  In contrast, the Company's Hotel Casino 
will have 290 standard hotel rooms and 35 suites and will have a parking 
garage that can accommodate 865 car.  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 or under 
construction, including the Black Hawk/Jacobs Casino which will include 1,000 
gaming devices and parking for 280 cars with provision for a 50 room hotel to 
be added at a later date; and the Isle of Capri, which purportedly will have 
more than 1,100 slot machines, 24 card tables (for blackjack and poker) and a 
parking garage for 1,000 cars.  The Isle of Capri Casino will not initially 
provide any hotel accommodations, although it purportedly will be designed to 
permit the construction of a hotel on top of the casino.  Riviera Holdings 
Corporation has announced plans to construct a large casino with 1,000 slot 
machines and parking for 500 cars.

     The following table presents certain information about the six largest 
casinos currently operating in the Black Hawk/Central City market, which 
control approximately 61% of the slot machines, 65% of the blackjack tables 
and 100% of the poker games in the Black Hawk/Central City market.

                                      -12-
<PAGE>
 
                            Size       Date      Number of Gaming Devises*
Casino                    Sq. Ft.*    Opened     Slots   Blackjack   Poker
Harvey's Wagon Wheel       40,000      12/94      850       18         9
Colorado Central Station   44,300      12/93      720       10         9
Bullwhackers               33,200       7/92      649        8         6
Canyon Casino              62,600      12/93      607        8        --
Gilpin Hotel/
   Black Hawk Gaming       35,300       1/95      520        8         8
Fitzgeralds Casino         26,700       2/95      492        6         5

*Estimated


     The Company plans to attain a competitive advantage over the established 
casinos by offering superior lodging, an entertainment lounge, indoor 
self-parking, and dining facilities, as well as a casino that is larger than 
the rest.  In comparison to the casinos that are presently operating in the 
Black Hawk/Central City market, and those that are planned, the Company's 
Hotel Casino will offer a 75,000 square foot casino featuring 1,000 mechanical 
and video slot machine, 20 blackjack tables, and 12 poker tables, all located 
on a single level.  

     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 may also sponsor charter bus services from the Denver metropolitan 
area as a promotional consideration.

     Gaming in Colorado is also permitted in the town of Cripple Creek and on 
two Indian reservations.  During the same 12 month period ended June 30, 1996, 
the 24 casinos located in Cripple Creek generated more than $97,000,000 of 
gaming revenues.  Cripple Creek is located approximately 110 miles south of 
Black Hawk.  The two casinos operated by Indian tribes are located a further 
distance away.  The tribes are not required to pay taxes or to report revenues 
to the Colorado Department of Revenue Division of Gaming.

     To a lesser extent, the Company's Casino will compete with casinos in 
other states, including those in Las Vegas, Reno and Lake Tahoe, Nevada, and 
river boat casinos operated in a number of mid-western and southern states.

                                      -13-
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     The Company is the plaintiff and a counterclaim defendant in a lawsuit 
pending in Denver, Colorado District Court, Case No. 95CV2310, entitled 
Country World Casinos, Inc., a Nevada corporation, Plaintiff, v. Tommyknocker 
Casino Corp., a Colorado corporation and New Allied Development Corporation, a 
Colorado corporation, Defendants, v. Country World Casinos, Inc., a Nevada 
Corporation, Holly Products, Inc., a New Jersey corporation, Ronald G. Nathan, 
Sal Lauria,  Roger D. Leclerc, William H. Patrowicz and David Singer, 
counterclaim Defendants.  This lawsuit was commenced by the Company on May 26, 
1995.  In the Company's Amended Complaint, the Company asserted eight claims 
against New Allied Development Corporation ("New Allied") and its subsidiary 
Tommyknocker Casino Corp. ("TKCC").

     In its complaint, the Company sought a declaration that it was not 
obligated to make any additional payments to TKCC under a certain promissory 
note executed by the Company in connection with its purchase of the Black Hawk 
property, until such time as TKCC secured the release of a prior deed of 
trust.  The Company also sought recovery of more than $656,000 paid to or on 
behalf of TKCC to clean up and remediate environmental contamination on the 
property purchased from TKCC in August 1993.  The Company sought to recover 
all or part of this amount from TKCC under the following legal theories: (1) 
that the environmental contamination on the property constitutes an 
encumbrance, which is in breach of the covenant against encumbrances contained 
in the warranty deed by which TKCC conveyed the property to the Company; (2) 
that TKCC and New Allied made fraudulent misrepresentations to the Company 
regarding the costs of the environmental clean up and remediation and that the 
Company is entitled to recover damages resulting from this misrepresentations, 
as well as exemplary damages; (3) that TKCC and New Allied made negligent 
misrepresentations to the Company regarding the costs of the environmental 
clean up and remediation and that the Company is entitled to recover damages 
resulting from these misrepresentations, as well as exemplary damages; (4) 
that TKCC's and New Allied's actions violated their duties of good faith and 
fair dealing; (5) that the misrepresentations of TKCC and New Allied 
constitute deceptive trade practices in violation of the Colorado Consumer 
Protection Act; and (6) that any agreement under which the Company purportedly 
agreed to pay for the environmental remediation and clean up costs (which 
agreement the Company denies exists) is void and unenforceable under various 
principles of law, including the statute of frauds and CERCLA.

     On or about June 15, 1995, following the Company's commencement of the 
lawsuit described above, TKCC filed a notice of election to foreclose on its 
note and deed of trust which were secured by the Company's Black Hawk 
property.  The Company denied that it was in default under the note because of 
TKCC's prior breach of the terms of the note by its failure to secure the 
immediate release of the first deed of trust on the property upon its receipt 
of $725,000 in January 1995.  A Denver District Court Magistrate ruled that 
since the Company has not paid to TKCC the monthly installments under the note 
since May 1995, the Company was in default, despite TKCC's failure to secure 
the release of the first deed of trust.  The Magistrate's Order is neither 
appealable nor binding in any subsequent proceeding.

                                      -14-
<PAGE>

     On October 12, 1995, the Company filed a Chapter 11 Petition in 
bankruptcy in the United States Bankruptcy in the United States Bankruptcy 
Court for the District of Colorado, Case No. 95-20563 RJB. The filing of the 
Company's bankruptcy petition stayed TKCC's pending foreclosure sale of the 
Black Hawk property.  The Bankruptcy Court ruled that the Company was 
obligated to pay the principal amount of the note plus accrued interest, but 
not certain default interest claimed by TKCC to be owing.  The Bankruptcy 
Court also ruled against the Company on the claims pertaining to the cost of 
environmental clean-up. The Company paid New Allied approximately $2,300,000 
and all prior deeds of trust were released.  The Company has filed an appeal 
of the Bankruptcy Court's ruling.  New Allied has crossed appealed the denial 
of late payment fees and interest.  Such appeals are pending.

     In March 1996 the Bankruptcy Court granted the Company's motion to 
approve $5 million in financing, which financing was obtained on May 31, 
1996.  The $5 million financing was obtained from a group of lenders led by 
Kennedy Funding, Inc. and Anglo-American Financial as agent ("Kennedy").

     In September 1996, the Bankruptcy Court held hearings to determine the 
amounts due to New Allied as well as other issues. The Company utilized the 
proceeds from the $5 million Kennedy loan in accordance with the Court's Order 
and paid New Allied and all unsecured creditors in full, as determined by the 
Court.

     The Company disagreed with the amounts deemed by the Bankruptcy Court to 
be owed to New Allied and in December 1996 filed an appeal of the Court's 
ruling.  New Allied cross appealed and such appeals are pending.

     In March 1997, the Court ordered the dismissal of the Company from 
Chapter 11 but retained jurisdiction over the appeals.

     The pending lawsuit between the Company and New Allied and TKCC was 
stayed upon the filing of the Company's bankruptcy petition.  That stay was 
lifted when the bankruptcy case was dismissed in March 1997, and the Company 
is now moving forward with these proceedings.

     The Company is seeking a court order requiring TKCC and New Allied to 
sell to the Company their 2.5 million shares of voting stock in the Company at 
the price set forth in ss.47.1-4.508 Rule 4.5 of the Colorado Gaming 
Regulations on the basis that New Allied and TKCC might possibly be unsuitable 
to hold voting securities in a licensed casino.  As part of the consideration 
given by the Company to TKCC to purchase the Black Hawk property, the Company 
issued to TKCC 2,250,000 shares of non-voting preferred stock in the Company.  
That preferred stock was subsequently given voting rights.  In a subsequent 
real estate purchase transaction, the Company issued to New Allied 250,000 
share of common stock.

     TKCC and New Allied have filed an answer to some of the Company's claims, 
denying liability.  In addition, TKCC and New Allied have filed counterclaims 

                                      -15-
<PAGE>

against the Company, as well as against Holly Products, Inc. ("Holly"), the 
majority shareholder in the Company, Ronald G. Nathan ("Nathan"), Sal Lauria 
("Lauria"), and David Singer ("Singer") former directors of the Company, and 
Roger G. Leclerc ("Leclerc") and William H. Patrowicz ("Patrowicz"), who are 
currently officers and directors of the Company.  TKCC alleges that the 
Company has breached an agreement to file a registration statement for the 
preferred stock given to TKCC as part of the consideration for purchase of the 
Black Hawk property.  The Company has filed an answer denying liability on 
this counterclaim.  The Federal Bankruptcy Court ruled that the Company was 
not in breach of its agreement.

     TKCC and New Allied have asserted that the Company, as well as Holly, 
Nathan, Lauria, Leclerc, Patrowicz and Singer, breached their fiduciary duties 
by the issuance of five million shares of common stock in the Company to 
Holly.  TKCC and New Allied seek actual and exemplary damages allegedly caused 
by said alleged wrongful issuance of stock.  TKCC and New Allied seek an 
injunction requiring the Company and it board of directors to cancel the five 
million shares of stock issued to Holly.

     The Company, as well as Leclerc, Holly, Patrowicz and Singer, have filed 
answers denying any wrongful conduct or any liability to TKCC or New Allied 
resulting from said issuance of stock to Holly and have affirmatively asserted 
that said issuance of stock was proper.  Neither Nathan nor Lauria has been 
served with the summons and counterclaim and have not yet appeared in this 
lawsuit.

