SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                               _________________
 
                                FORM 10-KSB/A-2

(Mark One)

(X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 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 1-12668

                                HOLLY HOLDINGS, INC.
                   (Name of Small Business Issuer in its charter)

         New Jersey                                  22-3172149     
(State or Other Jurisdiction of                 (IRS Employer 
Incorporation or Organization)                  Identification Number)


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

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

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12 (g) of the Exchange Act:  

Title of Each Class               Name of Each Exchange on Which Registered
Common Stock, no par value                             None
Common Stock Purchase Warrants                         None
Convertible Preferred D, $10 par value                 None

<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                   No     X   

     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 at December 22, 1997 of shares of the issuer's 
Common Stock, no par value (based upon the closing price per share of such 
stock, held by non-affiliates of the Registrant was approximately $397,894.  
Solely for the purposes of this calculation, shares held by directors and 
officers of the issuer have been excluded. Such exclusion should not be deemed 
a determination or an admission by the issuer that such individuals are, in 
fact, affiliates of the issuer.

     Indicate the number of shares outstanding of each of the issuer's classes 
of common equity, as of the latest practicable date: At December 22, 1997, 
there were outstanding 23,106,492 shares of the issuer's Common Stock, no par 
value.

     Documents incorporated by reference:

          Document                         Form 10-KSB Reference

          
     Transitional Small Business Disclosure Format (check one):
     
                      Yes _____               No    X    

                                     -2-
<PAGE>

                                    PART I
                           DESCRIPTION OF BUSINESS
ITEM 1
GENERAL

     The Company was incorporated in New Jersey in 1992. The Company, through 
its wholly owned subsidiary, HollyWood Manufacturing, Inc., used to 
manufacture wood cabinetry and fixtures.  Due to continued losses, the Company 
ceased ongoing operations of the woodworking business effective September 
1995.  In June 1994, the Company consummated the acquisition of Navtech 
Industries, Inc.  Due to minimal profits and the cancellation of Navtech's 
bank line of credit, the Company ceased ongoing operations effective June 
1997.  In July 1995, the Company acquired a majority of shares of Common Stock 
of Country World Casinos, Inc.  In March 1997, the Company consummated the 
acquisition of Nightlife Printing & Promotions, Inc. and American Publishers 
Company, Inc.  In June 1997, according to the terms of the acquisition 
agreement, all transactions were reversed and Nightlife Printing and American 
Publishing were returned to their original owners.  

Strategy

     Navtech Industries, Inc.

     On June 30, 1994, the Company acquired all of the issued and outstanding 
shares of Navtech Industries, Inc.("Navtech"). Navtech is an electronic cable 
and contract assembly company located in Shiprock, New Mexico. Navtech 
provides independent manufacturing services to original equipment 
manufacturers in industries such as gaming, medical equipment, security 
systems, computer peripherals, in-room hotel mini-bars and electronic musical 
systems. 

     In March 1994, Navtech entered into a series of agreements through which 
it purchased 26.7% of the issued and outstanding stock of RoomSystems for 
$282,000, which $278,000 was provided to Navtech by the Company.  In addition, 
in April 1994, Navtech and RoomSystems entered into an agreement granting 
Navtech exclusive rights to manufacture RoomSystems' in-room hotel mini-bars, 
provided Navtech meets certain quality, production and related criteria.  In 
April 1996, RoomSystems initiated action to cancel the agreement due to price 
and quality issues.  Navtech continued to manufacture for RoomSystems while 
both companies sought to negotiate a settlement to their respective 
differences.  On November 15, 1996, the companies executed a settlement 
agreement terminating all manufacturing agreements, resolving all pricing and 
payment terms and settling a date for the final shipment of units.  In January 
1997, the final units were shipped.  Since the profit margin on the units was 
lower than desired, the overall impact upon Navtech's profits were minimal.  
In April 1997, Navtech instituted legal action against RoomSystems to collect 
the balance due of approximately $125,000 for the January 1997 shipment.

     In April 1996, Navtech moved from Blanding, Utah to Shiprock, New 
Mexico.  The move allowed Navtech to operate from one facility totaling 54,000 
square fee in lieu of three separate facilities totaling 20,000 square feet.  
This enabled the Company to operate with greater efficiency and substantial 

                                     -3-
<PAGE>

less cost through consolidation of functions, elimination of transportation 
and reduction in management and supervisory staff.  In its new location in 
Shiprock, New Mexico, Navtech is located on the Navajo Reservation which 
allows for rebates in employing Native Americans, reduced energy costs and a 
forgiveness of rent payments on the new facility until such time as the move 
and refurbishing costs to the building are fully paid. It is estimated that 
this process will take approximately 10 years.  It was anticipated that the 
new facility would allow Navtech to expand its revenues, pending receipt of 
new orders and sufficient working capital.  Additionally, during the Company's 
first quarter of 1996 (April - June) the Company changed the management of 
Navtech with a smaller group of professionals to carry out Navtech's plan and 
meet targeted budgets for the upcoming year.  The nine months results for this 
subsidiary showed a significant turnaround to its income statement as compared 
to a $2 million loss last year.  Navtech suffered a mediocre fourth quarter 
(January - March 1997) and first quarter (April - June 1997) for the new year 
as well.  In the interim, Navtech reduced its staff significantly to reduce 
operating costs and conserve working capital until such time as new orders 
were received.  In June 1997, Navtech's bank, First National Bank of 
Farmington, informed Navtech that it would no longer continue its revolving 
line of credit. Accordingly, the Company was forced to cease ongoing 
operations and liquidate Navtech's assets to repay the loan to bank. 

     Country World Casinos, Inc.

     As of July 1997, the Company owns  65% of the outstanding shares of 
Country World Common Stock.  Country World intends to develop a casino, hotel 
and parking complex in the gaming district of Black Hawk, Colorado, which is 
located approximately 35 miles west of Denver, including an approximate 75,000 
square foot casino (the "Casino") for limited stakes gambling (that is, 
gambling in which bets are limited to a $5.00 maximum by Colorado law).  
Country World purchased the real property on which the Casino is to be 
constructed from New Allied for approximately $11, 500,000, consisting of 
$550,000 in cash, approximately $7,500,000 in preferred stock and 
approximately $3,500,000 in the form of a promissory note.

     On June 28, 1995, Tommyknocker, a subsidiary of New Allied, filed a Rule 
120 Motion in the District Court, City and County of Denver, Colorado. This 
action sought foreclosure on the property. On October 3, 1995, the magistrate 
in this case granted Tommyknocker's motion and authorized the sale of the 
property pursuant to the foreclosure on October 12, 1995. On October 12, 1995, 
Country World petitioned the U.S. Bankruptcy Court for the District of 
Colorado for protection under the rules of Chapter 11 of the Bankruptcy Code 
in order to stop the foreclosure.  The foreclosure had been stayed pending 
certain conditions.

     The Company, on behalf of Country World, obtained a 5 million dollars 
($5,000,000) financing package, which  enabled Country World to repay all of 
its outstanding indebtedness and emerge from Bankruptcy.  This financing 
package had been approved by the Bankruptcy Court and the Company utilized the 
funds in accordance with the Court's order.  With all issues completed in 
March 1997, the U.S. Bankruptcy Court ruled that Country World Casinos, Inc. 
be dismissed from Chapter 11.

                                     -4-
<PAGE>

     Country World anticipates that it will require an additional 
approximately $79,500,000 to construct an operational and licensed casino, 
hotel and parking complex.  In July 1997, Country World signed an agreement 
with U2 Consulting, of San Francisco, California, to provide up to $79,500,000 
in debt financing to construct such facility. 

     In March 1997, the Company acquired all of the outstanding shares of 
Nightlife Printing & Promotions, Inc., a commercial offset printer, and all of 
the outstanding shares of American Publishers Company, Inc., a wholesaler 
telemarketing company selling educational products to schools and libraries.  
In June 1997, according to the terms of the acquisition agreement, primarily 
as a result of the NASD's delisting of the Company's securities, all 
transactions were reversed and Nightlife Printing and American Publishing were 
returned to their original owners.
     
     Navtech Industries, Inc.

     During fiscal 1997, Navtech offered independent manufacturing services to 
original equipment manufacturers in a variety of industries. The Company 
assembled printed circuit boards and wire harness assemblies for slot machine 
tracking systems, signage, as well as various other products.  In June 1997, 
Navtech's primary secured lender, First National Bank of Farmington, informed 
Navtech that it would not extend the loan.  Navtech was unable to replace 
First National Bank of Farmington and the bank subsequently forced Navtech to 
cease ongoing operations and the Bank is liquidating the assets to pay this 
loan.

Employees

     As of July 1997, the Company has four full time employees including three 
executive officers. In June 1997, Navtech reduced its staff significantly 
maintaining management and sales personnel until new commitments/orders were 
received.  In July 1997, with the ceasing of Navtech's operations, all 
employees of Navtech were dismissed.

Insurance

     The Company's insurance coverage includes property and casualty 
insurance, liability insurance, including products liability, and excess 
liability coverage and directors and officers liability insurance. Based both 
upon its experience and industry standards, the Company believes that the 
types and amounts of its coverage are adequate.  In June 1997, the Company did 
not renew the key man life insurance policies for Mr. Berman and Mr. Patrowicz 
in an effort to reduce its fixed expenses.

Item 2 - Properties

     The Company's executive offices are presently contained within an office 
complex in Bala Cynwyd, Pennsylvania and is approximately 2,000 square feet. 
The offices are leased for a period of two years, commencing January 1996, at 
a net monthly rental of $2,400.

                                     -5-
<PAGE>

Item 3 - Legal Proceedings

     On May 26, 1995, the Company's majority owned subsidiary Country World 
Casinos, Inc. ("CWC") commenced a lawsuit against Tommyknocker Casino Corp. 
("Tommyknocker") and New Allied Development Corporation ("New Allied") in the 
District Court of Denver, County of Denver, Colorado, case number 95CV 2310. 
This action is primarily for breach of contract in connection with the 
acquisition of certain real property by CWC from the defendants. CWC is 
seeking monetary damages and declaratory relief.

     On August 15, 1995, Tommyknocker and New Allied filed a counterclaim in 
the aforementioned action against CWC, the Company, Ronald Nathan, Sal Lauria 
and David Singer who are former board members of CWC, Roger LeClerc, President 
of CWC and William Patrowicz director of CWC. The counterclaim alleges that 
CWC is in default under the Promissory Note issued by CWC to Tommyknocker in 
connection with the acquisition of the real property, CWC failed to register 
stock on behalf of Tommyknocker and that the Company has acquired control of 
CWC to the detriment of Tommyknocker and New Allied.

     In a related action on June 28, 1995, Tommyknocker filed a Rule 120 
Motion in the District Court, City and County of Denver, Colorado, case number 
95CV 2799. This motion sought foreclosure of the real property discussed 
above. On October 4, 1995, the magistrate in this case granted Tommyknocker's 
motion and authorized the sale of the property pursuant to the foreclosure on 
October 12, 1995.

     On October 12, 1995, CWC filed a bankruptcy petition under Chapter 11 of 
Title 11 of the United States Code. The case was filed in the United States 
Bankruptcy Court, District of Colorado, case number 95-20563rjb. Pursuant to 
the filing of the Bankruptcy, an automatic stay went into effect pursuant to 
11 U.S.C. Section 362 prohibiting the foreclosure sale. Tommyknocker filed a 
Motion for Relief from the stay and a hearing on this matter was held on 
December 22, 1995.  On January 3, 1996, the Court ruled that CWC should be 
given an opportunity to proceed with its Bankruptcy proceedings in a diligent 
and timely fashion.  The Court conditioned continuation of the stay pending 
the approval or denial as the case may be of CWC's financing proposal and 
certain other conditions.  In March 1996, the Court approved CWC's financing 
proposal and in May 1996, Country World closed on such financing.  In 
September 1996, the Court heard testimony in a claims hearing between the 
parties.  In early November 1996, the Company received final rulings from the 
Court.

