U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark 1)      X     Quarterly Report Under Section 13 or 15(d) of The Securities
             ---    Exchange Act of 1934    
                    
                    For the quarterly period ended      December 31, 1996
                                                     -------------------------


                    Transition Report Under Section 13 or 15(d) of The
                    Securities Exchange Act of 1934 (No Fee Required) for the
                    Transition Period  from ________ to ________

                         Commission file number 0-22450

                           COUNTRY WORLD CASINOS, INC.
                  --------------------------------------------
                 (Name of Small Business Issuer in its Charter)

             Nevada                                    13-3140389
  -------------------------------           ----------------------------------
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
  incorporation or organization)

       13576 West Utah Avenue
           Lakewood, CO                                        80228
---------------------------------------                      ----------
(Address of principal executive offices)                     (Zip Code)

       Registrant's telephone number, including area code: (303) 912-5776

            4155 E. Jewell Avenue, Suite 1000, Denver, Colorado 80222
            ---------------------------------------------------------
              (Former name, former address and formal fiscal year,
                         if changed since last report)

     Check whether the registrant (1) has filed all reports required to be filed
by Sections 13 or 15(d) of the Securities Exchange Act during the past 12 months
(or for  such  shorter  period  as the  Registrant  was  required  to file  such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes   X   No
          -----    -----

                      APPLICABLE ONLY TO CORPORATE ISSUERS.
Indicate  the  number of shares  outstanding  of each of the  issuer's  class of
common stock, as of the latest practicable date.

The  Registrant  had  10,836,187  shares of its common stock  outstanding  as of
February 18, 1997.

Transitorial Small Business Disclosure Format (Check one):  Yes      No   X
                                                               -----    -----


<PAGE>

                           COUNTRY WORLD CASINOS, INC.

                                      Index


                                                                    Page

Part I - FINANCIAL INFORMATION                                   

         Item 1.  Financial Statements                                3

         Item 2.     Management's Discussion and Analysis of
                  Financial Condition and Plan of Operation
                                                                      3
Part II -   OTHER INFORMATION

         Item 1.  Legal Proceedings                                   6

SIGNATURES                                                            7


                                        2

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

         Financial Statements are attached as pages F-1 through F-18.

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
          OPERATION.

     Country World  Casinos,  Inc.,  the  Registrant  (the "Company" or "Country
World") was incorporated on November 9, 1982 under the name,  Innovative Medical
Technology,  Inc. The Company was  organized to engage in the medical  industry.
The  Company  effected a public  offering in 1983.  The Company was  essentially
inactive until 1990 when it undertook the manufacturing of monolithic  composite
panels for use in the construction of semi-truck  trailers,  shipping containers
and industrial  buildings.  The Company  discontinued this business in September
1992.

     In 1993, the Company changed the focus of its planned  business  operations
to the construction of a casino in Black Hawk,  Colorado.  In August,  1993, the
Company  completed the acquisition from New Allied  Development  Corporation and
its subsidiary,  Tommyknocker Casino Corp. (collectively "NADC") of certain real
property located in Black Hawk,  Colorado known as Mill Sites 12 and 13, and the
Smith Lode Mining Claim, U.S. Survey No. 502 (the "Property").

     Since the Company's  purchase of the Property in August 1993, the Company's
activities  have  focused  on  obtaining  the  necessary  financing  and  making
preparations  for  construction  of the casino on the Property.  The Company has
been able to obtain  sufficient  financing to make  significant  preparation for
construction  of the casino,  but sufficient  financing has not been obtained to
commence  construction of this project.  The Company's efforts have included the
completion  of an  extensive  excavation  project  consisting  of the removal of
approximately  60,000  cubic  yards of rock and  dirt,  preparation  of  working
drawings for the  foundation of the project,  design of the interior  casino and
entertainment  areas of the  project,  work  with  the  Colorado  Department  of
Transportation  for the  redesign  of Highway  119,  the main access road to the
Property,  and work with the Black  Hawk-Central City Sanitation  District for a
sewer tap and with the City of Black  Hawk's  Water  District to provide a water
tap to the Property. Although these efforts have not been completed, the Company
believes  that,  if  financing  were  obtainable,  it should be in a position to
construct a gaming facility on the Property.