     The Company is a defendant in a lawsuit pending in Travis County, Texas 
District Court, Cause No. 95-04782, 200th Judicial District, entitled James 
Hamilton, Plaintiff v. Robert Todd Financial Corporation; Dean Anthony 
Esposito; Marco Guy Fiore, Jr.; Robert Bobak Fallah; Optex Biomedical Inc.; 
Pacific Rim Entertainment, Inc.; Country World Casinos, Inc., Defendants.  The 
Plaintiff James Hamilton ("Hamilton") contends that Defendants Robert Todd 
Financial Corporation, and its agents and/or employees, Defendants Dean 
Anthony Esposito, Marco Guy Fiore, Jr. and Robert Bobak Fallah, made 
misrepresentations regarding the Company's stock, which allegedly induced 
Hamilton's purchase of said stock.  Hamilton alleges that Defendants Robert 
Todd Financial Corporation, Dean Anthony Esposito, Marco Guy Fiore, Jr. and 
Robert Bobak Fallah, were authorized agents of the Company, and therefore, 
Hamilton alleges that the Company is liable for the alleged wrongful conduct 
of said Defendants.

     The Company has filed a Special Appearance and Answer, objecting to the 
jurisdiction of the Travis County, Texas District Court, as well as denying 
all material allegations of Hamilton's Original Petition.

     During the fiscal year ended June 30, 1994, the Company was informed by 
the Securities and Exchange Commission (the "SEC") that the SEC had instituted 
a formal order of investigation concerning the possibility of violations of 
the federal securities laws by the Company.  In August 1996, the Company was 
advised that the investigation had been terminated and that, at this time, no 
enforcement action has been recommended by the staff of the SEC.

                                      -16-
<PAGE>

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.

                                      -17-
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is traded in the over-the-counter market and 
is quoted and is listed on the Electronic Bulletin Board under the symbol, 
"CWRC".  The market for the Company's Common Stock must be characterized as a 
limited market due to the relatively low trading volume.  Set forth in the 
following table are high and low bid quotations for the Company's common stock 
for the fiscal years ended June 30, 1996 and 1997.  All quotations have been 
adjusted to reflect the 1-for-35 split of the Company's common stock in 1993.  
The quotations represent inter-dealer quotations without retail markups, 
markdowns or commissions and may not represent actual transactions.

Quarter Ended                High      Low
September 30, 1995           .31       .03
December 31, 1995            .19       .03
March 31, 1996               .31       .03
June 30, 1996                .56       .06
September 30, 1996           .41       .12
December 31, 1996            .38       .19
March 31, 1997               .38       .15
June 30, 1997                .40       .20

     At June 30, 1997, there were approximately 1,078 record holders of the 
Company's Common Stock.

     The Company has not paid or declared cash distributions or dividends on 
its common stock and does not intend to pay cash dividends in the foreseeable 
future.  Future cash dividends will be determined by the Company's Board of 
Directors based on the Company's earnings (if any), financial condition, 
capital requirements and other relevant factors.  The Company may not pay 
dividends on its common stock without the consent of the holders of at least a 
majority of the outstanding Series A preferred stock.  In addition, the 
holders of the Series A preferred stock shall be entitled to receive 
dividends, when and if declared by the Board of Directors of the Company, on 
an equal share-per-share basis with all outstanding shares of the Company's 
common stock.

                                      -18-
<PAGE>

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.

     In July 1997, the Company signed a financial agreement with U2 
Consulting, LLC., an affiliate of Pacific Genesis, Inc., a California company 
and Western Equities, Inc., a Wyoming company to raise $79.5 million through 
the issuance of corporate bonds.  The parties have 180 days to provide the 
above.

     The casino and hotel complex will be designed and constructed pursuant to 
a guaranteed maximum price agreement which is to be finalized prior to 
construction.  The team consists of Semple Brown Roberts, P.C., a Denver based 
architectural firm that has designed other facilities in Black Hawk, including 
Fitzgerald's casino and PCL Construction Services, Inc., a multi-billion 
dollar North American construction firm with U.S. headquarters located in 
Denver.  PCL's gaming credits include the MGM Grand and Stratosphere Tower in 
Las Vegas, Nevada, as well as the Chinook Winds Gaming and Convention Center 
in Lincoln City, Oregon.

LIQUIDITY & CAPITAL RESOURCES

     The Company's ability to obtain the financing and to proceed with its 
plans for a gaming facility had been affected by the Company's disputes with 
New Allied, which had culminated in litigation and foreclosure proceedings on 
the Property in 1995, and the Company's filing of a bankruptcy petition under 
Chapter 11.

     During the fiscal year ended June 30, 1995 and 1996, the Company had 
disagreements with New Allied.  As a result of New Allied's unwillingness to 
cooperate with the Company, New Allied's failure to secure a release of the 
$475,000 first deed of trust on the Property, New Allied's misrepresentations 
to the Company and subsequent legal problems involving New Allied, the Company 
instituted litigation against New Allied.

     New Allied commenced foreclosure proceedings involving the Property.  Due 
to the pendency of these proceedings, on October 12, 1995, the Company filed a 
Voluntary Petition Under Chapter 11 of the Bankruptcy Code in the United 

                                      -19-
<PAGE>

States Bankruptcy Court, District of Colorado (Case No. 95 20563 RJB).  As a 
result, all creditors of the Company were stayed from commencing or continuing 
any action or enforcing any judgment of lien against the Company or property 
of the Company, except as otherwise authorized pursuant to Title 11 U.S.C. 
362(b).  Relief may be sought by the filing of a complaint in the Bankruptcy 
Court, pursuant to Title 11 U.S.C. 362(d).

     In March 1996 the Bankruptcy Court granted the Company's motion to 
approve $5 million in financing, which financing was obtained on May 31, 
1996.  The $5 million financing was obtained from a group of lenders led by 
Kennedy Funding, Inc. and Anglo-American Financial as agent (the "Kennedy 
Funding Loan").

     In connection with this financing, the Company made a Promissory Note 
effective May 20, 1996 payable at the rate of 15% per annum until May 19, 1997 
(the "First Year Interest Obligation") and at a rate of 24% per annum 
thereafter.  Payments of principal and interest are payable as follows: (a) 
the First Year Interest Obligation was prepaid at closing; (b) commencing on 
May 19, 1997 and for each month thereafter, the Company is to make interest 
only payments, in advance, in the amount of 2% of the then existing principal 
balance due under the Note; and (c) the entire outstanding principal balance, 
together with all accrued and unpaid interest, if not previously paid, shall 
be finally due and payable on May 19, 1999.  The holder of the Note may 
accelerate the due date for the entire balance of principal, interest and 
other sums due upon maturity in the event of default under the Note.  The 
default rate of interest is 24% during the first loan year and 36% 
thereafter.  The Note is secured by a first deed of trust on the Property.  In 
May 1997, the Company issued a promissory note and second deed of trust on the 
property to Norlar, Inc. for a maximum of $600,000, or so much thereof as may 
have been advanced by maker, for general corporate purposes.  As of September 
1997, the Company owed approximately $600,000 on the Norlar Note.  In 
addition, for each $100,000 Norlar, Inc. has loaned to the Company, it has 
authorized the issuance of 500,000 warrants to purchase shares of common stock 
at $0.20 per share.  Norlar, Inc. is a closely-held corporation beneficially 
owned by Larry Berman and his wife.  Mr. Berman is Chairman and Chief 
Executive Officer of the Company. The loan will bear interest at 12% per annum 
and is to be repaid upon the earlier to the sale of the property or the 
contemplated refinance of the property.

     In September 1996, the Bankruptcy Court held hearings to determine the 
amounts due to New Allied as well as other issues.  The Company utilized the 
proceeds from the $5 million Kennedy Funding Loan in accordance with the 
Court's Order and paid New Allied and all unsecured creditors in full, as 
determined by the Court.

     In addition to obtaining the necessary financing, the Company must obtain 
from the Colorado Gaming Commission approval to commence gaming operations.  
The Commission's action is predicated upon approval of the applications of all 
of the Company's principals. The Company is taking the steps necessary to go 
forward with its submission to state authorities of its gaming application in 
January 1998 and receive the required approvals to engage in gaming operations 
within the State of Colorado. However, there can be no assurance that the 

                                      -20-
<PAGE>

Company will be successful in its efforts. Management believes that the length 
of time and disposition of the gaming approval process cannot be accurately 
predicted at this point, but that the process could be time consuming and 
expensive.

RESULTS OF OPERATIONS

     The Company has had no revenues from operations.  The Company incurred a 
loss from operations of $1,080,391 in the fiscal year ended June 30, 1997, as 
compared to a net loss of $416,440 for the year ended June 30, 1996.  The 
ability of the Company to achieve revenues in the future will be dependant 
upon realization of its plans to develop a gaming and hotel complex on the 
Property.

ITEM 7.  FINANCIAL STATEMENTS

     The Company was not able to complete its financial statements in time to 
file this Form 10-KSB report because the Company was indebted to its 
independent auditors and its independent auditors advised the Company that 
until such indebtedness was paid, it would not be able to furnish the Company 
an independent report.  The independent auditors have now been paid and the 
Company expects to file an amended 10-KSB within the next 15 days.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE

     In September 1996, the Company engaged as its principal accountant the 
firm of Moore Stephens, P.C.  Moore Stephens, P.C. replaced the firm of 
Erhardt Keefe Steiner & Hottman, P.C.  The report of Erhardt Keefe Steiner & 
Hottman P.C. on the financial statements of the Company at and for the years 
ended June 30, 1995 and 1994 did not contain an adverse opinion or disclaimer 
of opinion, nor was it modified as to uncertainty, audit scope or accounting 
principles, with the exception of the uncertainty regarding the Company's 
ability to continue as a going concern. The Company does not believe that 
there were any disagreements with Erhardt Keefe Steiner & Hottman P.C. on any 
matter of accounting principles or practices, financial statement disclosure 
or auditing scope or procedure, during the past two years which, if not 
resolved to Erhardt Keefe Steiner & Hottman P.C.'s satisfaction, would have 
caused it to make reference to the subject matter of the disagreement in 
connection with its Report.  The Company received a letter from Erhardt Keefe 
Steiner & Hottman P.C. stating that it was in agreement with the Company 
regarding these statements.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE 
COMPANY; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The following persons serve as officers and directors or the Company:

                                      -21-
<PAGE>

Name                       Position

Larry S. Berman            Chairman of the Board and Chief Executive Officer
Roger D. Leclerc           President and Director
William H. Patrowicz       Secretary, Treasurer and Director

     The following is brief biographical information concerning the Company's 
officers, directors and significant employees:

     Larry S. Berman, age 61, has served as Chief Executive Officer of the 
Company since June 1995 and as Chairman of the Board of Directors and 
Secretary of Holly since June 1992.  Since 1982, Mr. Berman has been Vice 
President of Coastal Leasing and Investment, Inc. where he is responsible for 
restructuring and otherwise assisting companies to raise debt and equity 
funds.