     The Court's order found that Tommyknocker Casino Corporation/New Allied  
was not entitled to default interest at the rate of 18%, however Country World 
is ordered to pay 8% per annum on the unpaid balance due Tommyknocker.  
Additionally, the Court ordered that both parties were obligated to pay their 
own expenses related to this matter.

     The Court further found that Country World Casinos, Inc. was not in 
default of its Agreement with Tommyknocker/New Allied with regard to filing a 
registration statement for its preferred stock and until Tommyknocker/New 
Allied files such registration statement and Country World fails to pay for 
its cost, Country World is not in breach of the agreement.

                                     -6-
<PAGE>


     The Court upheld Tommyknocker's/New Allied's claim that Country World was 
not entitled to an offset on the environmental clean up as the work had been 
completed and Country World paid all clean up costs without objection prior to 
the Company's acquisition of a majority ownership in Country World.

     The Company, on behalf of Country World, obtained a 5 million dollars 
($5,000,000) financing package, which  enabled Country World to repay all of 
its outstanding indebtedness and emerge from Bankruptcy.  This financing 
package had been approved by the Bankruptcy Court and the Company utilized the 
funds in accordance with the Court's order.  With all issues completed in 
March 1997, the U.S. Bankruptcy Court ruled that Country World Casinos, Inc. 
be dismissed from Chapter 11.

     On October 10, 1995, Phil B. Acton, Trustee of the Calvin Black Trust 
commenced a lawsuit against the Company in the United States District Court 
for the District of Utah, Central Division, case number 95CV 09305. This 
action sought repayment of a promissory note in the principal amount of 
$500,000.  As discussed in the Company's earlier filings in August 1996, this 
action was settled.

     The Company is the defendant in a lawsuit pending in United States 
District Court, District of Arizona, Case No. CIV97-212PHXROS entitled Holly 
Products, Inc. and Navtech Industries, Inc., Defendants v. Semisystems, Inc., 
Plaintiff. This lawsuit was commenced by Semisystems, Inc. on January 30, 
1997.  The complaint asserted six claims against Navtech for among other 
things, misrepresentation, breach of contract, breach of warranty, fraud, etc. 
and as the owner of 100% of the outstanding stock of Navtech, the Company 
should be held jointly and severally liable for all acts and obligations of 
its subsidiary Navtech.

     Navtech has ceased operations and is without resources, accordingly it 
was unable to defend itself in this matter and the Court awarded a judgement 
against Navtech in the amount of $3,280,630 in October of 1997.

     The Company was not served in this action until August 1997.  The Company 
immediately filed an order to show cause which vacated any possible default 
judgement and filed its answer to the allegations made by Semisystems in 
September 1997.  In an accompanying motion, the Company filed a motion to 
dismiss on the grounds that there is no personal jurisdiction over the Company 
in this District of Arizona.  Oral argument on the Motion is set for February 
20, 1998.

     The Company was a defendant in a lawsuit in the Fifth Judicial District 
Court, in Iron County, Utah, Case No. 970500004 entitled Lloyd & Myra 
Kartchner, Plaintiffs v. Holly Products, Inc. and Navtech Industries, Inc., 
Defendants.  This lawsuit was commenced in January 1997.  The complaint, 
alleges that both companies failed to live up to the terms of a resignation 
agreement dated February 28, 1996 between the Company, Navtech and the 
Plaintiff.  In August 1997, the Court found the resignation agreement valid 
and enforceable and issued an order granting Plaintiffs' Motion for summary 
judgement in the amount of $52,955.91.

                                     -7-
<PAGE>

     The Company is a defendant in a lawsuit pending in the Eleventh Judicial 
District Court, County of San Juan, State of New Mexico, Case No. CV-97-443-6 
entitled First National Bank of Farmington, Plaintiffs v. Navtech of New 
Mexico, Inc., Navtech Industries, Inc., Holly Products, Inc., n/k/a, Holly 
Holdings, Inc., Defendants.  This lawsuit was commenced on June 9, 1997 and 
amended on August 9, 1997.  The complaint alleges four claims against Navtech 
for debt and money due, one claim for personal property foreclosure against 
Navtech and two claims based on the guaranty of the Company.

     Navtech has ceased operations and is without resource, based on the 
foregoing it was unable to defend itself in this matter and in June 1997, the 
Court appointed a receiver to Marshall the inventory, assemble the orders, 
collect the receivables and contract for the completion of work in process to 
maximize return.  As of this date, that process has not been completed and 
accordingly, there is no way to determine the balance due to the bank and the 
case remains open.

     In 1996, the Company was a Defendant in a lawsuit in Superior Court of 
New Jersey, Burlington County, Case No. BUR-L-3467-95 entitled Pennsylvania 
Manufacturers Association Insurance Company, Plaintiff v. Holly Products, 
Inc., Defendant.  This lawsuit resulted in a summary judgement being issued 
against the Company in the amount of $63, 897.00 on November 8, 1996.

     In February 1997, the Company reached an agreement with Pennsylvania 
Manufacturers Association Insurance Company and filed a stipulation of 
settlement with the Court at which time the Company began making payments in 
accordance with a payout schedule over a 20 month period.  The Company made 
payments totaling $13,000 through April 1997 at which time payments ceased due 
to a cash flow shortage.

     In September 1997, the Pennsylvania Manufacturers Association Insurance 
Company has re-instituted steps to enforce the outstanding judgement against 
the Company

Item 4 - Submission of Matters to a Vote of Security Holders

     On June 5, 1996, by written consent of a majority of the Company's 
stockholders without a meeting, action was taken to amend the Company's 
Certificate of Incorporation to increase the authorized number of shares of 
Common Stock from 20 million to 50 million shares.  The foregoing was approved 
by the holders of 9,907,467 shares of the Company's Common Stock, constituting 
approximately 85.2% of such stock outstanding on April 30, 1996, the record 
date.

     In December 1996, at the annual meeting of shareholders, the shareholders 
were asked to approve the following agenda:

1.To elect a Board of Directors to serve until the next annual meeting of 
shareholders and until their successors have been duly elected and qualified;

                                     -8-
<PAGE>

2.To consider and act upon a proposal to amend the Company's Certificate of 
Incorporation to change the name of the Company to "Holly Holdings, Inc.";

3.To consider and act upon a proposal to amend the Company's Certificate of 
Incorporation to reflect a one-for-ten reverse split of the Company's Common 
Stock;

4.To consider and act upon a proposal to amend the Company's Certificate of 
Incorporation to increase the number of authorized shares of the Company's 
Common Stock from 50,000,000 to 150,000,000;

5.To consider and act upon a proposal to approve the Company's 1996 Stock 
Option Plan;

6.To consider and act upon a proposal to issue five pre-split shares of the 
Company's Common Stock in exchange for one share of the Company's Series D 
Preferred Stock and to amend the Company's Certificate of Incorporation to 
delete any reference to, or any provision for, the class of authorized stock 
designated as Series D Preferred Stock;

7.To ratify the selection of Moore Stephens CPA's to act as the Company's 
Independent Certified Public Accountants for the fiscal year ending March 31, 
1997;

     All of the above items except Item #6 were approved by the shareholders 
and were effective December 26, 1996.  The Company plans to reissue a proxy 
statement for Item #6.

                                     -9-
<PAGE>


PART II

Item 5 - Market for Common Equity and Related Stock Holder Matters

     The Company's Common Stock, Warrants and Series D Preferred Stock  are 
currently traded "over the counter market" under the respective symbols 
"HOPR", "HOPRW" and "HOPRP".

     The following table sets forth the high and low prices for such 
securities on the NASDAQ Small Cap Market during the quarters indicated. In 
July 1997, the Company's common stock and warrants were delisted from the 
NASDAQ Small Cap Market.  In March 1997, the Company's Series D Preferred 
stock was delisted from the NASDAQ Small Cap Market.
<TABLE>
                                     Common Stock           Warrants          Preferred
Period                               High      Low        High     Low       High     Low
<S>                                  <C>       <C>        <C>      <C>       <C>      <C>
December 20 to December 31, 1993     5 3/4    5 3/8         3/4     3/8         -       -
Quarter Ended March 31, 1994         6 1/4    5 1/2       1         5/8         -       -
Quarter Ended June 30, 1994          6 3/4    5 3/4       1 5/8   1             -       -
Quarter Ended September 30, 1994     8 1/8    6 1/2       4 1/8   1 7/8         -       -
Quarter Ended December 31, 1994      8 1/8    6 1/2       4 1/4   1 7/8     16      11
Quarter Ended March 31, 1995         7 1/4    5           4 1/8   2 3/8     16      10
Quarter Ended  June 30, 1995         7 3/8    5           4       2 3/8     15 1/4  10
Quarter Ended September 30, 1995     5 7/8    2 3/4       2 1/4     5/8     12       5 1/2
Quarter Ended December 31, 1995      3 7/8    1           1 5/8     5/8      8       2 1/4
Quarter Ended March 31, 1996         2 11/16    11/16     1 1/4     7/16     6       2 5/8
Quarter Ended June 30, 1996             3/4      5/16      11/16    5/16     2 5/8     3/4
Quarter Ended September 30, 1996       11/16     5/16       5/8     1/16     2         3/4
Quarter Ended December 31, 1996         9/16     1/4        3/8     1/16     1         3/8
Quarter Ended March 31, 1997          2 1/41     3/16       1/4     1/16       3/8     3/8
Quarter Ended June 30, 1997           2 1/16     1/4        1/8     1/16       1/4     1/8
Quarter Ended September 30, 1997        3/16     .06        1/16    .02        3/4     1/8
</TABLE>

     On December 15, 1997, the closing price of the Common Stock, Warrants and 
Preferred Stock listed in the "over the counter market" were $0.04, $0.01 and 
$0.08, respectively.  

     On September 15, 1997, there were 407 holders of record of the Company's 
Common Stock, 56 holders of record of the Warrants and 29 holders of record of 
the Series D Preferred Stock. The Company believes that there are in excess of 
3,500 beneficial owners of Common Stock, Warrants and Series D Preferred 
Stock.

DIVIDEND POLICY

     The Company does not anticipate that it will pay cash dividends on the 
Common Stock in the foreseeable future. The payment of such dividends by the 
Company will depend on its earnings, if any, and financial condition and such 
other factors as the Board of Directors of the Company may consider relevant. 
The Company currently intends to retain any earnings to provide for the 
development and growth of the Company.

     Holders of shares of Series D Preferred Stock receive dividends of 10% 
per annum. Such dividends accrue and are cumulative from the date of original 
issue and are payable quarterly in arrears on October 1, January 1, April 1

                                     -10-
<PAGE>

and July 1 of each year. Dividends on the shares of Series D Preferred Stock 
are payable prior to any dividends to be paid on the Common Stock.  The 
Company intends to pay dividends on the Series D Preferred Stock to the extent 
its earnings are sufficient, as determined in the discretion of the Board of 
Directors of the Company. Under New Jersey law, the Company is not permitted 
to pay dividends if either (i) it would be unable to pay its debts as they 
become due in the ordinary course of business or (ii) its total assets would 
be less than its total liabilities. Accordingly, dividend payments have not 
been made since July 1, 1995.

                                     -11-
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS

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.

General

     The Company is focusing all its attention in assisting its majority owned 
subsidiary, Country World Casinos, Inc., ("Country World") in completing its 
plan to build the largest casino and hotel complex in the state of Colorado, 
as well as completing its financials and settling outstanding indebtedness so 
that it can plan for new acquisitions in the future.