     In the fiscal year ended June 30,1995, the Company borrowed $1,000,000 from
Holly Holdings, Inc., formerly known as Holly Products, Inc. ("Holly"). On April
20, 1995,  the Company issued  5,000,000  shares of its common stock to Holly in
exchange for the cancellation of the $1,000,000 indebtedness, plus interest. The
Company  also agreed to grant  Holly the right to  purchase up to an  additional
20,000,000  shares of common stock at $.20 per share (a total of  $4,000,000) if
such funding was provided within a reasonable time and progress  continued to be
made concerning  financing for the casino project.  The Company and Holly agreed
that Holly would provide $250,000 to the Company by no later than June 30, 1995,
for which the Company would issue  1,250,000  shares of its common stock.  Holly
did not  provide  the  $250,000  to the  Company  by  June  30,  1995;  however,
subsequent to the  advancement  of the $1,000,000  referred to above,  Holly has
provided financing of approximately $433,000 to the Company through December 31,
1996.  In  addition,  as noted  below,  Holly has agreed to  provide  additional
financing to the Company.

     The Company is in need of  substantial,  additional  financing  in order to
complete  construction and to commence operation of the casino.  There can be no
assurance  that the Company will be able to obtain the necessary  financing.  In
addition,  the  Company's  ability to operate the casino will be dependent  upon
substantial other conditions, including the obtaining of licenses and compliance
with governmental regulations, grading and construction of the casino, obtaining
the  necessary  permits  and  approvals  from the City of Black  Hawk and  other
regulatory  bodies,  procuring  gaming  equipment  on  satisfactory  terms,  and
accomplishing  these objectives in a timely manner.  The Company does not expect
to accomplish these objectives in the current fiscal year.



                                        3

<PAGE>

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

     In 1995 NADC commenced foreclosure  proceedings involving the Property. Due
to the pendency of these  proceedings,  on October 12, 1995, the Company filed a
Voluntary  Petition Under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court, District of Colorado (Case No. 95 20563 RJB). As a result, all
creditors of the Company are stayed from  commencing or continuing any action or
enforcing  any  judgment or lien against the Company or property of the Company,
except as otherwise authorized pursuant to Title 11 U.S.C. 362(b). Relief may be
sought by the filing of a complaint in the Bankruptcy  Court,  pursuant to Title
11 U.S.C.  362(d). At present,  the effects of the bankruptcy  proceeding on the
long term  outlook  for the  Company,  and the ability of the Company to resolve
disputes with NADC and to commence development of the Property,  are unclear. In
addition,  NADC has filed a Motion to Convert with the Bankruptcy  Court seeking
to convert the Chapter 11 case to a Chapter 7 case. See Part II, Item 1. If NADC
is  successful  in the  Motion to  Convert,  the assets of the  Company  will be
liquidated and it would be unlikely that the common  shareholders  would receive
any proceeds from this  liquidation.  The Company  opposes the Motion to Convert
and, as more fully set forth below,  has submitted a Plan of  Reorganization  to
the Bankruptcy Court.

     In March 1996 the Bankruptcy  Court granted the Company's motion to approve
$5 million in financing,  which  financing was obtained on May 31, 1996.  The $5
million  financing was obtained from a group of lenders led by Kennedy  Funding,
Inc.  and  Anglo-American  Financial  as agent  ("Kennedy").  The lending  group
included Norlar,  Inc. Norlar, Inc. is a closely-held  corporation  beneficially
owned by Larry Berman and his wife. Mr. Berman is a director of the Company, and
an  officer,  director  and  principal  shareholder  of  Holly.  Norlar,  Inc.'s
participation  or percentage of the $5 million  financing is 47% or  $2,350,000.
The other participants are unrelated to the Company or Holly.

     In  connection  with this  financing,  the Company made a  Promissory  Note
effective May 20, 1996 payable to Kennedy in the principal  amount of $5 million
with  interest  payable  at the rate of 15% per annum  until  May 19,  1997 (the
"First Year  Interest  Obligation")  and at a rate of 24% per annum  thereafter.
Payments of principal  and  interest are payable as follows:  (a) the First Year
Interest  Obligation was prepaid at closing;  (b) commencing on May 19, 1997 and
for each month  thereafter,  the Company is to make interest only  payments,  in
advance,  in the amount of 2% of the then existing  principal  balance due under
the Note; and (c) the entire outstanding  principal  balance,  together with all
accrued and unpaid  interest,  if not previously  paid, shall be finally due and
payable on May 19, 1999.  The holder of the Note may accelerate the due date for
the entire  balance of  principal,  interest and other sums due upon maturity in
the event of default under the Note.  The default rate of interest is 24% during
the first loan year and 36%  thereafter.  The Note is secured by a first deed of
trust on the Property,  and any buildings,  fixtures and any materials which are
now or may hereafter be located on the Property. The Note has been guaranteed by
Holly.  In addition,  Holly and the Company  have entered into an  environmental
indemnity  agreement  with  Kennedy  pursuant to which they will defend and hold
harmless the co-lenders from any environmental claims.