     Roger D. Leclerc, age 47, has served as President of the Company since 
December 1994.  Prior thereto Mr. Leclerc served as the Company's project 
manager for its proposed Country World Casino since May 1994.  Prior to his 
involvement with the Country World Casino project, Mr. Leclerc was the General 
Manager for the Bull Durham Casino in Black Hawk.  Immediately prior thereto, 
he served as a General Manager of the Miner's Pick Casino in Central City.  
From March 1990 to June 1992, he was the General Manager of A&L Enterprises 
Inc. in Deadwood, South Dakota, which operated Ms. Kitty's Wilderness Edge 
Casino and Days Inn Hotel and Casino.

     William H. Patrowicz, age 49, has served as Secretary, Treasurer or the 
Company since April 1995 and as President and Director of Holly since June 
1992.  From 1982 to December 1991, Mr. Patrowicz was employed by Gunnebo 
Fastening Corp., most recently as Senior Vice President of Operations.

     Section 16(a) of the Exchange Act requires the Company's officers and 
directors and persons who own more than 10% of a registered class of the 
Company's equity securities, to file reports of ownership and changes in 
ownership to the Securities and Exchange Commission.  Officers, directors and 
greater than 10% stockholders are required by the regulations of the 
Commission to furnish the Company with copies of all Section 16(a) reports 
received by it, the Company believes that all filing requirements applicable 
to its current officers and directors were complied with for the fiscal year 
ended June 30, 1996.  The Company is unaware of the compliance of its 10% 
shareholders and its former officers and directors.

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 
Officers.

                                      -22-
<PAGE>

Name and Principal            Fiscal     Salary               Other Annual
Position                       Year         $      Bonus      Compensation

None

     The Company has no stock option, defined benefit or restricted stock 
award plans.  

     The Company estimates that Mr. Berman and Mr. Patrowicz spend a 
substantial majority of their time in management activities relating to the 
Company.  Neither party has received any compensation for previously rendered 
services to date, however consideration for remuneration will be discussed in 
the future.

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, 
1997 and information as of June 30, 1997 with respect to the ownership of 
common stock by each director of the Company and by all officers and directors 
as a group.

Name and Address of           Shares Beneficially
Beneficial Owner                    Owned                      Percent

New Allied Development             2,500,000 (1)                19.1%
    Corporation
3200 Cherry Creek S. Drive
Suite 360
Denver, CO 80209

Holly Holdings, Inc.               8,850,453 (2)               67.6%
200 Monument Road, Suite 10
Bala Cynwyd, PA 19004

Larry S. Berman                    8,850,453 (3)(4)            67.6%
200 Monument Road, Suite 10
Bala Cynwyd, PA 19004

Roger D. Leclerc                           0                      0% 
13576 S. Utah Avenue
Lakewood, CO 80222

William H. Patrowicz               8,850,453 (3)(4)            67.6%
200 Monument Road, Suite 10
Bala Cynwyd, PA 19004

All Officers and Directors         8,850,453 (2)(3)(4)         67.6%
as a Group (3 Persons)
___________

                                      -23-
<PAGE>

(1) New Allied Development Corporation is the owner of 2,250,000 shares of the 
    Company's Series A Preferred Stock.  The Series A Preferred Stock is 
    convertible into Common Stock on a one share basis.  The Table also
    includes 250,000 shares of Common Stock owned by New Allied.

(2) The above does not include an additional 20,000,000 shares of common stock 
    which are the subject of a letter agreement between the Company and Holly 
    dated April 17, 1995.

(3) Messrs. Larry S. Berman and William H. Patrowicz are affiliated with Holly 
    Holdings, Inc. and therefore may be deemed to be beneficial owners of the 
    Company's shares held by Holly Holdings, Inc.

(4) The above does not include an additional 40,000,000 shares of common stock 
    upon conversion of Series B Preferred stock owned by two directors and two 
    non-affiliates of the Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The sole holder of the Company's Series A Convertible Preferred stock, 
New Allied, acquired its shareholdings in connection with a sale to the 
Company in August 1993, of the Property upon which the Company proposes to 
construct its casino and hotel complex.  New Allied also received cash and a 
promissory note (secured by a deed of trust on the Property) in connection 
with this transaction.  In June 1994, the Company completed the acquisition of 
an additional 375,000 square feet of vacant land located in close proximity to 
the land which is the site for the proposed  casino and hotel complex.  The 
Company paid $200,000 to New Allied, delivered a promissory note in the amount 
of $725,000 and issued 250,000 shares of its common stock.  In April 1997, the 
Company elected and New Allied has accepted a return of the property for the 
balance due on the note as it is of no value to the Company within its current 
plans.

     During the fiscal year ended June 30, 1995, the Company borrowed 
$1,000,000 from Holly, which indebtedness plus accrued interest was then 
canceled by the issuance to Holy of 5,000,000 shares of the Company's common 
stock.  The Company also agreed with Holly that Holly would have the right to 
purchase up to an additional 20,000,000 shares of common stock at $0.20 per 
share if additional funding were provided within a reasonable time and 
progress continued to be made concerning financing for the proposed casino and 
hotel complex.  In April 1997 Holly exercised its right under said agreement 
and converted $250,000 of its debt into 1,250,000 shares of the Company's 
common stock.

     Holly has continually provided advances to the Company throughout the 
bankruptcy proceedings.  Prior to the conversion of debt to equity by Holly 
and assumption of certain parties' debt by the Company, the Company was 
indebted to Holly in the amount of approximately $1,449,588.  In May 1997, the 
Company eliminated $1,000,000 of its debt to its majority shareholder, Holly 
Holdings, Inc. in an exchange of debt with two directors of the Company and 
two non-affiliates of the Company.

                                      -24-
<PAGE>

     In April 1997, the Company filed with the State of Nevada, under Section 
78.1055, a Designation of Rights Privileges and Preferences for 5,000,000 
shares of Class B preferred stock.  In May 1997, the Company issued 4,000,000 
shares to two directors and two non-affiliates of the Company in exchange for 
$1,000,000 in debt to the four parties.  The terms of the class B preferred 
stock rank it junior to all classes of the Company's stock now issued and on 
parity with any class of capital stock hereafter created.  The Class B 
preferred stock shall be voted with the common stock as a single class and 
shall not be entitled to vote as a separate class nor shall the Class B 
preferred be entitle to receive dividends of any kind.  Each share of Class B 
preferred stock can be converted into common stock of the corporation one year 
after the date of issuance at the rate for 10 for 1 and the holders are 
entitled to vote the underlying shares as if converted.

     In March 1996, the Bankruptcy Court granted the Company's motion to 
approve $5,000,000 in financing, which financing was obtained on May 31, 
1996.  The $5,000,000 financing was obtained from a group of lenders led by 
Kennedy Funding, Inc. and Anglo-American Financial as agent ("Kennedy").

     In connection with this financing, the Company delivered to the lender a 
Promissory Note effective May 20, 1996 payable at the rate of 15% per annum 
until May 19, 1997 (the "First Year Interest Obligation") and at a rate of 24% 
per annum thereafter.  Payments of principal and interest are payable as 
follows: (a) the First Year Interest Obligation was prepaid at closing; (b) 
commencing on May 19, 1997 and for each month thereafter, the Company is to 
make interest only payments, in advance, in the amount of 2% of the then 
existing principal balance due under the Note; and (c) the entire outstanding 
principal balance, together with all accrued and unpaid interest, if not 
previously paid, shall be finally due and payable on May 19, 1999.  The holder 
of the Note may accelerate the due date for the entire balance of principal, 
interest and other sums due upon maturity in the event of default under the 
Note.  The default rate of interest is 24% during the first loan year and 36% 
thereafter.  The Note is secured by a first deed of trust on the Property.  In 
May 1997, the Company issued a promissory note and second deed of trust on the 
property to Norlar, Inc. for a maximum of $600,000, or so much thereof as may 
have been advanced by maker, for general corporate purposes.  In addition, for 
each $100,000 Norlar, Inc. has loaned to the Company, it has authorized the 
issuance of 500,000 warrants to purchase shares of common stock at $0.20 per 
share.  Norlar, Inc. is a closely-held corporation beneficially owned by Larry 
Berman and his wife.  Mr. Berman is Chairman and Chief Executive Officer of 
the Company. The loan will bear interest at 12% per annum and is to be repaid 
upon the earlier to the sale of the property or the contemplated refinance of 
the property.

     In September 1996, the Bankruptcy Court held hearings to determine the 
amounts due to New Allied as well as other issues.  The Company utilized the 
proceeds from the $5 million Kennedy loan in accordance with the Court's Order 
and paid New Allied and all unsecured creditors in full, as determined by the 
Court.

                                      -25-
<PAGE>
     
     Although paid in accordance with the Court's order, the Company disagreed 
with the amounts deemed by the Bankruptcy Court to be owed to New Allied and 
in December 1996 filed an appeal of the Court's ruling.  New Allied cross 
appealed and such appeals are pending.

     In March 1997, with all issues being resolved, the Court ordered the 
dismissal of the Company from Chapter 11 but retained jurisdiction over the 
appeal.

     In July 1997, the Company issued 1,000,000 shares of its common stock to 
Eastern Equities Consultants, Ltd. as full and final compensation for the 
placement of the casino and hotel financing.

     In August 1997, the Company authorized the issuance of 100,000 warrants 
to purchase shares of common stock at $0.20 per share to Samanda, Inc. as a 
finder's fee for locating and arranging a gaming contract.  In October 1997, 
said gaming contract was not finalized, negotiations were terminated and the 
authorized issuance of warrants to Samanda, Inc. as a finder's fee was 
withdrawn.