     In order to begin the process of timely completing the goals, Country 
World 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, Country World has signed a management agreement with Signature 
Hospitality Resources, Inc. of Denver, Colorado to manage the 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 Planning 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.

     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.  Country World 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.  Country World 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 Casino's atmosphere will feature a country western music theme

                                     -12-
<PAGE>

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.

     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 Country World 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 
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 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 

                                     -13-
<PAGE>

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.  

Results of Operations
Twelve Months Ended March 31, 1997 Compared to Twelve Months Ended March 31, 
1996

     Based on the following results of operations and the non renewal of 
Navtech's line of credit with the First National Bank of Farmington, the 
Company was forced to cease ongoing operations of this segment of the 
Company's business.  Due to the plan of discontinuance for Navtech, revenues 
and net losses have been eliminated from the statement of operations.  The 
following comparison, therefore, does not include the results attributable to 
Navtech, but contains the costs of discontinued operations.

     Due to the discontinuance of Navtech, the Company had no revenue, cost of 
sales or gross profit for the twelve months ended March 31, 1997 and, 
retroactively, no revenue for the twelve months ended March 31, 1996.

     Total costs and expenses for the twelve months ended March 31, 1997 were 
$3,845,433 as compared to $3,377,865 for the comparable period ended March 31, 
1996.  The increase is primarily attributable to a corporate increase of legal 
and other professional fees, raising of working capital, consulting, stock 
expenses, as well as promotional fees.

     Other income (expense) for the twelve months ended March 31, 1997 
increased to $2,035,157 as compared to $331,567 during the comparable period 
in 1996.  This increase was due to a $1,700,000 loss incurred when an 
acquisition of the Company was rescinded due to adverse financial conditions, 
pursuant to the agreement.

     Discontinued operations showed a loss from operations of $3,947,298 for 
the twelve months ended March 31, 1997, as compared to a loss of $5,141,379  
for the twelve months ended March 31, 1996.  This reduction was due to the 
lower cost of closing down Navtech Industries as compared to the cost of 
closing HollyWood, the Company's woodworking business which ceased operations 
in September 1995.   The estimated loss on disposal of the woodworking 
business and the electronic component manufacturing business increase to 
$3,603,291 in 1997 from $2,709,280 in 1996 due to a higher debt load by 
Navtech as compared to HollyWood.

                                     -14-
<PAGE>

Liquidity and Capital Resources

     To the extent the Company has ceased operations of its woodworking 
business, its cash requirements  diminished accordingly, an extended line of 
credit had been secured to fund Navtech's operations with The First National 
Bank of Farmington in Farmington, New Mexico.  The terms of this facility were 
for a receivable and inventory line of credit in an amount not to exceed 
$1,500,000 with a monthly floating interest rate of 1.5% over prime.  As of 
December 31, 1996, Navtech was indebted to the bank in the amount of 
approximately $1.2 million.  This loan became due on March 15, 1997, and was 
extended to June 1997.  In June 1997, the bank informed Navtech that there 
would be no further extensions.

     In January 1995, the Company borrowed, on an unsecured basis, an 
aggregate of $1,000,000 from three individuals and entities at 15% annual 
interest. In lieu of such interest, the Company issued to such note holders an 
aggregate of 150,000 shares of Common Stock. The principal amount of such 
notes was due and payable on January 13, 1996, and in March 1996, the Company 
entered into an extension agreement with the three individuals whereas the 
Company made a partial payment of $500,000 and Mr. Larry Berman, the Company's 
Chairman, gave 370,000 shares of his personal stock for an extension until 
August 9, 1996 at which time a balance payment of $400,000 was due. The 
Company made a partial payment for interest, as well as an extension fee in 
the amount of $200,000. The Noteholders agreed to extend the final payment due 
date until after funding of the Country World Casino project.  The Company 
utilized the $1,000,000 to make a loan to Country World, which indebtedness 
was canceled in exchange for the issuance of 5,000,000 shares of Country World 
common stock to the Company. Country World Casinos, Inc. plans to invest up to 
an additional $70 to $80 million to develop and construct the casino and hotel 
complex in Black Hawk, Colorado.

     During the year 1996, the Company consummated a Private Placement of 
1,162,000 shares of its Series E Convertible Preferred Stock in various 
trounces, resulting in gross and net proceeds of $11,620,000 and $9,751,000, 
respectively.  The proceeds of this offering were utilized for repayment of 
debt, settlement of litigation fees associated with securing financing for 
Country World Casinos, Inc. and working capital for the Company and Navtech.  
Each share of Series E Preferred Stock is convertible into shares of the 
Company's Common Stock at the rate determined by dividing $10.00 by the lesser 
of 75% of the closing bid price as reported, of the Company's Common Stock on 
the date of the closing of the subscription or 65% of the average closing bid 
price for the five (5) trading days immediately preceding the date of 
conversion.  As of September 1997, 87,500 shares are yet to be converted.
     
     In April 1996, the State of New Jersey approved the issuance of 555,000 
shares of Series Z Preferred Stock in accordance with the Company's 
Certificate of Designation.  In September 1996, such authorization was 
increased to 1,050,000 shares and issued in exchange for debt.  In July 1997, 
the shares of Series Z preferred stock were converted into 5,068,140 shares of 
common Stock.

     In June 1996, the Company issued an aggregate of 1,300,000 shares of its

                                     -15-
<PAGE>

common stock to Messrs. Irwin Schneider, Eugene Lombardo and Scott Schneider 
in return for certain services performed by these individuals on behalf of the 
Company.

     In September 1996, the Company issued 573,333 shares of common stock to N 
& A Promotions in return for certain services performed for the Company.

     In September 1996, a debt of $30,000 owed to Sunrise, Inc. was converted 
into 30,000 shares of Series C Preferred Stock and pursuant to the terms 
thereof, into 120,000 shares of common stock.

     In October 1996, the Company issued 450,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.

     In March 1997, the Company issued 100,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.

     In April 1997, the Company issued 250,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.

     In April 1997, the Company issued 555,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.

     Unless and until the Company improves its financial results sufficiently 
and maintains such improved results, the Company may have to borrow or raise 
additional capital to fund any cash shortage, in the need should arise.

     At March 31, 1996, the Company had owed $250,000 plus accrued interest 
and legal fees as required under the default provisions of the note, to the 
Calvin Black Trust.  During the current period, the Company liquidated this 
note by payments and by the exchange of equity a subsidiary had in another 
company, terminating the legal action brought upon the default.

Item #7     Financial Statements - See Page F-1 through F-24


Item #8Changes in and disagreements with accountants on accounting and 
financial disclosure. - Not applicable

PART III

Item #9Directors, Executive Officers, Promoters and Control Persons, 
Compliance with Section 16(a) of the Exchange Act

     The executive officer and directors of the Company as of June 30, 1997 
are as follows:

                                     -16-
<PAGE>

Name                    Age          Position with the Company

Larry S. Berman          61          Chairman, Chief Executive Officer,
                                     Secretary, and Director

William H. Patrowicz     49          President, Chief Operating Officer,
                                     Treasurer, and Director


     LARRY S. BERMAN has served as Chairman, Secretary, and Director of the 
Company 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 raise debt and equity funds.

     WILLIAM H. PATROWICZ has served as President, Chief Operating Officer, 
and Director of the Company since June 1992.  From 1982 to December 1991, Mr. 
Patrowicz was employed by Gunnebo Fastening Corp., most recently as Senior 
Vice President of Operations.

     Directors hold office until the next annual meeting of stockholders 
following their elections, or until their successors are elected and 
qualified.  Officers are elected annually by the Board of Directors and serve 
at the discretion of the Board.

                                     -17-
<PAGE>

Item #10
Executive Compensation

The following table sets forth the cash compensation paid by the Company to 
its chief executive officer and each of its executive officers whose total 
cash compensation exceeded $100,000 for the fiscal period ended March 31, 
1997, 1996 and 1995, respectively:

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

Larry S. Berman        1995     117,000(1)          0          0
Chairman and Chief     1996     156,000             0          0
Executive Officer      1997     156,000             0          0


William H. Patrowicz   1995     110,500(2)          0          0
President and Chief    1996     130,000             0          0
Operating Officer      1997     130,000             0          0


(1)     Includes a portion of a $156,000 annual salary which took effect 
January 1, 1995.
(2)     Includes a portion of a $130,000 annual salary which took effect 
January 1, 1995.
     The value of personal benefits furnished to Mr. Patrowicz and Mr. Berman 
did not exceed 10% of their respective cash compensation.

     In February 1996, the Company and Mr. Lloyd Kartchner, Chief Executive 
Officer and Director of Navtech, agreed to a mutual separation of the parties 
under certain terms and conditions.  Among the most important terms being, Mr. 
Kartchner has agreed not to compete with the Company for a period of three 
years in return for a buy out of his employment contract in the amount of 
$150,000, release of his personal guarantees associated with the Company's 
business, release of the Escrow Agreement, registration of his Holly Products, 
Inc. shares of Common Stock and indemnification for any claims, past or 
future.

Item #11     Security Ownership of  Certain Beneficial Owners and Management.

     Set forth below is information at September 15, 1997, concerning the 
beneficial ownership of Common Stock by (i) all persons known by the Company 
to own beneficially 5% or more of the Company's Common Stock, (ii) each 
director of the Company and (iii) all directors and executive officers of the 
Company as a group.

                                     -18-
<PAGE>

Shares Beneficially Owned (Post Split)

Name (1)(2)(3)                       Number    Percent

Larry S. Berman (3)                1,669,616     7.7%
Chairman, Chief Executive
Officer, Secretary, and
Director of the Company

William H. Patrowicz               1,333,180     6.2%
President, Chief Operating
Officer, Treasurer,
and Director

All Directors and Executive        3,002,796    13.9%
Officers as a Group (2 persons)

(1)     Except as indicated below, all of such persons and entities have sole 
investment and voting power over the shares listed as being owned by them.

(2)     The addresses of certain of such persons are:

     Larry Berman                    
     William H. Patrowicz
     Holly Holdings, Inc.
     200 Monument Road, Suite 10     
     Bala Cynwyd, Pennsylvania 19004     

(3)     Norlar, Inc. is the record holder of a portion of such shares.

                                     -19-
<PAGE>

Item 12     CERTAIN TRANSACTIONS

     On April 20, 1995, the Company acquired 5,000,000 shares of Common Stock 
of Country World Casinos, Inc. ("Country World"), in exchange for the 
cancellation of $1,000,000 of indebtedness owed by Country World to the 
Company. In June 1997, the Company acquired 1,250,000 additional shares in 
exchange for the cancellation of $250,000 of indebtedness.  The Company also 
acquired 16,667 shares of Country World Common Stock in a separate transaction 
for $50,000. Country World has purchased real estate located in the gaming 
district of Black Hawk, Colorado, on which it seeks to construct the Casino. 
In addition, the Company acquired an additional 2,250,453 shares of Common 
Stock of Country World from certain existing shareholders of Country World, in 
exchange for 744,592 shares of the Company's Common Stock. As of June 30, 
1997, the Company owns 65% of the outstanding shares of Country World Common 
Stock.

     From December 1995 to March 1997, the Company sold 1,162,000 shares of 
its Series E Convertible Preferred Stock for $10.00 per share.   This 
transaction was done in accordance with Regulation S of the Securities Act of 
1933.  The Series E Preferred Stock is convertible into the Company's Common 
Stock at the lesser of 75% of the bid price on the date of closing or 65% of 
the bid price on the five days preceding the conversion date.  The Company 
received net proceeds from this transaction of approximately $9,751,000.  The 
proceeds were utilized for repayment of debt, settlement of litigation fees 
associated with securing financing for Country World Casinos, Inc.  and 
working capital for the Company and Navtech.

     In December 1995, the Company committed to guaranty a $5 million loan for 
Country World for use in paying the secured and unsecured creditors of Country 
World.  The loan was approved by the U.S. Bankruptcy Court for the District of 
Colorado and said funds were distributed in accordance with the Court's Order 
in March 1997.

     In March 1997, the United States Bankruptcy Court for the District of 
Colorado dismissed Country World from its pending Chapter 11 case.
     
     On October 10, 1995, Phil B. Acton, Trustee of the Calvin Black Trust 
commenced a lawsuit against the Company in the United States District Court 
for the District of Utah, Central Division, case number 95CV 09305. This 
action seeks repayment of a promissory note in the principal amount of 
$500,000.  On January 15, 1996 the Company, the Calvin Black Trust and Norlar, 
Inc. a corporation owned by Mr. Larry Berman, the Chairman and Chief Executive 
Officer of the Company and his spouse entered into a Sale and Forbearance 
Agreement pursuant to which The Calvin Black Trust sold to Norlar $250,000 of 
the indebtedness owed by the Company in exchange for $250,000 in cash from 
Norlar and Norlar agreed to deliver to the Calvin Black Trust upon the 
effectiveness of a Registration Statement either 250,000 shares of the 
Company's Common Stock or $500,000 worth of the Company's Common Stock 
whichever be greater.  In exchange, The Calvin Black Trust agreed to forbear 
from taking any further actions for a period of six months from the date of 
the Sale and Forbearance.   The Company will repay Norlar the $250,000 and 
replace the shares of the Company's Common Stock that Norlar is required to 
deliver to The Calvin Black Trust pursuant to the terms of the Sale and 
Forbearance Agreement in either cash or the Company's securities as determined 
by the Company's Board of Directors.  In April 1996, the Agreement was amended 
and the Trust was paid an additional $150,000 and Norlar agreed to deliver to 
the Trust, upon effectiveness of a Registration Statement, either 200,000

                                     -20-
<PAGE>
 
shares of the Company's Common Stock or $348,000 worth of the Company's Common 
stock, whichever be greater, for an extension of time to file a Registration 
Statement.  In August 1996, the Company liquidated this note by payments and 
by the exchange of equity a subsidiary had in another company, terminating the 
legal action brought upon the default.

     In April 1996, the Company filed for approval with the State of New 
Jersey, pursuant to the provisions of Section 14A:7-2(2) of the New Jersey 
Business Corporation Act, a Certificate of Amendment to its Certificate of 
Incorporation to authorize the issuance of 555,000 of Preferred Stock of the 
Corporation to be designated Class Z Preferred Stock, $0.25 par value.  Such 
designation was approved by the State in April 1996.  In September 1996, such 
authorization was increased to 1,050,000 shares and issued in exchange for 
debt.  In July 1997, the shares of Series Z preferred stock were converted 
into 5,068,140 shares of common stock.  The reason for such authorization is 
due to the Company, its Board of Directors and management team as a whole, 
submitting to a licensing procedure enforced by the State of Colorado Gaming 
Commission.  Under the terms of the licensing procedure, all parties must be 
licensed prior to opening operations of Country World Casinos and if there was 
to be a sudden change in control in the Board of Directors or management team, 
the Casino would be forced to close until new personnel could be licensed, 
quite possibly bankrupting the Company.

     In June 1996, the Company issued an aggregate of 1,300,000 shares of its 
Common Stock to Messrs. Irwin Schneider, Eugene Lombardo and Scott Schneider 
in return for certain services performed by these individuals on behalf of the 
Company.

     In September 1996, the Company issued 57,333 shares of common stock to N 
& A Promotions in return for certain services performed for the Company.

     In September 1996, a debt of $30,000 owed to Sunrise, Inc. was converted 
into 30,000 shares of Series C Preferred Stock and pursuant to the terms 
thereof, into 120,000 shares of common stock.

     In October 1996, the Company issued 450,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.

     In March 1997, the Company issued 100,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.

     In April 1997, the Company issued 250,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.

     In April 1997, the Company issued 555,000 shares of common stock to 
Sparta Capital Ltd. for the exercise of its warrants.
     
                                     -21-
<PAGE>

ITEM #13 - EXHIBITS

EXHIBIT
NUMBER          DESCRIPTION OF EXHIBIT

None

                                     -22-
<PAGE>

Signatures


     In accordance with Section 13 or 15 (d) of the Exchange Act of 1934, the 
issuer caused this report to be signed on its behalf by the undersigned, 
thereunto duly authorized.

                                        HOLLY HOLDINGS, INC.


Dated:     February 9, 1998              /s/ William H. Patrowicz
                                             William H. Patrowicz
                                             Sole Officer and Director


     In accordance with the Exchange Act, this report has been signed below by 
the following persons on behalf of the Registrant in the capacities and on the 
dates indicated.



/s/ William H. Patrowicz  Sole Officer and Director       February 9, 1998
William H. Patrowicz          

                                     -23-
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES

INDEX


Financial statements:
     Report of Independent Auditors.................................F-2 - F-3
     
     Consolidated Balance Sheet as of March 31, 1997................F-4 - F-5

     Consolidated Statements of Operations for the Years............F-6
       Ended March 31, 1997 and 1996

     Consolidated Statements of Stockholders' Equity (Deficit)......F-7
       for the Years Ended March 31, 1997 and 1996

     Consolidated Statements of Cash Flows for the Years............F-8 - F-9
       Ended March 31, 1997 and 1996

     Notes to Consolidated Financial Statements.....................F-10 - F-24

<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of
     Holly Holdings, Inc.
     Bala Cynwyd, Pennsylvania

     
          We were engaged to audit the accompanying consolidated balance sheet 
of Holly Holdings, Inc. and its subsidiaries as of March 31, 1997, and the 
related consolidated statement of operations, stockholders' equity (deficit), 
and cash flows for the fiscal year ended March 31, 1997.  These consolidated 
financial statements are the responsibility of the Company's management.  The 
consolidated statement of operations, stockholders' equity, and cash flows for 
the fiscal year ended March 31, 1996, were audited by us, and our report dated 
June 21, 1996, on those financial statements included an explanatory paragraph 
that described an uncertainty raising substantial doubt about the Company's 
ability to continue as a going concern.

          We were unable to perform an audit sufficient in scope to enable us 
to form an opinion on the consolidated financial statements of Holly Holdings, 
Inc. and its subsidiaries for the year ended March 31, 1997, because 
accounting records, detail and supporting data for a significant subsidiary of 
the Company were not available for our inspection.  We were also unable to 
obtain a discussion or evaluation of pending and/or threatened litigation from 
one of the Company's outside legal counsels.
     
          The accompanying consolidated financial statements have been 
prepared assuming  Holly Holdings, Inc. and will continue as a going concern.  
As discussed in Note 3 to the consolidated financial statements, the Company's 
recurring losses from operations, accumulated deficit,  cumulative negative 
cash flows from operations, and pending litigation involving one of its 
subsidiaries, raise substantial doubt about Holly Holdings, Inc. ability to 
continue as a going concern.  Management's plans in regard to these matters 
are also described in Note 3.  The consolidated financial statements do not 
include any adjustments that might result from the outcome of this 
uncertainty.

          As discussed in the preceding paragraphs, because we were unable to 
obtain sufficient competent evidential matter the scope of our work was not 
sufficient, and the significance of the uncertainty was such that we are 
unable to express, and we do not express, an opinion on the financial 
statements referred to in the first paragraph as of and for the fiscal year 
ended March 31, 1997.


               MOORE STEPHENS, P. C.
               Certified Public Accountants.


Cranford, New Jersey
December 18, 1997

                                     F-2
<PAGE>

REPORT OF INDEPENDENT AUDITORS


To the Stockholders and Board of Directors of
     Holly Products, Inc.
     Moorestown, New Jersey

     
          We have audited the accompanying consolidated statements of 
operations, stockholders' equity, and cash flows of Holly Products, Inc. and 
its subsidiaries for the fiscal year ended March 31, 1996.  These consolidated 
financial statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these consolidated financial 
statements based on our audit.

          We conducted our audit in accordance with generally accepted 
auditing standards.  Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the consolidated financial 
statements are free of material misstatement.  An audit includes examining, on 
a test basis, evidence supporting the amounts and disclosures in the 
consolidated financial statements.  An audit also includes assessing the 
accounting principles used and significant estimates made by management, as 
well as evaluating the overall consolidated financial statement presentation.  
We believe that our audit provides a reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to 
above present fairly, in all material respects, the consolidated results of oper
ations, stockholders' equity, and cash flows of Holly Products, Inc. and its 
subsidiaries for the fiscal year ended March 31, 1996, in conformity with 
generally accepted accounting principles.

          The accompanying consolidated financial statements have been 
prepared assuming  Holly Products, Inc. will continue as a going concern.  As 
discussed in Note 3 to the consolidated financial statements, the Company's 
recurring losses from operations, accumulated deficit and recurring negative 
cash flows from operations, raise substantial doubt about Holly Products, 
Inc.'s ability to continue as a going concern.  Management's plans in regard 
to these matters are also described in Note 3.  These consolidated financial 
statements do not include any adjustments that might result from the outcome 
of this uncertainty.



               MOORE STEPHENS, P. C.
               Certified Public Accountants.


Cranford, New Jersey
June 21, 1996

                                     F-3
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997.

Assets:
Current Assets:
     Cash                                                  $     20,946
     Prepaid Expenses                                           261,096

     Total Current Assets                                       282,042

Property and Equipment - (Net of Accumulated 
     Depreciation and Amortization of $45,533)               12,262,189

Deposits                                                            440

     Total Assets                                      $     12,544,671



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

                                     F-4
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997. 



Liabilities and Stockholders' (Deficit):
Current Liabilities:
     Cash Overdraft                                     $     44,142
     Notes Payable                                            35,951
     Notes Payable - Related Party                         1,400,365
     Notes Payable - Other                                   400,000
     Accounts Payable and Accrued Expenses                   769,513
     Net Liabilities of Discontinued Operations            6,662,869

     Total Current Liabilities                             9,312,840

Long-Term Liabilities:
     Note Payable                                          2,650,000
     Note Payable - Related Party                          2,350,000

     Total Long-Term Liabilities                           5,000,000

Minority Interest     3,195,291

Commitments and Contingencies                                     --

Stockholders' (Deficit):
     Preferred Stock - Authorized 2,000,000 Shares:
          Series D: 10% Convertible $10.00 Par Value,
          $1.00 Per Share Per Annum Cumulative Dividends,
          384,639 Shares Issued and Outstanding            3,846,390

     Series E: Convertible $10.00 Par Value, 157,500
          Shares Issued and Outstanding                    1,575,000
 
          Series Z: Convertible $0.25 Par Value,
          1,013,628 Shares Issued and Outstanding            253,407

     Additional Paid-in Capital (Preferred)                3,818,034

     Common Stock - No Par Value, Authorized
          150,000,000 Shares, 6,564,035 Shares Issued
          and Outstanding                                 19,506,404

     Additional Paid-in Capital (Common)                     (83,947)

     Accumulated (Deficit)                               (33,878,748)

     Total Stockholders' (Deficit)                        (4,963,460)

     Total Liabilities and Stockholders' (Deficit)    $   12,544,671


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

                                     F-5
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS 


                                                            Years ended
                                                              March 31,
                                                      1 9 9 7          1 9 9 6

Net Sales                                          $       --       $       --

Cost of Sales                                              --               --

     Gross Profit                                          --               --

Operating Expenses:
     General, Selling and Administrative            3,845,433        3,377,865 
     
     Operating (Loss)                              (3,845,433)      (3,377,865)