     In September 1997, the Company issued 395,500 shares of its Common Stock 
to Sommer & Schneider LLP, its securities attorneys, for payment of legal fees 
and a six month retainer.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (A)  Exhibits

1.  Financing Agreement with U2 Consulting, Inc. and Western Equities, Inc.
2.  Standard form of agreement between owner and architect
3.  Standard form of agreement for interior design services
4.  Interim agreement between owner and contractor (PCL Construction Services, 
    Inc.)
5.  Limited technical services agreement with Signature Hospitality Resources, 
    Inc.
6.  Hotel Management Agreement with Signature Hospitality Resources, Inc.
7.  Casino Manager letter of intent with Luciani & Associates, LLC and G. 
    Michael Brown, joint venture

     (B)Reports on Form 8-K

     No reports on Form 8-K were filed during the last quarter of the fiscal 
year ended June 30, 1997.

                                      -26-
<PAGE>


SIGNATURES

     In accordance with the requirements of Sections 13 or 15(d) of the 
Securities Exchange Act of 1934, as amended, the Registrant has caused this 
Report to be signed on its behalf by the undersigned, thereunto duly 
authorized.


                                   COUNTRY WORLD CASINOS, INC.


Dated: November 25, 1997            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: November 25, 1997               /s/ Larry S. Berman
                                       Larry S. Berman, Chairman & CEO

Dated: November 25, 1997               /s/ Roger D. Leclerc
                                       Roger D. Leclerc, President and Director

Dated: November 25, 1997               /s/ William H. Patrowicz
                                       William H. Patrowicz, Secretary,
                                       Treasurer and Director

                                      -27-
<PAGE>

                        REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders
     Country World Casinos, Inc.
     Denver, Colorado


          We have audited the accompanying balance sheet of Country World 
Casinos, Inc. (a development stage company) as of June 30, 1997, and the 
related statements of operations, stockholders' equity, and cash flows for 
each of the two fiscal years in the period 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 on 
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 misstatement.  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 that 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. (a development stage company) as of June 30, 1997, and the 
results of its operations and its cash flows for each of the two fiscal years 
in the period then ended in conformity with generally accepted accounting 
principles.  We express no opinion on the cumulative period from inception 
through June 30, 1997.

          The accompanying financial statements have been prepared assuming 
that Country World Casinos, Inc. will continue as a going concern.  As 
discussed in Note 2 to the financial statements, the Company has suffered 
recurring losses since inception and has a working capital deficit of approximat
ely $1,340,000 as of June 30, 1997.  These conditions raise substantial doubt 
about Country World Casinos, Inc.'s ability to continue as a going concern.  
Management's plans in regard to these matters are also discussed in Note 2.  
The financial statements do not include any adjustments that might result from 
this uncertainty.



               MOORE STEPHENS, P.C.
               Certified Public Accountants.



Cranford, New Jersey
October 10, 1997

                                      F-1
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET AS OF JUNE 30, 1997.

Assets:
Current Assets:
   Cash                                                     $     4,961
   Prepaid Interest                                              73,140

   Total Current Assets                                          78,101

Property and Equipment:     
     Land                                                     7,475,475
     Casino Under Development                                 5,388,871
     Furniture and Equipment                                     48,068

     Total                                                   12,912,414
     Less: Accumulated Depreciation                              21,002

     Total Property and Equipment                            12,891,412

Other Asset:
     Deposits                                                       630

     Total Assets                                      $     12,970,143



The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-2
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET AS OF JUNE 30, 1997.


Liabilities and Stockholders' Equity:
Current Liabilities:
     Accounts Payable                                       $    38,115
     Payroll and Property Taxes Payable                          95,461
     Accrued Expenses                                            28,779
     Note Payable - Stockholder                                 725,000
     Notes Payable - Related Party (Net of
      Deferred Financing Cost of $45,000)                       155,000
     Accrued Interest - Related Parties                         175,943
     Other Current Liabilities                                    4,977
     Due to Parent                                              196,878
     
     Total Current Liabilities                                1,420,153

Long-Term Debt:
     Notes Payable                                            2,650,000
     Notes Payable - Related Party                            2,350,000

     Total Long-Term Debt                                     5,000,000

Other Liabilities                                                 4,199

Commitments and Contingencies                                        --

Stockholders' Equity:
     Convertible Preferred Stock, Series A,
      $.001 Par Value, 2,250,000 Shares Authorized,
      2,250,000 Shares Issued and Outstanding 
      (Liquidation Preference $7,492,500)                        2,250

     Convertible Preferred Stock, Class B, $.25 Par
      Value, 5,000,000 Shares Authorized, 4,000,000
      Shares Issued and Outstanding 
      (Liquidation Preference $1,000,000)                    1,000,000

     Common Stock, $.001 Par Value, 75,000,000 Shares
      Authorized,12,086,187 Issued and Outstanding              12,086

     Additional Paid-in Capital                              9,871,300

     Deficit Accumulated During the Development Stage       (4,339,845)

     Total Stockholders' Equity                              6,545,791

     Total Liabilities and Stockholders' Equity       $     12,970,143




The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-3
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

 
                                                             For the period from
                                                               November 9, 1982
                                                             (Date of Inception)
                                             Years ended       through June 30,
                                               June 30,            1 9 9 7    
                                         1 9 9 7     1 9 9 6     (Unaudited)
Costs and Expenses:
  Research and Development Costs        $     --    $     --      $ 122,000
  Professional Fees - Due to Bankruptcy  339,843     151,831        491,674
  General and Administrative Expenses    282,414     414,930      3,237,037
  Management Fee - Related Party         408,000          --        408,000
  Depreciation Expense                     6,867       6,398         42,514
     
  Totals                               1,037,124     573,159      4,301,225
     
Other Income (Expense):
  Interest Income                         27,443       6,719         94,812
  Interest Expense                        (3,931)         --         (3,931)
  Interest Expense - Related Party       (67,514)         --        (67,514)
  Rental Income                               --          --         45,126
  Loss on Non-Marketable Securities           --          --        (85,000)
  Write off of Loan Receivable                --          --        (90,000)
  Forfeited Deposit                           --          --       (100,000)
  Other Income                               735          --            735
     
  Totals                                 (43,267)      6,719       (205,772)
     
  (Loss) from Continuing Operations
   Before Discontinued Operations and
   Extraordinary Item                 (1,080,391)   (566,440)     4,506,997
     
Discontinued Operations:     
  Gain on Disposal of Subsidiaries            --          --        389,286
  (Loss) from Discontinued Operations         --          --       (389,286)
     
  Total Discontinued Operations               --          --             --
     
  (Loss) Before Extraordinary Item    (1,080,391)   (566,440)    (4,506,997)
     
Extraordinary Item:
  Extraordinary Gain on Forgiveness of Debt, 
          Primarily Related Party             --     150,000        167,152
     
   Net (Loss)                       $ (1,080,391) $ (416,440)  $ (4,339,845)
     
Per Share Data:     
  (Loss) Per Share Before Extraordinary
   Item                                     $     (.10)     $     (.05)
   Extraordinary Item Per Share                     --             .01
      
   Net (Loss) Per Common Share              $     (.10)     $     (.04)
     
Weighted Average Number of Shares           10,985,493      10,836,187

The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-4
<PAGE>

<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY
</CAPTION>

          
                                                                                                            Deficit      
                                                                                                          Accumulated        
                                    Preferred Stock                    Common Stock           Additional  During the     Total
                               Series A         Series B                         Subscribed     Paid-In   Development Stockholders
                            Shares  Amount   Shares  Amount   Shares  Amount   Shares  Amount   Capital     Stage        Equity
<C>                           <S>      <S>     <S>     <S>      <S>     <S>      <S>     <S>      <S>        <S>           <S>

November 9, 1982 (Date of 
 Inception)                     --    $ --      --    $ --        --    $ --       --    $ --     $ --        $ --       $   --

Issuance of Shares for Cash 
 ($.51 Per Share)               --      --      --      --     2,971      15       --      --    1,510          --        1,525

Issuance of Common Stock to
 the Public ($12.50 Per Share)  --      --      --      --     1,474       8       --      --  644,992          --      645,000

Deferred Offering Costs         --      --      --      --        --      --       --      -- (115,690)         --     (115,690)

Cancellation of Common Stock    --      --      --      --      (800)     (4)      --      --        4          --           --

Issuance of Shares for Services
 ($.18 Per Share)               --      --      --      --    85,714     429       --      --   14,571          --       15,000

Issuance of Common Stock at a 
 Discount ($.02 Per Share)      --      --      --      -- 1,339,212   6,696       --      --   13,304          --       20,000

Capital Contribution            --      --      --      --        --      --       --      --    2,850          --        2,850

Net Loss for the Period from 
 November 9, 1982 (Date of
 Inception) Through 
 June 30, 1992                  --      --      --      --        --      --       --      --       --    (221,169)    (221,169)

 Balance - June 30, 1992        --      --      --      -- 1,428,571   7,144       --      --  561,541    (221,169)     347,516

Issuance of Common Stock at a 
 Discount for Services ($.02
 Per Share) May 1993            --      --      --      --   714,287   3,571       --      --    8,929          --       12,500

Net Loss for Year Ended 
 June 30, 1993                  --      --      --      --        --      --       --      --       --    (373,401)    (373,401)

 Balance - June 30, 
  1993 - Forward                --    $ --      --    $ -- 2,142,858 $10,715       --    $ -- $570,470   $(594,570)   $ (13,385)

The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-5
<PAGE>


</TABLE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY
</CAPTION>

          
                                                                                                            Deficit      
                                                                                                          Accumulated        
                                    Preferred Stock                    Common Stock           Additional  During the     Total
                               Series A         Series B                         Subscribed     Paid-In   Development Stockholders
                            Shares  Amount   Shares  Amount   Shares  Amount   Shares  Amount   Capital     Stage        Equity
<C>                           <S>      <S>     <S>     <S>      <S>     <S>      <S>     <S>      <S>        <S>           <S>

 Balance - June 30, 
  1993 - Forwarded              --    $ --      --    $ -- 2,142,858 $10,715       --    $ -- $570,470   $(594,570)   $ (13,385)

Change in Par Value from
 $.005  to $.001                --      --      --      --        --  (8,572)      --      --    8,572          --           --

Issuance of Stock for Cash 
 September 1993 ($1.00 Per
 Share)                         --      --      --      --   600,000     600       --      --  599,400          --      600,000

Issuance of Stock for Cash 
 August 1993 ($1.00 Per Share)  --      --      --      -- 1,500,000   1,500       --      -- 1,498,500         --    1,500,000