Other (Expense) Income:
     Other Income                                         735           19,513
     Interest Expense                                (376,346)        (351,080)
     Interest Income                                   40,454               --
     Loss On Investment                            (1,700,000)              --

     Other (Expense) - Net                         (2,035,157)        (331,567)

Minority Interest Share in Loss of Subsidiary         390,873          143,101

     (Loss) from Continuing Operations             (5,489,717)      (3,566,331)

Discontinued Operations:
     (Loss) from Operations of Woodworking
       Business and Electronic Component
       Manufacturing Business                      (3,947,298)      (5,141,379)

Estimated (Loss) on Disposal of Woodworking
     Business and Electronic Component
       Manufacturing Business Including Provision
       of $143,000 and $666,224 for Operating
       Losses During the Phase Out Period          (3,603,291)      (2,709,280)

     Net (Loss)                                   (13,040,306)     (11,416,990)

Preferred Stock Dividends                             389,975          439,479

     Net (Loss) Available to Common
      Stockholders                             $  (13,430,281)  $  (11,856,469)

Loss Per Common Share:
     (Loss) from Continuing Operations         $        (1.43)           (5.29)
     (Loss) from Discontinued Operations                (1.03)           (7.63)
     Estimated (Loss) on Disposals                       (.94)           (4.02)

     Net (Loss) Per Common Share               $        (3.50)  $       (17.59)

     Weighted Average Number of Common
      Shares Outstanding                            3,837,269          673,916

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

                                     F-6
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
                                                           Preferred Stock
                                 Series B             Series C            Series D            Series E             Series Z
                             Number               Number             Number               Number               Number             
                           of Shares  Amount    of Shares  Amount  of Shares  Amount    of Shares   Amount   of Shares   Amount 
<S>                           <C>      <C>        <C>       <C>      <C>       <C>         <C>       <C>       <C>         <C>   

Balance - March 31, 
     1995                    75,000  $ 7,500         --   $   --    402,500 $4,025,000       --   $    --        --    $    -- 

Dividends Paid                   --       --         --       --         --        --        --        --        --         -- 
Shares Issued in Acquisition     --       --         --       --         --        --        --        --        --         -- 
Shares Issued in Exchange
  for Existing Debt              --       --    180,000  180,000         --        --        --        --        --         -- 
Conversion to Preferred 
     Stock                  (75,000)  (7,500)   450,000    7,500         --        --        --        --        --         -- 
Conversion to Common 
     Stock                       --       --   (630,000)(187,500)        --        --        --        --        --         -- 
Shares Issued for Litigation
     Settlement                  --       --         --       --         --        --        --        --        --         -- 
Shares Issued for Services
     Rendered                    --       --         --       --         --        --        --        --        --         -- 
Shares Issued in Exchange
     for Existing Debt           --       --         --       --         --        --        --        --        --         -- 
Issuance of Series E
     Preferred Stock             --       --         --       --         --        --   747,000  7,470,000       --         -- 
Conversion to Common
     Stock                       --       --         --       --    (12,525) (125,250) (160,000)(1,600,000)      --         -- 
Net (Loss) for the Period        --       --         --       --         --        --        --        --        --         -- 

Balance - March 31, 1996         --       --         --       --    389,975  3,899,750  587,000 5,870,000        --         -- 

 Adjustment for Prior Year 
    Beneficial Conversion of 
    Series E Preferred Stock 
    to Common Stock (10D)        --       --         --       --         --        --        --        --        --         --
 Shares Issued in Exchange 
    for Debt                     --       --         --       --         --        --        --        -- 1,013,628    253,407
 Shares Issued For Services 
    Rendered                     --       --         --       --         --        --        --        --        --         --
 Shares Issued For Exercise 
    of Warrants                  --       --         --       --         --        --        --        --        --         --
 Shares Issued in Acquisition    --       --         --       --         --        --        --        --        --         --
    Conversion of Series D 
    Preferred to Common
    Stock                        --       --         --       --     (5,336)  (53,360)       --        --        --         --
 Issuance of Series E 
    Preferred Stock              --       --         --       --         --        --   375,000  3,750,000       --         --
 Conversion of Series E
    Preferred to Common
    Stock                        --       --         --       --         --        --  (804,500)(8,045,000)      --         --
 Beneficial Conversion of 
    Series E Preferred 
    to Common Stock (10D)        --       --         --       --         --        --        --        --        --         --
Net(Loss) for the Period         --       --         --       --         --        --        --        --        --         --

 Balance - March 31, 1997        --   $   --         --   $   --    384,639  $3,846,390 157,500 $1,575,000 1,013,628  $ 253,407

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

                                     F-7a
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)


                                    Common Stock
                                                                                               Total
                              Additional                           Additional               Stockholders'
                               Paid-in       Number                 Paid-in    Accumulated     Equity
                               Capital     of Shares     Amount     Capital     (Deficit)     (Deficit)
<S>                              <C>          <C>         <C>         <C>          <C>           <C>

Balance - March 31, 
     1995                     $(732,420)     410,960   $4,599,383  $ (83,947)  (4,104,695)   $ 3,710,821

Dividends Paid                       --           --           --         --     (137,604)      (137,604)
Shares Issued in Acquisition         --       74,459    2,187,733         --           --      2,187,733
Shares Issued in Exchange
  for Existing Debt                  --           --           --         --           --        180,000
Conversion to Preferred 
     Stock                           --           --           --         --           --             --
Conversion to Common 
     Stock                     (442,500)     252,000      630,000         --           --             --
Shares Issued for Litigation
     Settlement                      --        2,500       75,000         --           --         75,000
Shares Issued for Services
     Rendered                        --       44,750    1,214,038         --           --      1,214,038
Shares Issued in Exchange
     for Existing Debt               --        2,793       38,756         --           --         38,756
Issuance of Series E
     Preferred Stock         (1,020,401)          --           --         --           --      6,449,599
Conversion to Common
     Stock                      255,773      247,584    1,469,477         --           --             --     
Net (Loss) for the Period            --           --           --         --  (11,416,990)   (11,416,990)

Balance - March 31, 1996     (1,939,548)   1,035,046   10,214,387    (83,947) (15,659,289)     2,301,353

 Adjustment for Prior Year 
    Beneficial Conversion of 
    Series E Preferred Stock 
    to Common Stock (10D)       850,786           --           --         --     (850,786)            --
 Shares Issued in Exchange 
    for Debt                         --       12,000       30,000         --           --        283,407
 Shares Issued For Services 
    Rendered                         --      187,333      702,500         --           --        702,500
 Shares Issued For Exercise 
    of Warrants                      --       45,000      280,750         --           --        280,750
 Shares Issued in Acquisition        --    1,500,000    1,500,000         --           --      1,500,000
    Conversion of Series D 
    Preferred to Common
    Stock                         9,710       44,048       43,650         --           --             --
 Issuance of Series E 
    Preferred Stock            (741,164)          --           --         --           --      3,008,836
 Conversion of Series E
    Preferred to Common
    Stock                     1,309,883    3,740,608    6,735,117         --           --             --
 Beneficial Conversion of 
    Series E Preferred 
    to Common Stock (10D)     4,328,367           --           --         --   (4,328,367)            --
Net(Loss) for the Period             --           --           --         --  (13,040,306)   (13,040,306)

 Balance - March 31, 1997   $ 3,818,034    6,564,035  $19,506,404   $(83,947)$(33,878,748)   $(4,963,460)

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

</TABLE>
                                     F-7b

<PAGE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 


                                                            Years ended
                                                              March 31,
                                                      1 9 9 7          1 9 9 6


Operating Activities:
     (Loss) From Continuing Operations            $(5,489,717)     $(3,566,331)
     Adjustments to Reconcile Net (Loss) to
      Net Cash 
          (Used for) Operating Activities:
          Depreciation and Amortization               142,547           28,523
          Amortization of Deferred Financing
            Activities                                227,199          112,500
          Loss on Investment                        1,700,000                -
          Services Performed in Exchange for Stock    702,500                -
          Minority Interest                          (390,873)        (143,101)
          Write-off of Intangibles                     19,867                -
          
     Changes in Assets and Liabilities:
          (Increase) Decrease in:
               Other Current Assets                        --           (2,800)
               Prepaid Expenses                       397,041         (411,980)
               
          Increase (Decrease) in:
               Accounts Payable and Accrued
                 Expenses                            (485,924)         593,573
          
          Total Adjustments                         2,312,357          176,715

     Net Cash - Continuing Operations - Forward    (3,177,360)      (3,389,616)

Discontinued Operations:
     (Loss) From Discontinued Operations           (3,947,298)      (5,141,379)
     Adjustments to Reconcile Net (Loss) to Net
       Cash Operations:
          Depreciation and Amortization               263,537          252,228 
          Bad Debts                                   127,823          434,496
     Equity in Earnings of Unconsolidated Affiliate        --          (85,355)
     Changes in Net Assets, Liabilities and Losses  2,649,165        2,337,752

     Net Cash - Discontinued Operations - Forward    (906,773)      (2,202,258)

Investing Activities - Continuing Operations:
     Payment for Investment Acquisition - Forward    (200,000)               -

Investing Activities - Discontinued Operations:
     Acquisition of Assets - Forward              $  (392,420)     $  (534,396)


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

                                     F-8
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS 


                                                            Years ended
                                                              March 31,
                                                      1 9 9 7          1 9 9 6

     Net Cash - Continuing Operations - Forwarded $(3,177,360)     $(3,389,616)

     Net Cash - Discontinued Operations -
       Forwarded                                     (906,773)      (2,202,258)

Net Investing Activities - Continuing Operations -
      Forwarded                                      (200,000)              --

Net Investing Activities - Discontinued Operations
      - Forwarded                                    (392,420)        (534,396)

Financing Activities - Continuing Operations:
     Proceeds from Demand Notes Payable                    --          500,000
     Payment of Notes Payable - Other                (823,838)        (500,000)
     Proceeds from Demand Notes Payable -
      Stockholders and Related Parties                384,500        1,771,000
     Payment of Demand Notes Payable - Stockholders
          and Related Parties                              --       (1,396,157)
     Proceeds from Sale of Warrants                        --          300,000
     Proceeds from Exercise of Warrants               268,750               --
     Proceeds from Issuance of Preferred Stock      3,008,836        6,449,599
     Dividends Paid                                        --         (137,604)
     Cash Overdraft                                    44,142               --

     Net Cash - Financing Activities - Continuing
       Operations                                   2,882,390        6,686,838 

Financing Activities - Discontinued Operations:
     Proceeds of Demand Note Payable - Banks          880,647          858,353 
     Payment of Demand Note Payable - Banks                --         (300,000)
     Payment of Demand Notes Payable                       --         (373,639)

     Net Cash - Financing Activities - Discontinued
      Operations                                      880,647          184,714

     Net (Decrease) Increase in Cash                 (913,516)         745,282

Cash - Beginning of Years                             934,462          189,180

     Cash - End of Years                            $  20,946        $ 934,462
Supplemental Disclosures of Cash Flow Information:
     Cash paid during the years for:
          Interest - (Net of Amounts Capitalized)   $   4,442        $ 409,483
          Income Taxes                              $      --        $      --
          
Supplemental Schedule of Non-Cash Investing and Financing Activities:
     See notes to consolidated financial statements for details of certain 
non-cash investing and financing activities.


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

                                     F-9
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(1) Organization and Business

Holly Holdings, Inc. (the "Company") formerly known as Holly Products, Inc., 
was incorporated in New Jersey in 1992.  The Company, through its wholly owned 
subsidiary, HollyWood Manufacturing, Inc., was a manufacturer of wood 
cabinetry and fixtures. Due to continued losses, the Company ceased ongoing 
operations of the woodworking business effective September 1995.  In June 
1994, the Company consummated the acquisition of Navtech Industries, Inc. 
("Navtech"), a manufacturer of electronic components.  Due to minimal profits 
and the cancellation of Navtech's bank line of credit, the Company ceased 
ongoing operations effective June 1997.  In July 1995, the Company acquired an 
interest in Country World Casinos, Inc. ("Country World") which at March 31, 
1997 accumulated approximately 66.3%.  In March 1997, the Company acquired 
Nightlife Printing & Promotions, Inc. and American Publishers Company, Inc.  
In June 1997, as all conditions of the acquisition agreement had not been met, 
the transaction was reversed.  The net assets of Nightlife Printing and 
American Publishing were returned to their original owners.  The Company 
recorded a loss for the year ended March 31, 1997, of $1,700,000 related to 
this rescission.

Country World has purchased land and intends to develop a casino and hotel 
complex in Black Hawk, Colorado.  The land and development costs are recorded 
at cost and no depreciation will be taken until such time as the Company 
places the casino into operation.  Financing for the completion of the casino 
development project has not yet been finalized.

As of March 31, 1997, Country World has not completed construction of its 
planned principal operation and has not realized any revenue from its planned 
operations.

Discontinued Operations - HollyWood Manufacturing ("Hollywood") - In September 
1995, the Company decided to discontinue its woodworking business.  The 
Company was unsuccessful in its attempts to divest itself of that business or 
find a suitable manufacturer for its products and consequently, ceased ongoing 
operations of the woodworking business to reduce its losses.  The Company 
dismissed the entire staff and management of its woodworking operation and 
liquidated its assets.  The lease for the facility housing the woodworking 
business expired on December 31, 1995 at which time the Company vacated the 
premises.  The Company used the funds raised through the liquidation of 
assets, the collection of outstanding receivables and advances from a related 
party to satisfy a secured credit facility.  No revenue was generated for the 
years ended March 31, 1997 and 1996.

Discontinued Operations - Navtech Industries, Inc. - In June 1997, Navtech's 
bank informed Navtech that it would no longer extend a revolving line of 
credit.  In July 1997, Navtech ceased ongoing operations.  The Company is a 
defendant in a lawsuit pending in the Eleventh Judicial District Court, County 
of San Juan, State of New Mexico, Case No. CV-97-443-6 entitled First National 
Bank of Farmington, Plaintiffs v. Navtech of New Mexico, Inc., Navtech 
Industries, Inc., Holly Products, Inc., n/k/a, Holly Holdings, Inc., 
Defendants.  This lawsuit was commenced on June 9, 1997 and amended on August 
9, 1997.  The complaint alleges four claims against Navtech for debt and money 
due, one claim for personal property foreclosure against Navtech and two 
claims based on the guaranty of the Company.

Navtech has ceased operations and is without resource, based on the foregoing 
it was unable to defend itself in this matter and in June 1997, the Court 
appointed a receiver to Marshall the inventory, assemble the orders, collect 
the receivables and contract for the completion of work in process to maximize 
return.  As of this date, that process has not been completed and accordingly, 
there is no way to determine the balance due to the bank and the case remains 
open.

Navtech's results are reported as a discontinued operation in the consolidated 
financial statements for all periods presented.  Revenues generated by Navtech 
for the years ended March 31, 1997 and 1996 was approximately $3,420,000 and 
$4,110,000, respectively.  The assets and liabilities of Navtech have been 
reported in the consolidated balance sheet as net liabilities of discontinued 
operations.

                                     F-10
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2 
     
(1) Organization and Business (Continued)

Discontinued Operations - Navtech Industries, Inc. (Continued) - Net 
liabilities of discontinued operations of Navtech at March 31, 1997 are as 
follows:

Cash Overdraft                         $     (5,246)
Accounts Receivable Trade                    33,512
Accounts Payable and Accrued Expenses    (1,086,286)
Notes Payable and Capitalized Leases     (5,604,849)

     Total                             $ (6,662,869)

Consolidation - The accompanying consolidated financial statements include the 
accounts of the Company and its subsidiaries, Country World, Navtech and 
Hollywood.  All material inter-company transactions and balances have been 
eliminated in consolidation.  HollyWood Manufacturing and Navtech have been 
discontinued (See Note 1).

(2) Summary of Significant Accounting Policies

Property and Equipment - Property and equipment are stated at cost. 
Depreciation is determined using the straight-line method over the estimated 
useful lives of the related assets or the remaining lease term (See Note 5).

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 revenue and expenses during the 
reporting period.  Actual results could differ from those estimates.

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 March 31, 1997.

Impairment - The carrying value of land, casino under development and 
furniture and equipment are 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 March 31, 1997, management expects these assets to be fully recoverable.

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.

                                     F-11
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3 

(3) Going Concern

The accompanying consolidated financial statements have been prepared on a 
going concern basis, which contemplates the realization of assets and the 
satisfaction of liabilities and commitments in the normal course of business.  
As reflected in the consolidated financial statements, the Company has 
incurred recurring net losses from operations, an accumulated deficit, 
recurring negative cash flows from operations, and is subject to the adverse 
effect of lawsuits and judgements filed against Navtech (See Note 17).

The continuation of the Company as a going concern is dependent upon its 
ability to reduce losses, settle litigation and to obtain additional 
financing.  The Company experienced a substantial net loss for the year ended 
March 31, 1997.  Approximately $4,400,000 of such loss was attributable to 
Navtech, which has been discontinued.

In May 1996, the Company arranged for a $5,000,000 financing package for 
Country World which enabled Country World to emerge from Chapter 11 
proceedings and to repay all of its outstanding indebtedness as of March 1997 
related to the casino development project.  Further, with the simultaneous 
settlement of certain outstanding litigation (See Note 17) as a part of the 
Chapter 11 proceedings, it is anticipated that Country World will be able to 
move forward with its plans to finance and construct the casino.  
Additionally, Country World has moved to smaller, less expensive quarters 
substantially reducing its operating costs.

There can be no assurance that management's plans to reduce operating losses, 
settle litigation or be successful in its efforts to develop a gaming and 
hotel complex will be successful.  The financial statements do not include any 
adjustments relating to the recoverability and classification of recorded 
assets, or the amounts and classification of liabilities that might be 
necessary in the event the Company cannot continue in existence.

(4) Fair Value of Financial Instruments

In assessing the fair value of financial instruments, the Company was required 
to make assumptions, which were based on estimates of market conditions and 
risks existing at that time.  For certain instruments, including cash, 
accounts payable, and net liabilities of discontinued operations, the carrying 
amount approximates fair value for the majority of these instruments because 
of their short maturities.  The fair value of long-term debt and related party 
indebtedness was based on the current rates offered to the Company for debt of 
similar maturities.  Such fair value was determined to approximate carrying 
value.

(5) Property and Equipment

The following is a summary of property and equipment as of March 31, 1997:

                                                         Estimated
                                                        Useful Life

Land                                 $ 7,475,475          --
Office Furniture and Equipment            98,818         5-7 Years
Leasehold Improvements                     3,713           2 Years
Casino Under Development               4,729,716          --

Total                                 12,307,722
Less:  Accumulated Depreciation           45,533
     Property and Equipment - Net   $ 12,262,189

                                     F-12
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4 

(5) Property and Equipment (Continued)

The Company has capitalized the following costs related to the casino 
construction through March 31, 1997: 

Interest on Long-Term Debt                        $     936,443
Architectural Fees and Fees for Construction          1,737,189

     Total                                      $     2,673,632

Interest paid on debt used to finance the development costs was capitalized 
during the years ended March 31, 1997 and 1996 and amounted to approximately 
$633,000 and $258,000, respectively.  

Depreciation expense amounted to $23,347 and $18,590 for the years ended March 
31, 1997 and 1996, respectively.

(6) Concentration Risk

Due to the concentration of the Company's activities in the development of the 
casino in Colorado, the potential for a near term severe impact exists and can 
result from the negative effects of the economic forces within the market or 
geographic area.

(7) Intangible Assets
     
In February 1996, the Company paid $149,000 to the former director of Navtech 
in exchange for his covenant not-to-compete with Navtech in the continental 
United States for three years.  Since Navtech ceased doing business, the 
amortization period was accelerated.  Management then evaluated the period of 
amortization based upon analyzing projected undiscounted net cash flow from 
operations and determined that the asset has become impaired.  Accordingly, 
the balance of the intangible asset of $19,827 has been written off.
     
Amortization expense charged to operations for this intangible asset for 1997 
and 1996 was $119,200 and $9,973, respectively.

(8) Notes Payable - Other

 In January 1995, the Company borrowed, on an unsecured basis, an aggregate of 
$1,000,000 (evidenced by notes payable) from three individuals and entities at 
15% annual interest.  The fifteen percent (15%) notes were due and payable on 
January 13, 1996.  The maturity date was extended based on a loan extension 
agreement.  The terms of the agreement provided for a payment of $500,000 
(which was paid in March 1996) and transfer of 370,000 shares of the Company's 
common stock to the note holders.  The note was further extended to August 1, 
1999. (See Note 19).  As of March 31, 1997, a $400,000 principal balance was 
owed on the notes payable.

                                     F-13
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5 


(9) Long-Term Debt

Long-term debt consists of the following:
                                                          Notes    Related Party
                                                         Payable    Note Payable
Note payable due May 31, 1999 with interest at
     15% until May 19, 1997 and at 24% per annum
     thereafter payable interest only in monthly
     installments used to finance the development of
     the casino project. The note is collateralized
     by a first lien and deed of trust on real
     property.  A portion of this financing amounting
     to $2,350,000 was obtained through a group of
     related party lenders and accordingly is
     classified as such.                               $ 2,650,000  $ 2,350,000

$10,445 Note Payable - interest at 15% payable in
     equal monthly installments over four (4) years.
     The note is collateralized by a copy machine.
     The Company is in default on these payments.            9,175           --

$725,000 Note Payable - stockholder, interest at 8%,
     payable in monthly installments over ten (10)
     years starting 15 months after the June 28, 1994
     closing.  The note is collateralized by a first
     deed of trust on real property with a net book
     value of approximately $1,175,000 (See Note 17).           --      725,000

Note payable due in monthly installments of $4,667
     through September 15, 1997, including interest
     at 15.50%.                                             26,776           --

The Company is indebted to certain officers and
     directors for past due services and reimbursements.        --      415,365

During the year ended March 31, 1996, the Company issued 
     several notes payable to Norlar, Inc., a company
     owned by the Chief Executive Officer of the Company
     and his spouse.  Each note payable provided for 12%
     interest and a 90 day maturity period.  In August
     1996, $138,640 of the debt was converted to 554,560 
     shares of Series Z preferred stock.                        --      260,000

Total Debt                                               2,685,951    3,750,365
Less:  Current Maturities                                   35,951    1,400,365

     Net Long-Term Debt                                $ 2,650,000  $ 2,350,000

Future principal maturities for the above notes at March 31, 1997 are as 
follows:

                         Notes     Related Party
                        Payable     Note Payable
Year ended
March 31,
     1998                      $   35,951    $ 1,400,365
     1999                       2,650,000      2,350,000
     2000                              --             --
     2001                              --             --
     2002                              --             --
     Thereafter                        --             --
     Total Long-Term Debt     $ 2,685,951    $ 3,750,365

                                     F-14
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6 

(10) Capital Transactions

(A) Preferred Stock - Series B - In December 1993, the Company designated 
75,000 shares of its then authorized shares of preferred stock as Series B 
Preferred Stock, $.10 par value, $.75 per share per annum, cumulative 
dividends, no voting rights and a $6.00 liquidation value per share.  These 
shares were exchanged into 450,000 shares of Series C Preferred Stock in July 
1995 (See Note 10H).