Issuance of Convertible
 Preferred Stock for
 Acquisition of Land,
 Valued at $1.00 Per Share
 issued August 1993      2,250,000   2,250      --      --       --       --       --      -- 2,247,750         --    2,250,000

Issuance of Stock to Related 
 Party for Cash and Services 
 Pursuant to Exercise of
 Options ($1.00 Per Share)      --      --      --      --  250,000      250       --      --   249,750         --      250,000

Purchase and Cancellation of  
 Treasury  Stock ($1.00
 Per Share)                     --      --      --      -- (125,000)    (125)      --      --  (124,875)        --     (125,000)

Issuance of Stock for Cash 
 (140,000 Shares and 60,662 
 Shares issued December 1993 and
 January 1994, Respectively,
 at $2.50 and $2.47 Per Share,
 Respectively)                  --      --      --      --  200,662      200       --      --   499,800         --      500,000

Issuance of Common Stock for 
 Acquisition of Land Valued at 
 $1.00 Per Share, issued
 June 1994                      --      --      --      --  250,000      250       --      --   249,750         --      250,000

Issuance of Common Stock for 
 Cash and Services Pursuant 
 to Exercise of Options
 (75,000 Shares and 20,000
 Shares issued April and
 June 1994, Respectively
 at $2.50 Per Share)           --       --      --     --   95,000        95       --      --   237,405         --      237,500

Issuance of Common Stock for 
 Services Rendered, Valued
 at $2.50 Per Share, issued
 April 1994                    --       --      --     --  200,000       200       --      --   499,800         --      500,000

Subscription of Common Stock
 Pursuant to Private Placement
 Offering - June 1994
 ($3.00 Per Share)             --       --      --     --      --         --  262,667     263   787,737         --      788,000

Net Loss for Year Ended 
 June 30, 1994                 --       --      --     --      --         --      --       --        -- (1,490,785)  (1,490,785)

 Balance - June 30,
  1994 - Forward        2,250,000   $2,250      --    $-- 5,113,520   $5,113 262,667    $ 263 $7,324,059 $(2,085,355) $5,246,330


The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-6
<PAGE>


</TABLE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY
</CAPTION>

          
                                                                                                            Deficit      
                                                                                                          Accumulated        
                                    Preferred Stock                    Common Stock           Additional  During the     Total
                               Series A         Series B                         Subscribed     Paid-In   Development Stockholders
                            Shares  Amount   Shares  Amount   Shares  Amount   Shares  Amount   Capital     Stage        Equity
<C>                           <S>      <S>     <S>     <S>      <S>     <S>      <S>     <S>      <S>        <S>           <S>

 Balance - June 30,
  1994 - Forward        2,250,000   $2,250      --    $-- 5,113,520   $5,113 262,667    $ 263 $7,324,059 $(2,085,355) $5,246,330

Issuance of Common Stock 
 Pursuant to Private Placement 
 Offering - December 1994
 ($2.67 Per Share)             --       --      --     --   460,000      460      --       --  1,229,040          --   1,229,500

Convert Subscribed Stock to 
 Common and Record Fees -
 December 1994                 --       --      --     --   262,667      263 (262,667)   (263)        --          --          --

Issuance of Stock to Parent
 for Outstanding Note issued 
 April 20, 1995 ($.20 Per
 Share)                        --       --      --     -- 5,000,000    5,000      --       --  1,009,451          --   1,014,451

Net Loss for Year Ended 
 June 30, 1995                 --       --      --     --        --       --      --       --         --    (757,659)   (757,659)

 Balance - June 30, 1995 2,250,000   2,250      --     -- 10,836,187  10,836      --       --  9,562,550  (2,843,014)  6,732,622

Net Loss for Year Ended 
 June 30, 1996                 --       --      --     --         --      --      --       --         --    (416,440)   (416,440)

 Balance - June 30, 1996 2,250,000   2,250      --     -- 10,836,187  10,836      --       --  9,562,550  (3,259,454)  6,316,182

Issuance of Preferred Stock -
 Class B in Exchange for 
 Parent Debt ($.25 Per Share) 
 April 1997                    --      -- 4,000,000 1,000,000     --      --      --       --         --          --   1,000,000

Common Stock Issued in 
 Exchange for Parent Debt 
 ($.20 Per Share) April 1997   --      --       --     --  1,250,000   1,250      --       --    248,750          --     250,000

Warrants Issued for 1,000,000
 Shares of Common Stock in
 connection with Norlar, Inc.
 debt financing (.06 Per
 Warrant)                     --       --       --     --         --      --      --       --     60,000          --      60,000

Net Loss for Year Ended 
 June 30, 1997                --       --       --     --         --      --      --       --         --  (1,080,391) (1,080,391)

Balance - June 30, 1997 2,250,000  $2,250 4,000,000 $1,000,000 12,086,187 $12,086 --     $ -- $9,871,300 $(4,339,845) $6,545,791

The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-7
<PAGE>

</TABLE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS
</CAPTION>

                                                                For the period from
                                                                  November 9, 1982
                                                                (Date of Inception)
                                              Years ended         through June 30,
                                                June 30,              1 9 9 7    
                                          1 9 9 7       1 9 9 6      (Unaudited)
<C>                                         <S>           <S>             <S>
Operating Activities:
  Continuing Operations:          
    (Loss) Before Extraordinary Item   $(1,080,391)   $ (566,440)   $ (4,506,997)
    Adjustments to Reconcile Net
      (Loss) to Net Cash (Used for)
      Operating Activities:     
      Depreciation                           6,867         6,398          42,514
      Amortization of Discount -
       Related Party                        15,000            --          15,000
      Common Stock Issued for Interest          --            --          14,451
      Common Stock Issued for Services          --            --         837,500
      Loss on Nonmarketable Securities          --            --         (85,000)
      Write off of Loan Receivable              --            --         (90,000)
      Extraordinary Item, Primarily Related
       Party                                    --       150,000         167,152
      Accrued Interest - Related Party      52,514            --          52,514
      Allocation of Management Fees -
       Related Party                       408,000            --         408,000
     
    Changes in Assets and Liabilities:     
     (Increase) Decrease in:
       Prepaid Interest                    (73,140)     (687,500)       (760,640)

     Increase (Decrease) in:          
       Accounts Payable                   (109,294)      147,409          38,115
       Payroll and Property Taxes Payable   95,461            --          95,461
       Accounts Payable - Liabilities
        Subject to Compromise             (366,735)     (253,229)             --
       Accrued Interest - Related Parties   29,357            --         175,943
       Accrued Interest - Liabilities
        Subject to Compromise             (225,135)           --              --
       Accrued Expenses                    (71,306)       70,315          28,779
       Accrued Expenses - Subject
        to Compromise                      (41,937)       41,937              --
     
     Discontinued Operations:     
       Net (Loss)                               --            --        (389,286)
       Adjustments to Reconcile Net (Loss)to Net Cash     
         (Used for) Operating Activities:     
         Gain on Disposal of Assets             --            --         389,286
     
     Total Adjustments                    (280,348)     (524,670)        939,789
     
Net Cash Used for Operating Activities -
 Forward                               $(1,360,739)  $(1,091,110)    $(3,567,208)
</TABLE>
     
The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-8
<PAGE>
<TABLE>
<CAPTION>
COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS
</CAPTION>
  
                                                                For the period from
                                                                  November 9, 1982
                                                                (Date of Inception)
                                              Years ended         through June 30,
                                                June 30,              1 9 9 7    
                                          1 9 9 7       1 9 9 6      (Unaudited)
<C>                                         <S>           <S>             <S>

Net Cash Used for Operating Activities -
 Forward                               $(1,360,739)  $(1,091,110)     $(3,567,208)
     
Investing Activities:     
  Purchase of Land and Payment of
   Casino Development Costs               (126,860)     (872,420)     (5,214,871)
  Purchase of Furniture and Equipment           --            --         (57,406)
  Investment in Patent                          --            --         (62,000)
  Deposits and Other                          (190)        3,363            (630)
  (Increase) Decrease in Restricted Cash    49,994       (49,994)             --
     
  Net Cash Used for Investing Activities   (77,056)     (919,051)     (5,334,907)
     
Financing Activities:     
  Payment of Capital Lease Obligation       (1,515)       (2,718)         (4,233)
  Proceeds from Long-Term Borrowings            --     5,000,000       6,000,000
  Advances from Parent                     896,978       301,204       1,254,003
  Disbursement to Parent                  (316,379)           --        (316,379)
  Proceeds from Related Party Notes        200,000            --         200,000
  Repayments on Long-Term Borrowings    (1,109,837)   (1,553,027)     (3,450,000)
  Proceeds from Stock and Warrant Issuance      --            --       5,220,835
  Capital Contribution                          --            --           2,850
     
  Net Cash Provided by (Used for)
   Financing Activities                   (330,753)    3,745,459       8,907,076
     
  Net (Decrease) Increase in Cash       (1,768,548)    1,735,298           4,961
     
Cash - Beginning of Periods              1,773,509        38,211              --
     
  Cash - End of Periods                  $   4,961   $ 1,773,509         $ 4,961

Supplemental Disclosure of Cash Flow Information:
     Interest paid in fiscal years ended June 30, 1997 and 1996 was $3,931 and 
$1,830, respectively, net of interest capitalized.  No income taxes were paid 
during the fiscal years ended June 30, 1997 and 1996.



The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-9
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

     During the year ended June 30, 1997, the Company capitalized $887,663 in 
interest related to the construction of the casino.
     
     During the year ended June 30, 1997, the Company issued warrants for 
1,000,000 shares of the Company's common stock.  A deferred financing cost of 
$60,000 was recorded for the estimated fair value of these warrants.  At June 
30, 1997, the unamortized deferred financing balance was $45,000.

     During the year ended June 30, 1997, the Company converted Parent company 
advances of $1,000,000 into 4,000,000 shares of Preferred Series B Stock.

     During the year ended June 30, 1997, $250,000 of indebtedness to the 
Parent was converted into 1,250,000 shares of restricted common stock.

     During the year ended June 30, 1996, the Company capitalized $569,984, in 
accrued interest related to the construction of the casino. 

The Accompanying Notes are an Integral Part of these Financial Statements.

                                      F-10
<PAGE>

COUNTRY WORLD CASINOS, INC.