(B) Preferred Stock - Series C - During the fiscal year ended March 31, 1996, 
the Company converted all of its Series C Convertible Preferred stock into 
common stock  (See Note 10H).  The Series C stock carried a $.125 per share 
per annum cumulative dividend, and a $1.00 liquidation value per share.  Each 
share was convertible into four shares of common stock and had voting rights 
equal to four votes per share.

(C) Preferred Stock - Series D - At March 31, 1997, the Company had 
outstanding 384,639 shares of 10% Convertible Cumulative Series D Preferred 
Stock, $10 per value per share.  Dividends on the Convertible Preferred Stock 
are due quarterly and are in arrears.  The Convertible Preferred Stock has a 
liquidation preference of $10 per share and is convertible into two (2) shares 
of common stock.  Holders of Convertible Preferred Stock are not entitled to 
vote on any matter, except as required by law.  At March 31, 1997, dividends 
in arrears on such stock amounted to $792,475 or approximately $2.00 per 
share.

(D) Preferred Stock - Series E - During fiscal 1996, the Company consummated a 
Private Placement of 747,000 shares of its Series E Convertible Preferred 
Stock resulting in gross and net proceeds of $7,470,000 and $6,449,599, 
respectively.  The proceeds of this offering were utilized for repayment of 
debt, settlement of litigation and working capital for the Company and 
Navtech.  Each share of Series E Preferred Stock is non-voting, does not pay a 
dividend, and is convertible into shares of the Company's common stock at the 
rate determined by dividing $10.00 by the lesser of 75% of the closing of the 
subscription or 65% of the average closing bid price for the five (5) trading 
days immediately preceding the close of conversion.   This beneficial 
conversion feature of the difference between the conversion price and the fair 
value of the common stock into which the security is convertible is recognized 
as a dividend to the preferred stockholders over the minimum period during 
which the preferred stockholders can convert.  For the fiscal year ended March 
31, 1997, the amount recognized in stockholders' equity for this beneficial 
conversion feature was $4,328,367.  The amount recognized for the fiscal year 
ended March 31, 1996 was $850,786 and is shown as an adjustment to the 
beginning balance of the current year's stockholders' equity.

During fiscal 1997, the Company issued 375,000 shares of Series E Convertible 
Preferred Stock resulting in net proceeds of $3,008,836.

(E) Preferred Stock - Series Z - In April and September 1996, the Company 
designated 550,000 and 555,000 shares, respectively, of its preferred stock as 
Series Z Voting Convertible Preferred Stock, $.25 par value with no dividend 
rights.  The Convertible Preferred Stock has a $.25 liquidation value per 
share, and each share is convertible at anytime beginning two years following 
the date of issuance of such shares into 5 shares of fully paid and 
non-assessable shares of common stock.

(F) Country World Acquisition - During fiscal 1996, the Company issued 74,459 
shares of common stock valued at $2,187,733 toward the purchase of Country 
World.

                                     F-16
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7

(10) Capital Transactions (Continued)

(G) Debt to Equity Conversions:

Fiscal 1996 - In May 1995, certain related party indebtedness aggregating 
$50,000 was converted into 50,000 shares of Series C Preferred Stock.  In July 
1995, certain related party indebtedness aggregating $100,000 was converted 
into 100,000 shares of Series C Preferred Stock.  In August 1995, indebtedness 
in the amount of $30,000 was converted into 30,000 shares of Series C 
Preferred Stock.  During fiscal 1996, $4,167 in dividends were paid to the 
holders of the Series C Preferred Stock.

In January 1996, certain related party indebtedness aggregating $38,756 was 
converted into 2,793 shares of Company common stock.

Fiscal 1997 - During the quarter ended September 1996, 1,013,628 shares of 
Series Z Preferred Stock was issued in exchange for certain related party 
indebtedness of $253,407.

In September 1996, $30,000 of debt owed was converted into 12,000 shares of 
common stock.

(H) Preferred to Common Conversion:

Fiscal 1996 - In July 1995, certain related party Series B Preferred Stock was 
converted into 450,000 shares of Series C Preferred Stock.  During fiscal 
1996, $32,812 in dividends was paid to the holders of Series B Preferred 
Stock.  In August 1995, such preferred stock was converted (pursuant to the 
terms thereof) into 180,000 shares of common stock.  In October and December 
1995, shares of Series C Preferred Stock arising through debt conversions were 
converted, pursuant to the terms thereof, into an aggregate of 72,000 shares 
of Company common stock.

During fiscal year 1996, 12,525 shares of Series D Preferred Stock and 160,000 
shares of Series E Preferred Stock were converted, pursuant to the terms 
thereof, into 2,505 shares and 245,079 shares, respectively, of Company common 
stock.

Fiscal 1997 - During the quarter ended June 30, 1996, September 30, 1996, and 
December 31, 1996, 497,000, 140,000 and 157,500 shares, respectively, of 
Series E Preferred Stock were converted pursuant to the terms thereof into 
1,911,214, 1,033,384, and 796,010 shares, respectively, of Company common 
stock.

In March 1997, 5,336 shares of Series D Preferred Stock were converted into 
44,048 shares of the Company common stock.

(I) Legal Settlement - In August 1995, the Company issued 2,500 shares of its 
common stock relating to a legal settlement.  The Company has reflected a 
charge to the statement of operations of $75,000 to reflect the settlement.

                                     F-17
<PAGE>

<PAGE>HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8 

(10) Capital Transactions (Continued)

(J) Exchange for Services:

Fiscal 1996 - In August 1995, the Company issued 1,250 shares of its common 
stock to each of two individuals in return for legal services performed.  
Additionally, the Company issued 750 shares of its common stock in return for 
other legal services performed.  The statement of operations reflects a charge 
of $98,750 to reflect the estimated fair value of such services.

In October 1995, the Company issued 3,000 shares of its common stock to two 
individuals as a retainer for legal services to be performed through July 
1996.  The estimated fair value of such services was $78,750.  The statement 
of operations reflects a charge of $43,750 for the expensed portion of the 
retainer.

In December 1995, the Company issued 30,000 shares of its common stock in 
return for services rendered in connection with the liquidation of its 
woodworking subsidiary and the reorganization of Country World Casinos, Inc.  
The Company has reflected a charge to the statement of operations of $862,500 
to reflect the estimated fair value of such services.

In January 1996, the Company issued 5,000 shares of its common stock in return 
for legal services performed.  The Company reflected a charge to the statement 
of operations of $128,100 to reflect the estimated fair value of such 
services. 

In February 1996, the Company hired Martin Janis & Company to act as agent for 
the Company in providing public relations for a three month period.  The 
Company issued 3,500 shares of its common stock for such services.

Fiscal 1997 - In June 1996, the Company issued 130,000 shares of its common 
stock to three individuals in return for certain services they performed for 
the Company valued at $487,500.

In September 1996, the Company issued 57,333 shares of common stock to a 
company in return for certain services, valued at $215,000.

(K) Authorized Common Stock - In June 1996, the Company increased its 
authorized common stock to 50,000,000 shares.  In December 1996, the Company 
increased its authorized common stock to 150,000,000 shares no par value.

(L) Outstanding Warrants - At March 31, 1997, 487,500 common stock purchase 
warrants were outstanding.  Each warrant entitles the holder to purchase one 
share of Company common stock at any time through December 20, 1998 at a price 
of $57.50.

(M) Shares Issued for Exercise of Warrants - In October 1996, the Company 
issued 45,000 shares of its common stock for the exercise of 45,000 warrants.

(N) Reverse Common Stock Split - In December 1996, the Company authorized a 
10:1 common stock reverse split, whereby 10 shares of common stock were 
reclassified into one share of common stock.  This reverse stock split is 
shown retroactively for all periods presented.

                                     F-18
<PAGE>

<PAGE>HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9 


(11) Public Relations Agreement

In January 1996, the Company hired Corporate Relations Group, Inc. ("CRG") to 
act as the Company's financial public relations firm through July 1996.  The 
agreed fee for these services was $350,000 payable in cash, or at the 
Company's option, by delivering 273,437 shares of its common stock.  In 
connection with such hiring, Norlar, Inc., a company owned by the Company's 
Chairman and his spouse, transferred to CRG 273,437 shares of the Company's 
stock owned by it.  In February 1996, the Company paid Norlar, Inc. $350,000 
for the transferral of their shares of the Company to CRG and charged expense.

(12) Loss Per Share

Loss per share for the year ended March 31, 1997 is based on 3,837,269 
weighted average shares outstanding.  The effect of outstanding warrants were 
not included in the calculation as their effect would be anti-dilutive.  As 
supplementary primary loss per share information, had the conversions to 
common stock described in Note 10 taken place at the beginning of the year, 
loss per share would have been affected as follows based on 5,075,599 weighted 
average shares outstanding.

Pro Forma:

                                                           Year ended
                                                         March 31, 1997
Loss Per Common Share:
     Loss from Continuing Operations                      $     (1.08)
     Loss from Discontinued Operations                    $      (.78)
     Estimated Loss on Disposal of Woodworking Business   $      (.71)
     Net Loss Per Common Share                            $     (2.65)

(13) Commitments and Contingencies 

(A) Leases - The Company entered into a noncancelable operating lease for 
office space in Pennsylvania.  This operating lease expires on January 31, 
1998.  The rent expense amounted to $28,800 and $51,111 for the years ended 
March 31, 1997 and 1996, respectively.

The Company entered into various noncancelable automobile leases on a 
month-to-month basis.  Future minimum lease payments for the next five years 
are as follows:
     
                   Office          Auto
                 Facilities       Leases
March 31,
     1998        $   24,000     $   16,733
     1999                --          9,349
     2000                --             --
     2001                --             --
     2002                --             --
     Thereafter          --             --

     Totals      $   24,000     $   26,082

(B) Guaranty - In December 1995, the Company committed to guaranty a $27.35 
million loan for Country World in the form of permanent financing to replace 
construction financing to construct a casino in the state of Colorado.

                                     F-19
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10 

(14) Income Taxes

The Company has net operating loss carryovers of approximately $1,100,000, 
$1,000,000, $12,800,000 and $12,100,000 as of March 31, 1997, expiring in the 
years 2008, 2009, 2010 and 2011, respectively.  However, utilization of the 
loss carryovers is subject to Internal Revenue regulations where the 
corporation has issued substantial additional stock.  Accordingly, a portion 
of this loss carryover may not be available to the Company.

Generally Accepted Accounting Principles require the establishment of a 
deferred tax asset for all deductible temporary differences and operating loss 
carryforwards.  The deferred tax asset attributable to operating loss 
carryforwards amounted to approximately $10,800,000 at March 31, 1997.  
Because of the uncertainties discussed in Note 3, 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 
pursuant to SFAS No. 109.  Accordingly, no deferred tax asset is reflected in 
these financial statements.  The increase in the valuation allowance during 
the year was $4,840,000.

(15) Business Combination

On April 20, 1995, the Company acquired 5,000,000 shares of common stock of 
Country World Casinos, Inc. ("Country World"), in exchange for the 
cancellation of $1,000,000 of indebtedness owed by Country World to the 
Company.  The results of operations of Country World are included in the 
consolidated statements of operations from that date.  The Company also 
acquired 16,667 shares of Country World common stock in a separate transaction 
for $50,000.  Country World has purchased real estate located in the gaming 
district of Black Hawk, Colorado, on which it seeks to construct the casino 
complex.  In addition, the Company acquired an additional 2,250,453 shares of 
common stock of Country World from certain existing shareholders of Country 
World, in exchange for 744,592 shares of the Company's common stock.  As of 
March 31, 1997, the Company owns 66.3% of the outstanding shares of Country 
World common stock and 54.9% of the total voting stock (common and preferred) 
of Country World.