(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION BUSINESS

ORGANIZATION AND BUSINESS - Country World Casinos, Inc. (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, casino in Black Hawk, Colorado.  In 
August 1993, the Company completed the acquisition from New Allied Development 
Corporation and its subsidiary, Tommyknocker Casino Corp., 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").  Except as 
specifically identified to the contrary, New Allied Development Corporation 
and Tommyknocker Casino Corp. will be referred to collectively as "New 
Allied."

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.

As of June 30, 1997, the Company has not completed construction of its planned 
principal operation nor has it realized any revenue from its planned 
operations.  Accordingly, the Company is considered to be in the development 
stage.

On October 12, 1995, the Company filed a voluntary petition for reorganization 
under Chapter 11 of the federal bankruptcy laws in the United States 
Bankruptcy Court for the District of Colorado.  On March 10, 1997, the 
bankruptcy petition was dismissed.

The Company is a majority-owned subsidiary of Holly Holdings, Inc. (the 
"Parent").

CONCENTRATION OF CREDIT RISK - The Company maintains cash balances in bank 
deposit accounts.  At June 30, 1997, the Company had no credit risk beyond 
insured amounts.

USE OF ESTIMATES - The preparation of financial statements in conformity with 
generally accepted accounting principles requires management to make estimates 
and assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of income and costs and expenses during 
the reporting period.  Actual results could differ from those estimates.

CASINO UNDER DEVELOPMENT - The Company's land and development costs are 
recorded at cost and no depreciation will be taken on the casino project until 
such time as the Company places the casino into operation.

FURNITURE AND EQUIPMENT - Furniture and equipment is stated at cost and is 
being depreciated on a straight-line basis over estimated useful lives of five 
to seven years.

                                      F-11
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION BUSINESS
(Continued)

LOSS PER SHARE - Loss per share of common stock was computed based on the 
weighted average number of common shares outstanding during the period.  
Common stock equivalents are not included as their effect would be 
antidilutive.

CASH EQUIVALENTS - The Company considers all highly liquid instruments 
purchased with a maturity of three months or less to be cash equivalents.  The 
Company did not have any cash equivalents at June 30, 1997.

IMPAIRMENT - The carrying value of land and casino under development is 
reviewed on an annual basis as to whether such carrying value has become 
impaired, pursuant to guidance established in Statement of Financial 
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of 
Long-Lived Assets  and for Long-lived Assets to Be Disposed of."  Management 
considers assets to be impaired if the carrying value exceeds expected future 
cash flows (undiscounted and without interest charges).  If impairment is 
deemed to exist, the assets will be written down to fair value.  As of June 
30, 1997, management expects these assets to be fully recoverable.

STOCK OPTIONS - The Company accounts for employee stock-based compensation 
under the intrinsic value based method as prescribed by Accounting Principles 
Board ("APB") Opinion No. 25.  The Company applies the provisions of Statement 
of Financial Accounting Standards ("SFAS") No. 123 to non-employee stock-based 
compensation and the pro forma disclosure provisions of that statement to 
employee stock-based compensation.

(2) 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 $1,340,000 as of June 30, 1997.  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 casino under development, the obtaining of 
related licenses, the successful completion of its construction and success of 
its future operations.  Limited stakes gaming did not commence in Colorado 
until October 1991, so there is limited experience in Colorado from which to 
evaluate the likelihood of success of the Company's proposed gaming 
operations.  In addition, the Black Hawk/Central City casino market is 
characterized by intense competition.  The competition includes established 
companies, some of which have greater financial resources, experience and 
expertise than the Company.

In July 1997, the Company signed a financial agreement with U2 Consulting, 
LLC., an affiliate of Pacific Genesis, Inc., a California company and Western 
Equities, Inc., a Wyoming company to raise $75 million through the issuance of 
corporate bonds.  The parties have 180 days to provide the above.  In 
September 1997, said agreement was increased to $79.5 million.  In October 
1997, a private placement memorandum was distributed to potential investors.

                                      F-12
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(2) GOING CONCERN (Continued)

In September 1997, the Company contracted with the Colorado Gaming Development 
Company, Inc., Semple Brown Roberts, P.C. and PCL Construction Services, Inc. 
("PCL"), all of Denver, Colorado to design and construct the planned casino 
and hotel complex.  The proposed casino and hotel complex will be designed and 
constructed pursuant to a guaranteed maximum price agreement which is to be 
finalized prior to construction.  The interim agreement with PCL contemplates 
a construction contract for a "Guaranteed Maximum Price" equal to the 
"Guaranteed Maximum Cost of the Work" plus 4.5%.  The Guaranteed Maximum Price 
will be determined by agreement between the Company and the Contractor when 
sufficient definitive design information becomes available.  Any changes to 
the work under the construction contract will necessitate revision of the 
Guaranteed Maximum Cost and the Guaranteed Maximum Price.  If the actual final 
cost of the construction project is less than the Guaranteed Maximum Cost, 
then the cost savings will be shared so that the Company will recoup 75% of 
such savings.  If the actual final cost of construction exceeds the Guaranteed 
Maximum Cost (as it may be revised), such excess cost will be borne by the 
Contractor and will not be taken into account in determining the Guaranteed 
Maximum Price to be paid by the Company.  In addition, PCL agreed to lend to 
the Company, for use on the construction of the planned casino and hotel 
complex, an amount up to $1,000,000 on an as needed basis, on and prior to 
November 1, 1997 (See Note 13B).  The note will bear interest at a rate of 
prime plus 3% per annum.  The Company has also signed a management agreement 
with Signature Hospitality Resources, Inc. of Denver, Colorado to manage its 
Radisson Black Hawk Hotel, a separate agreement to use the national flag of 
Radisson on the hotel.  For its management services, Signature Hospitality 
Resources, Inc. (the "Hotel Manager") will receive a monthly management fee 
equal to 2% of gross sales (exclusive of casino operations) of the proposed 
hotel, plus a percentage of the net operating income, as defined.  The 
agreement between the hotel manager is for an initial term of ten years, but 
may terminate earlier upon the occurrence of certain events.  In addition, the 
Company has signed a binding letter of intent with Luciani & Associates, LLC 
and G. Michael Brown, joint venture of Atlantic City, New Jersey (the "Casino 
Manager"), to manage the casino operations.  For services rendered in 
connection with the design and construction of the Casino, the Casino Manager 
will receive a base fee of $15,000 per month.  The Casino Manager will receive 
fees not to exceed $500,000 for additional management and consulting services 
in the pre-opening phase.  The pre-opening phase services will pertain to the 
establishment of varies internal and accounting controls and systems, 
operational procedures, staffing standards, recruitment and hiring, and 
marketing strategies.  In addition, the Company will pay the Casino Manager's 
Colorado gaming license application fees.

Upon commencement of gaming operations, the Casino Manager will receive a 
management fee equal to 2% of gross Casino revenues, plus an 7% Casino 
earnings, as defined.  A portion of the fee would be prepaid monthly and 
credited against the amount actually due.

The letter of intent provides that the definitive management agreement will be 
for an initial term of five years commencing in the date that gaming 
operations begin and will be renewable by the Casino Manager for successive 
five-year terms.

The Company's ability to operate the casino will be dependent upon substantial 
other conditions, including the obtaining of licenses and compliance with 
governmental regulations, grading and construction of the casino, obtaining 
the necessary permits and approvals from the City of Black Hawk and other 
regulatory bodies, procuring gaming equipment on satisfactory terms, and 
accomplishing these objectives in a timely manner.

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.

                                      F-13
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(3) CASINO UNDER DEVELOPMENT

On August 6, 1993, the Company closed on an acquisition of approximately 
79,000 square feet of vacant land from New Allied ("Parcel One") located 
within the city of Black Hawk, Gilpin County, Colorado.  The Company paid 
$550,000 cash, delivered a promissory note in the amount of $3,450,000, and 
delivered 2,250,000 shares, valued at $1.00 per share, of its Convertible 
Series A Preferred stock each of which are convertible to common stock on a 1 
for 1 basis.  The Company is obligated to file a registration statement with 
the Securities and Exchange Commission ("SEC") to register the distribution of 
the Convertible Series A Preferred stock to New Allied along with the shares 
of its common stock underlying the Convertible Series A Preferred.

On June 28, 1994, the Company closed on an acquisition for an additional 
375,000 square feet of vacant land from New Allied ("Parcel Two") located in 
close proximity to the original land purchased. The Company paid $200,000 
cash, delivered a promissory note in the amount of $725,000, and delivered 
250,000 shares of its common stock valued at $1.00 per share (See Notes 4, 5 
and 10).

Subject to future financing and other factors described in Note 2, the Company 
intends to construct a casino and hotel complex on Parcel One.  

The Company has capitalized the following costs related to the casino 
construction through June 30, 1997:

Interest on Long-Term Debt                      $     1,887,458
Architectural Fees and Fees for Construction          3,501,413

     Total                                      $     5,388,871

Interest capitalized during the years ended June 30, 1997 and 1996 amounted to 
$887,663 and $569,984, respectively.

(4) LONG-TERM DEBT AND NOTES PAYABLE 

Long-term debt consists of a $5,000,000 note payable to Kennedy Funding with 
interest at 15% until May 19, 1997 and at 24% per annum thereafter, payable 
interest only in monthly installments.  The note is collateralized by a first 
lien and deed of trust on real property (Parcel One) with a net book value of  
approximately $6,300,000. The loan is fully guaranteed by the Parent.  A 
portion of this financing, amounting to $2,350,000, was obtained from a group 
of related party lenders and accordingly is classified as such. The long-term 
debt of $5,000,000 is due in May 1999.

NOTE PAYABLE - STOCKHOLDER - Note payable stockholder consists of a $725,000 
note payable to New Allied with interest at 8%, payable in monthly 
installments over 10 years beginning in September 1995.  The note is 
collateralized by a first deed of trust on real property with a net book value 
of approximately $1,175,000 (Parcel Two) (See Note 10).

NOTES PAYABLE - RELATED PARTY - Norlar, Inc. has extended a credit of up to 
$600,000, through a series of notes payable with interest at 12%, due on 
demand.  Norlar, Inc. is a closely-held corporation beneficially owned by Mr. 
Larry S. Berman, the Chairman and Chief Executive Officer of the Company and 
his spouse.  In connection with this debt, the Company issued warrants for 
1,000,000 shares of the Company's common stock.  The warrants are exercisable 
at $.20 per share and do not expire.  A deferred financing cost of $60,000 was 
recorded for the estimated fair value of these warrants.  At June 30, 1997, 
the unamortized deferred financing balance is $45,000.  The notes are 
collateralized by a second lien and deed of trust on real property (Parcel 
One).  The effective interest rate including the deferred financing cost, is 
36%.  As of June 30, 1997, the remaining borrowings available is $400,000 (See 
Note 13C).