Country World intends to develop a 200,000 square foot country western motif 
casino complex in the gaming district of Black Hawk, Colorado, which is 
located approximately 35 miles west of Denver, including a 75,000 square foot 
casino (the "Casino") for limited-stakes gambling (that is, gambling in which 
bets are limited to a $5.00 maximum by Colorado law).

The minority interest represents the portion of Country World not owned by the 
Company.  At March 31,  1997, substantially all of the minority interest is 
represented by preferred stockholders of Country World.  There are no dividend 
requirements related to the preferred stock.  The Company owns no Country 
World preferred stock.  As shown in the statements of operations for the year 
ended March 31, 1997 and 1996, respectively approximately $348,000 and 
$143,000 of the loss from operations of Country World for such period has been 
attributed to the minority interest.

(16) Casino Under Development

In August 1993, Country World closed on an acquisition of approximately 
100,621 square feet of vacant land located within the city of Black Hawk, 
Gilpin County, Colorado.  Country World paid $550,000 cash, delivered a 
promissory note in the amount of $3,450,000, and delivered 2,250,000 shares of 
its Convertible Preferred stock which is convertible to common stock on a 1 
for 1 basis.  The acquisition of the land was subject to a first deed of trust 
in the amount of $475,000.  The Company is obligated to file a registration 
statement to cover the distribution of the Convertible Preferred stock to the 
shareholders of the selling entity, which is a publicly-held corporation based 
in Denver, Colorado.

Subsequently, the Company closed on an acquisition to an additional 375,000 
square feet of vacant land 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 (See Note 
19D).

                                     F-20
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11 

(17) Litigation and Legal Proceedings 

On May 26, 1995, the Company's majority owned subsidiary Country World 
Casinos, Inc. ("Country World") commenced a lawsuit against Tommyknocker 
Casino Corp. ("Tommyknocker") and New Allied Development Corporation ("New 
Allied") in the District Court of Denver, County of Denver, Colorado, case 
number 95CV 2310. This action is primarily for breach of contract in 
connection with the acquisition of certain real property by Country World from 
the defendants. Country World is seeking monetary damages and declaratory 
relief.

     On August 15, 1995, Tommyknocker and New Allied filed a counterclaim in 
the aforementioned action against Country World, the Company, Ronald Nathan, 
Sal Lauria and David Singer who are former board members of Country World, 
Roger LeClerc, President of Country World and William Patrowicz director of 
Country World. The counterclaim alleges that Country World is in default under 
the Promissory Note issued by Country World to Tommyknocker in connection with 
the acquisition of the real property, Country World failed to register stock 
on behalf of Tommyknocker and that the Company has acquired control of Country 
World to the detriment of Tommyknocker and New Allied.

     In a related action on June 28, 1995, Tommyknocker filed a Rule 120 
Motion in the District Court, City and County of Denver, Colorado, case number 
95CV 2799. This motion sought foreclosure of the real property discussed 
above. On October 4, 1995, the magistrate in this case granted Tommyknocker's 
motion and authorized the sale of the property pursuant to the foreclosure on 
October 12, 1995.

     On October 12, 1995, Country World filed a bankruptcy petition under 
Chapter 11 of Title 11 of the United States Code. The case was filed in the 
United States Bankruptcy Court, District of Colorado, case number 95-20563rjb. 
Pursuant to the filing of the Bankruptcy, an automatic stay went into effect 
pursuant to 11 U.S.C. Section 362 prohibiting the foreclosure sale. 
Tommyknocker filed a Motion for Relief from the stay and a hearing on this 
matter was held on December 22, 1995.  On January 3, 1996, the Court ruled 
that Country World should be given an opportunity to proceed with its 
Bankruptcy proceedings in a diligent and timely fashion.  The Court 
conditioned continuation of the stay pending the approval or denial as the 
case may be of Country World's financing proposal and certain other 
conditions.  In March 1996, the Court approved Country World's financing 
proposal and in May 1996, Country World closed on such financing.  In 
September 1996, the Court heard testimony in a claims hearing between the 
parties.  In early November 1996, the Company received final rulings from the 
Court.

     The Court's order found that Tommyknocker Casino Corporation/New Allied  
was not entitled to default interest at the rate of 18%, however Country World 
is ordered to pay 8% per annum on the unpaid balance due Tommyknocker.  
Additionally, the Court ordered that both parties were obligated to pay their 
own expenses related to this matter.

     The Court further found that Country World Casinos, Inc. was not in 
default of its Agreement with Tommyknocker/New Allied with regard to filing a 
registration statement for its preferred stock and until Tommyknocker/New 
Allied files such registration statement and Country World fails to pay for 
its cost, Country World is not in breach of the agreement.

The Court upheld Tommyknocker's/New Allied's claim that Country World was not 
entitled to an offset on the environmental clean up as the work had been 
completed and Country World paid all clean up costs without objection prior to 
the Company's acquisition of a majority ownership in Country World.

     The Company, on behalf of Country World, obtained a $5,000,000 financing 
package, which  enabled Country World to repay all of its outstanding 
indebtedness and emerge from Bankruptcy. 

This financing package had been approved by the Bankruptcy Court and the 
Company utilized the funds in accordance with the Court's order.  With all 
issues completed in March 1997, the U.S. Bankruptcy Court ruled that Country 
World Casinos, Inc. be dismissed from Chapter 11.

                                     F-21
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12 

(17) Litigation and Legal Proceedings (Continued)

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 (See Note 9).

On October 10, 1995, Phil B. Acton, Trustee of the Calvin Black Trust 
commenced a lawsuit against the Company in the United States District Court 
for the District of Utah, Central Division, case number 95CV 09305. This 
action sought repayment of a promissory note in the principal amount of 
$500,000.  As discussed in the Company's earlier filings in August 1996, this 
action was settled.

     The Company is the defendant in a lawsuit pending in United States 
District Court, District of Arizona, Case No. CIV97-212PHXROS entitled Holly 
Products, Inc. and Navtech Industries, Inc., Defendants v. Semisystems, Inc., 
Plaintiff. This lawsuit was commenced by Semisystems, Inc. on January 30, 
1997.  The complaint asserted six claims against Navtech for among other 
things, misrepresentation, breach of contract, breach of warranty, fraud, etc. 
and as the owner of 100% of the outstanding stock of Navtech, the Company 
should be held jointly and severally liable for all acts and obligations of 
its subsidiary Navtech.

     Navtech has ceased operations and is without resources, accordingly it 
was unable to defend itself in this matter and the Court awarded a judgement 
against Navtech in the amount of $3,280,630 in October of 1997.

     The Company was not served in this action until August 1997.  The Company 
immediately filed an order to show cause which vacated any possible default 
judgement and filed its answer to the allegations made by Semisystems in 
September 1997.  In an accompanying motion, the Company filed a motion to 
dismiss on the grounds that there is no personal jurisdiction over the Company 
in this District of Arizona.  Oral argument on the Motion is set for February 
20, 1998.

The Company was a defendant in a lawsuit in the Fifth Judicial District Court, 
in Iron County, Utah, Case No. 970500004 entitled Lloyd & Myra Kartchner, 
Plaintiffs v. Holly Products, Inc. and Navtech Industries, Inc., Defendants.  
This lawsuit was commenced in January 1997.  The complaint, alleges that both 
companies failed to live up to the terms of a resignation agreement dated 
February 28, 1996 between the Company, Navtech and the Plaintiff.  In August 
1997, the Court found the resignation agreement valid and enforceable and 
issued an order granting Plaintiffs' Motion for summary judgement in the 
amount of $52,955.91, which is accrued as of March 31, 1997.

     The Company is a defendant in a lawsuit pending in the Eleventh Judicial 
District Court, County of San Juan, State of New Mexico, Case No. CV-97-443-6 
entitled First National Bank of Farmington, Plaintiffs v. Navtech of New 
Mexico, Inc., Navtech Industries, Inc., Holly Products, Inc., n/k/a, Holly 
Holdings, Inc., Defendants.  This lawsuit was commenced on June 9, 1997 and 
amended on August 9, 1997.  The complaint alleges four claims against Navtech 
for debt and money due, one claim for personal property foreclosure against 
Navtech and two claims based on the guaranty of the Company.

Navtech has ceased operations and is without resource, based on the foregoing 
it was unable to defend itself in this matter and in June 1997, the Court 
appointed a receiver to marshall the inventory, assemble the orders, collect 
the receivables and contract for the completion of work in process to maximize 
return.  As of this date, that process has not been completed and accordingly, 
there is no way to determine the balance due to the bank and the case remains 
open.

                                     F-22
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13 


(17) Litigation and Legal Proceedings (Continued)


In 1996, the Company was a Defendant in a lawsuit in Superior Court of New 
Jersey, Burlington County, Case No. BUR-L-3467-95 entitled Pennsylvania 
Manufacturers Association Insurance Company, Plaintiff v. Holly Products, 
Inc., Defendant.  This lawsuit resulted in a summary judgement being issued 
against the Company in the amount of $63,897 on November 8, 1996, which is 
accrued as of March 31, 1997.

     In February 1997, the Company reached an agreement with Pennsylvania 
Manufacturers Association Insurance Company and filed a stipulation of 
settlement with the Court at which time the Company began making payments in 
accordance with a payout schedule over a 20 month period.  The Company made 
payments totaling $13,000 through April 1997 at which time payments ceased due 
to a cash flow shortage.

     In September 1997, the Pennsylvania Manufacturers Association Insurance 
Company has re-instituted steps to enforce the outstanding judgement against 
the Company

It is not feasible to predict or determine the final outcome of these 
proceedings.

(18) 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.

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 basis 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.  Basic EPS will be based 
on average common shares outstanding and diluted EPS will include the effects 
of potential common stock, such as, options and warrants.

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.  Management is 
in the process of determining its preferred format.  SFAS No. 130 is not 
expected to have a material impact on the Company.

                                     F-23
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #14 

(18) New Authoritative Pronouncements (Continued)

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.  Management is in the process of evaluating 
the disclosure requirements.  SFAS No. 131 is not expected to have a material 
impact on the Company.

(19) Subsequent Events
     
Note Payable - Other - In consideration of the extension of the maturity date 
to August 1, 1999, consideration of $200,000 was paid to the noteholders in 
May 1997 (See Note 8).

Related Party Note Payable - In May 1997, the balance due on notes payable to 
Norlar, Inc. of $260,000 was paid (See Note 9).

Country World - 

(A) Notes Payable - Related Party - In October 1997, Norlar, Inc. extended a 
credit of up to $1,200,000, through a series of notes payable with interest at 
12%, due on demand to Country World.  In connection with this debt, Country 
World 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 December 18, 1997, the unamortized deferred financing balance is 
$-0-.  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 December 18, 1997, the Company was indebted to Norlar, Inc. in the 
amount of approximately $698,900.  Warrants to purchase 3,000,000 shares of 
common stock of Country World at $.20 per share have been issued to Norlar, 
Inc. in connection with this indebtedness.

(B) In July 1997, Country World issued 1,000,000 shares of its common stock to 
Eastern Equities Consultants, Ltd. for efforts to secure casino and hotel 
financing.

(C) 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.

                                     F-24
<PAGE>

HOLLY HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #15 

(19) Subsequent Events (Continued)

Country World (Continued) - 

(D) In September 1997, Country World 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 Guaranteed Maximum Price 
will be determined by agreement between Country World and the Contractor when 
sufficient definitive design information becomes available.  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 Country World 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 Country World.  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.  The total amount of indebtedness with respect to this 
construction loan was $998,000 at December 18, 1997.  The note bears 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, on October 21, 1997, Country World signed a management 
agreement with Luciani & Associates, LLC and G. Michael Brown, joint venture 
of Atlantic City, New Jersey, to manage the casino operations. 


              .   .   .   .   .   .   .   .   .   .   .   .   .