                                      F-14
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS


(5) STOCKHOLDERS' EQUITY

PREFERRED STOCK - In July 1993, the Company amended its Articles of 
Incorporation to provide for 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.

In August 1993, the Board of Directors created Series A Convertible Preferred 
("Convertible Preferred") stock valued at $1.00 per share.  The maximum 
issuable shares under the series is 2,250,000 shares.  Holders of the 
Convertible Preferred shares shall be entitled to dividends as declared by the 
Board of Directors.

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.

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 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.

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 of authorized shares of common stock are 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.  

In April 1997, the Company issued 4,000,000 shares of Class B in exchange for 
$1,000,000 in cash advances that had been made to the Company by the Parent.

During the year ended June 30, 1996, the Parent acquired an additional 
2,250,453 shares of the Company's common stock from certain existing 
shareholders of Country World, in exchange for 744,592 shares of its common 
stock.  The Parent also acquired 16,667 shares of Country World common stock 
in a separate transaction for $50,000.  As of June 30, 1997, the Parent owns 
approximately 70% of the outstanding shares of Country World common stock.

In April 1997, $250,000 owed to the Parent was converted into 1,250,000 shares 
of the Company's common stock.

                                      F-15
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(6) INCOME TAXES

The Company accounts for income tax expense and liabilities under the asset 
and liability method.  That method requires the establishment of deferred tax 
assets for all deductible temporary differences and operating loss 
carryforwards and deferred tax liabilities for all taxable temporary 
differences.  The Company had no taxable temporary differences which would 
have resulted in material deferred tax liabilities at June 30, 1997. 
Deductible temporary differences consist primarily of operating loss 
carryforwards.  The deferred tax asset attributable to operating loss 
carryforwards amounted to approximately $1,474,000 at June 30, 1997.  This 
represents an increase of approximately $367,000 over the preceding year.  
Because of the Company's continued losses, however, any deferred tax asset 
established for utilization of the Company's tax loss carryforwards would 
correspondingly require a valuation allowance of the same amount.  
Accordingly, no deferred tax asset is reflected in these financial statements.

At June 30, 1997, the Company's net operating income loss carryforwards and 
their expiration dates are as follows:

 Expiring in Years ending                  Net Operating Income Tax
          June 30,                            Loss Carryforwards     
           1998                                 $     77,204
           1999                                       77,550
           2000                                      115,122
           2001                                       73,687
           2002                                      202,122
           2003 Through 2011                       3,790,635

                    Total                    $     4,336,320

Net operating loss income tax carryforwards may be limited, however, if a more 
than 50% change in ownership is deemed to have occurred.   

Income tax at the federal statutory rate reconciled to the Company's effective 
rate is as follows:

                                                       June 30,
                                               1 9 9 7          1 9 9 6
Federal Statutory Rate                          (34.0)%          (34.0)%
Non-Deductible Expenses                          (0.5)            (0.5)     
Net Operating Loss For 
     Which No Tax Benefit was Received           34.5             34.5

     Effective Rate                                -- %             -- %

The Company has not generated taxable income since its inception, and 
therefore, no provision for income taxes has been made.


(7)RELATED PARTY TRANSACTIONS

MANAGEMENT AGREEMENT - In July 1996, the Company made an arrangement with its 
Parent whereby the Company agreed to pay a management fee for services 
rendered by the Parent.  The cost of such services aggregated $408,000 for the 
year ended June 30, 1997. 

                                      F-16
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS


(7)RELATED PARTY TRANSACTIONS (Continued)

DUE TO PARENT - The amount due to Parent at June 30, 1997 represents aggregate 
advances to the Company [net of repayments].  Interest accrues on outstanding 
balances at 8% per annum.  Interest for the year ended June 30, 1997 amounted 
to $52,514 and is included in the statement of operations with interest 
expense - related party.

NOTE PAYABLE - RELATED PARTY - As a result of the closing of the $5,000,000 
loan during the year ended June 30, 1996, loan servicing fees and prepaid 
interest payments were made to the group of lenders which includes Norlar, 
Inc. aggregating $600,000.  This amount was capitalized to casino under 
development.  

STOCKHOLDER FUNDING - During the fiscal year ended June 30, 1995, the Company 
borrowed $1,000,000 from the Parent, which indebtedness plus accrued interest 
was then canceled by the issuance to the Parent of 5,000,000 shares of the 
Company's common stock.  The Company also agreed that the Parent would have 
the right to purchase up to an additional 20,000,000 shares of common stock at 
$.20 per share if additional funding were provided within a reasonable time 
and progress continued to be made concerning financing for the proposed casino 
and hotel complex.  In April 1997, the Parent exercised its right under said 
agreement and converted $250,000 of its debt into 1,250,000 shares of the 
Company's common stock.

ENVIRONMENTAL INDEMNIFICATION - The Company and its Parent have entered into 
an environmental indemnity agreement with the co-lenders of the $5,000,000 
loan pursuant to which they will defend and hold harmless the co-lenders from 
any environmental claims connected to the property which collateralizes 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.

The Parent has continually provided advances to the Company since 1995.  Prior 
to the conversion of debt to equity by Holly and assumption of certain 
parties' debt by the Company, the Company was indebted to Holly in the amount 
of approximately $1,449,588.  In May 1997, the Company eliminated $1,000,000 
of its debt to its majority shareholder, Holly Holdings, Inc. in an exchange 
of debt with two directors of the Company and two non-affiliated of the 
Company.

EXTRAORDINARY GAIN - In May 1995, the Company made an arrangement with the 
majority shareholder whereby the Company agreed to pay the related party 
$15,000 per week for a management fee.  As of June 30, 1995, the Company had 
not made any payments related to the arrangement and accordingly owed the 
related party $150,000.  In February 1996, the $150,000 accrual was reversed 
and the arrangement was terminated.  This forgiveness of debt is reflected as 
an extraordinary item in the statements of operations for the year ended June 
30, 1996.

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
Generally accepted accounting principles require disclosing fair value to the 
extent practicable for financial instruments which are recognized or 
unrecognized in the balance sheet.  The fair value of the financial 
instruments disclosed herein is not necessarily representative of the amount 
that could be realized or settled, nor does the fair value amount consider the 
tax consequences of realization or settlement.  The fair value of long-term 
debt, was estimated based on the current rates offered to the Company for debt 
of similar maturities.  Such fair value was determined to approximate carrying 
value.

                                      F-17
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

For certain instruments, including cash, trade payables, short-term notes 
payable and amount due to Parent, it was estimated that the carrying amount 
approximated fair value for these instruments because of their short 
maturities.  

(9) COMMITMENT AND CONTINGENCIES
RENT EXPENSE - The Company closed its only office, located in Denver, 
Colorado, in December 1996.  The Company did not lease any office space 
subsequent to December 1996.  Rent expense, which is included in general and 
administrative expenses, for year ended June 30, 1997 and 1996 was $18,901 and 
$40,766, respectively.

(10) LITIGAITON
The Company is the plaintiff and a counterclaim defendant in a lawsuit pending 
in Denver, Colorado District Court, Case No. 95CV2310, entitled Country World 
Casinos, Inc., a Nevada corporation, Plaintiff, v. Tommyknocker Casino Corp., 
a Colorado corporation and New Allied Development Corporation, a Colorado 
corporation, Defendants, v. Country World Casinos, Inc., a Nevada Corporation, 
Holly Products, Inc., a New Jersey corporation, Ronald G. Nathan, Sal Lauria, 
Roger D. Leclerc, William H. Patrowicz and David Singer, counterclaim 
Defendants.  This lawsuit was commenced by the Company on May 26, 1995.  In 
the Company's Amended Complaint, the Company asserted eight claims against New 
Allied Development Corporation ("New Allied") and its subsidiary Tommyknocker 
Casino Corp. ("TKCC").

In its complaint, the Company  sought a declaration that it was not obligated 
to make any additional payments to TKCC under a certain promissory note 
executed by the Company in connection with its purchase of the Black Hawk 
property, until such time as TKCC secured the release of a prior deed of 
trust.  The Company also sought recovery of more than $656,000 paid to or on 
behalf of TKCC to clean up and remediate environmental contamination on the 
property purchased from TKCC in August 1993.  The Company sought to recover 
all or part of this amount from TKCC under the following legal theories: (1) 
that the environmental contamination on the property constitutes an 
encumbrance, which is in breach of the covenant against encumbrances contained 
in the warranty deed by which TKCC conveyed the property to the Company; (2) 
that TKCC and New Allied made fraudulent misrepresentations to the Company 
regarding the costs of the environmental clean up and remediation and that the 
Company is entitled to recover damages resulting from these 
misrepresentations, as well as exemplary damages; (3) that TKCC and New Allied 
made negligent misrepresentations to the Company regarding the costs of the 
environmental clean up and remediation and that the Company is entitled to 
recover damages resulting from these misrepresentations, as well as exemplary 
damages; (4) that TKCC's and New Allied's actions violated their duties of 
good faith and fair dealing; (5) that the misrepresentations of TKCC and New 
Allied constitute deceptive trade practices in violation of the Colorado 
Consumer Protection Act; and (6) that any agreement under which the Company 
purportedly agreed to pay for the environmental remediation and clean up costs 
(which agreement the Company denies exists) is void and unenforceable under 
various principles of law, including the statute of frauds and the 
Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

On or about June 15, 1995, following the Company's commencement of the lawsuit 
described above, TKCC filed a notice of election to foreclose on its note and 
deed of trust which were secured by the Company's Black Hawk property.  The 
Company denied that it was in default under the note because of TKCC"s prior 
breach of the terms of the note by its failure to secure the immediate release 
of the first deed of trust on the property upon its receipt of $725,000 in 
January 1995.  A Denver District Court Magistrate ruled that since the Company 
has not paid to TKCC the monthly installments under the note since May 1995, 
the Company was in default, despite TKCC's failure to secure the release of 
the first deed of trust.  The Magistrate's Order is neither appealable nor 
binding in any subsequent proceeding.

                                      F-18
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(10) LITIGATION (Continued)

On October 12, 1995, the Company filed a Chapter 11 Petition in bankruptcy in 
the United States Bankruptcy Court for the District of Colorado, Case No. 
95-20563 RJB.  The filing of the Company's bankruptcy petition stayed TKCC's 
pending foreclosure sale of the Black Hawk property.  The Bankruptcy Court 
ruled that the Company was obligated to pay the principal amount of the note 
plus accrued interest, but not certain default interest claimed by TKCC to be 
owing.  The Bankruptcy Court also ruled against the Company on the claims 
pertaining to the cost of environmental clean-up.  The Company paid New Allied 
approximately $2,300,000 and all prior deeds of trust were released.  The 
Company has filed an appeal of the Bankruptcy Court's ruling.  New Allied has 
cross appealed the denial of late payment fees and interest.  Such appeals are 
pending.

In March 1996, the Bankruptcy Court granted the Company's motion to approve $5 
million in financing, which financing was obtained on May 31, 1996.  The $5 
million financing was obtained from a group of lenders led by Kennedy Funding, 
Inc. and Anglo-American Financial as agent ("Kennedy").

In September 1996, the Bankruptcy Court held hearings to determine the amounts 
due to New Allied as well as other issues.  The Company utilized the proceeds 
from the $5 million Kennedy loan in accordance with the Court's Order and paid 
New Allied and all unsecured creditors in full, as determined by the Court.

The Company disagreed with the amounts deemed by the Bankruptcy Court to be 
owed to New Allied and in December 1996 filed an appeal of the Court's 
ruling.  New Allied cross appealed and such appeals are pending.

In March 1997, the Court ordered the dismissal of the Company from Chapter 11 
but retained jurisdiction over the appeals.  

The pending lawsuit between the Company and New Allied and TKCC was stayed 
upon the filing of the Company's bankruptcy petition.  That stay was lifted 
when the bankruptcy case was dismissed in March 1997, and the Company is now 
moving forward with these proceedings.

The Company is seeking a court order requiring TKCC and New Allied to sell to 
the Company their 2.5 million shares of voting stock in the Company at the 
price set forth in ss.47.1-4.508 Rule 4.5 of the Colorado Gaming Regulations 
on the basis that New Allied and TKCC might possibly be unsuitable to hold 
voting securities in a licensed casino.  As part of the consideration given by 
the Company to TKCC to purchase the Black Hawk property, the Company issued to 
TKCC 2,250,000 shares of non-voting preferred stock in the Company.  That 
preferred stock was subsequently given voting rights.  In a subsequent real 
estate purchase transaction, the Company issued to New Allied 250,000 shares 
of common stock.

TKCC and New Allied have filed an answer to some of the Company's claims, 
denying liability.  In addition, TKCC and New Allied have filed counterclaims 
against the Company, as well as against Holly Products, Inc. ("Holly"), the 
majority shareholder in the Company, Ronald G. Nathan ("Nathan"), Sal Lauria 
("Lauria"), and David Singer ("Singer") former directors of the Company, and 
Roger G. Leclerc ("Leclerc") and William H. Patrowicz ("Patrowicz"), who are 
currently officers and directors of the Company.  TKCC alleges that the 
Company has breached an agreement to file a registration statement for the 
preferred stock given to TKCC as part of the consideration for purchase of the 
Black Hawk property.  The Company has filed an answer denying liability on 
this counterclaim.  The Federal Bankruptcy Court ruled that the Company was 
not in breach of its agreement.

                                      F-19
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(10) LITIGATION (Continued)

TKCC and New Allied have asserted that the Company, as well as Holly, Nathan, 
Lauria, Leclerc, Patrowicz and Singer, breached their fiduciary duties by the 
issuance of five million shares of common stock in the Company to Holly.  TKCC 
and New Allied seek actual and exemplary damages allegedly caused by the 
alleged wrongful issuance of stock.  TKCC and New Allied seek an injunction 
requiring the Company and its board of directors to cancel the five million 
shares of stock issued to Holly.

The Company, as well as Holly, Leclerc, Patrowicz and Singer, have filed 
answers denying any wrongful conduct or any liability to TKCC or New Allied 
resulting from said issuance of stock to Holly and have affirmatively asserted 
that said issuance of stock was proper.  Neither Nathan nor Lauria has been 
served with the summons and counterclaim and have not yet appeared in this 
lawsuit.

The Company is a defendant in a lawsuit pending in Travis County, Texas 
District Court, Case No. 95-04782, 200th Judicial District, entitled James 
Hamilton, Plaintiff v. Robert Todd Financial Corporation; Dean Anthony 
Esposito; Marco Guy Fiore, Jr.; Robert Bobak Fallah; Optex Biomedical Inc.; 
Pacific Rim Entertainment, Inc.; Country World Casinos, Inc., Defendants.  The 
Plaintiff, James Hamilton ("Hamilton") contends that Defendants, Robert Todd 
Financial Corporation, and its agents and/or employees, Defendants, Dean 
Anthony Esposito, Marco Guy Fiore, Jr. and Robert Bobak Fallah, made 
misrepresentations regarding the Company's stock, which allegedly induced 
Hamilton's purchase of said stock.  Hamilton alleges that Defendants, Robert 
Todd Financial Corporation, Dean Anthony Esposito, Marco Guy Fiore, Jr. and 
Robert Bobak Fallah, were authorized agents of the Company, and therefore, 
Hamilton alleges that the Company is liable for the alleged wrongful conduct 
of said Defendants. 

The Company has filed a Special Appearance and Answer, objected to the 
jurisdiction of the Travis County, Texas District Court, as well as denying 
all material allegations of Hamilton's Original Petition.

With respect to certain real property owned by the Company in Black Hawk, 
Colorado (Mill Sites 1, 2 and 3, and certain adjacent mining claims), a claim 
has been made against the Company by New Allied on its deed of trust 
encumbering said real property.  The Company and New Allied, however, have 
reached an agreement to resolve this dispute, pursuant to which the Company 
will convey title to the Hotel Property to New Allied in full settlement of 
New Allied's claims relating to this real property.  The Settlement Agreement, 
however, has not yet been formally reduced to writing.

While it is not feasible to predict or determine the final outcome of these 
proceedings, management does not believe that they should result in a 
materially adverse effect on the Company's financial position, results of 
operations or liquidity.

(11) NEW AUTHORITATIVE PRONOUNCEMENTS

The Financial Accounting Standards Board ("FASB") has issued Statement of 
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and 
Servicing of Financial Assets and Extinguishment of Liabilities."  SFAS No. 
125 is effective for transfers and servicing of financial assets and 
extinguishment of liabilities occurring after December 31, 1996.  Earlier 
application is not allowed.  The provisions of SFAS No. 125 must be applied 
prospectively; retroactive application is prohibited.  Adoption on January 1, 
1997 is not expected to have a material impact on the Company.  The FASB 
deferred some provisions of SFAS No. 125, which are not expected to be 
relevant to the Company.

                                      F-20
<PAGE>

COUNTRY WORLD CASINOS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

(11) NEW AUTHORITATIVE PRONOUNCEMENTS (Continued)

The FASB issued SFAS No. 128, "Earnings Per Share," and SFAS No. 129, 
"Disclosure of Information about Capital Structure" in February 1997.  SFAS 
No. 128 simplifies the earnings per share ("EPS") calculations required by 
Accounting Principles Board ("APB") Opinion No. 15, and related 
interpretations, by replacing the presentation of primary EPS with a 
presentation of basic EPS.  SFAS No. 128 requires dual presentation of basic 
and diluted EPS by entities with complex capital structures.  Basic EPS 
includes no dilution and is computed by dividing income available to common 
stockholders by the weighted-average number of common shares outstanding for 
the period.  Diluted EPS reflects the potential dilution of securities that 
could share in the earnings of an entity, similar to the fully diluted EPS of 
APB Opinion No. 15.  SFAS No. 128 is effective for financial statements issued 
for periods ending after December 15, 1997, including interim periods; earlier 
application is not permitted.  When adopted, SFAS No. 128 will require 
restatement of all prior-period EPS data presented; however, the Company has 
not sufficiently analyzed SFAS No. 128 to determine what effect SFAS No. 128 
will have on its historically reported EPS amounts.

SFAS No. 129 does not change any previous disclosure requirements, but rather 
consolidates existing disclosure requirements for ease of retrieval.

The FASB has issued SFAS No. 130, "Reporting Comprehensive Income."  SFAS No. 
130 is effective for fiscal years beginning after December 15, 1997.  Earlier 
application is permitted.  Reclassification of financial statements for 
earlier periods provided for comparative purposes is required.  SFAS No. 130 
is not expected to have a material impact on the Company. 

The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise 
and Related Information."  SFAS No. 131 changes how operating segments are 
reported in annual financial statements and requires the reporting of selected 
information about operating segments in interim financial reports issued to 
shareholders.  SFAS No. 131 is effective for periods beginning after December 
15, 1997, and comparative information for earlier years is to be restated.  
SFAS No. 131 need not be applied to interim financial statements in the 
initial year of its application.  SFAS No. 131 is not expected to have a 
material impact on the Company.

(12) SUBSEQUENT EVENTS

(A) In July 1997, the Company issued 1,000,000 shares of its common stock, 
valued at approximately $200,000, to Eastern Equities Consultants, Ltd. for 
efforts to secure casino and hotel financing.

(B) In September 1997, the Company issued 395,500 shares, valued at 
approximately $74,000, of its common stock to Sommer & Schneider LLP, its 
securities attorneys, for payment in legal fees and a six month retainer.

(13) SUBSEQUENT EVENTS (Unaudited) Subsequent to the Date of the Report of 
Independent Auditors

(A) Casino Management Contract - On October 21, 1997, the Company signed a 
management agreement with Luciani and Associates which will supervise, direct 
and control the management and operation of the proposed casino and related 
business as agent for the Company. 

(B) Interim Construction Loan - The total amount of indebtedness with respect 
to the PCL construction loan described in Note 2 was $998,000 as of October 
20, 1997.

(C) Norlar Debt - As of October 20, 1997, the Company was indebted to Norlar, 
Inc. in the amount of approximately $550,000.  Warrants to purchase 3,000,000 
shares of common stock at $.20  per share have been issued to Norlar, Inc. in 
connection with this indebtedness.

 .   .   .   .   .   .   .   .   .   .   .

                                      F-21
<PAGE>

</TABLE>