     In  February  1997,  the  Company  submitted  its  Third  Amended  Plan  of
Reorganization (the "Plan") and a Fourth Amended Disclosure  Statement regarding
the Plan.  The  primary  purpose  of the Plan is to  maintain  ownership  of the
Property through a refinancing of the Property and to pay allowed claims against
the  bankruptcy  estate of the Company in full.  If the Company is successful in
its Plan,  the Company will have no unsecured  debt other than to Holly and will
have a $5 million secured loan on the Property.

     Norlar has agreed  with the other  participants  in the $5 million  loan to
subordinate  Norlar's interest to the other  participants for the benefit of the
Company. Norlar has agreed and it is proposed in the Plan, that all of Norlar's


                                        4

<PAGE>


monthly  payments  which would be due on its 47% interest in the $5 million loan
be deferred until the Property is refinanced, sold, foreclosed upon or otherwise
liquidated. Accordingly, the Company would be required, commencing May 19, 1997,
to make monthly  interest-only  payments on the  remaining 53% of the $5 million
loan owed to the non-Norlar participants.  Therefore, the Company's requirements
would be $53,000 per month.

     It is  proposed  in the  Plan  that  the  Company  will  continue  to  seek
construction  financing  or  joint-venture  agreements  in order to develop  the
Property.  Notwithstanding  this ultimate objective,  it is proposed in the Plan
that the  Company  undertake  interim  restructuring  to fulfill  the  financial
requirements of the Plan.

     It is provided in the Plan that the Company will utilize the remaining cash
on  hand  from  the  $5  million  refinancing  of  the  Property  (approximately
$460,000), plus a $1 million cash infusion by Holly to pay all allowed claims in
accordance with the terms of the Plan. Holly has agreed to provide $1 million on
a phased-in  basis,  with an initial payment of $750,000 to be made on or before
February 28, 1997. Holly has agreed to pay the remaining $250,000 to the Company
on or before November 19, 1997. The Company has agreed with Holly to reduce this
agreement  for the  cash  infusion  to  written  documents,  and to apply to the
Bankruptcy Court for approval of the financial  transaction with full disclosure
to all  creditors and parties in interest  regarding  the specific  terms of the
cash infusion. Monies from Holly would be paid into a special bank account being
established  by the  Company  at its bank,  Norwest  Bank of  Glendale,  for the
purpose of funding the Plan. The Company  believes that its cash on hand and the
$1 million  cash  infusion  will be  sufficient  to fund the Plan and to pay the
interest-only  payments of $53,000 per month on the $5 million loan,  commencing
May 19, 1997, through May 19, 1998.

     The Company will  continue to seek  construction  financing  and  permanent
"take-out"  financing,  or a  joint-venture  partner  in  order to  develop  the
Property by the construction of a gaming facility. If the Company should fail in
its  efforts  to obtain  such  financing,  it is  provided  in the Plan that the
Company will market the Property  for sale in order to liquidate  the  Property.
This back-up option  establishes a firm cut-off date of December 31, 1997 within
which the Company is to secure  construction  financing and  permanent  take-out
financing or obtain a joint-venture partner for the development of the Property.
If the Company is unable to meet these  conditions,  the Company proposes in the
Plan to list the  Property for sale  pursuant to a public  sale.  As part of the
Plan, the Company would seek the approval of the Bankruptcy  Court for the sale.
It is further  provided  in the Plan that if the  Company is unable to close the
sale on the Property by April 30, 1998,  that the case will be converted  into a
Chapter 7 case, with a trustee appointed to liquidate the Property.

     The  Company has made  several  unsuccessful  efforts to obtain  financing,
construction financing,  "take-out" financing, or joint venture agreements in an
attempt to develop the Property. The Company is currently engaged in discussions
with a development firm regarding development of Property,  but no assurance can
be given that  arrangements  will be made with this firm, or if arrangements are
made,  that  they  will be on  terms  favorable  to the  Company.  There  can no
assurance that the Company will be successful in its efforts to obtain financing
for development of the Property,  or in the development or any actual  operation
of the Property.

     The Company has incurred  substantial net losses, and had a working capital
deficiency  of  approximately  $1,753,686  at December 31, 1996.  Insofar as the
Company has not completed its casino facility,  it has received no revenues from
operations  from these planned  business  activities.  The  Company's  financial
statements  have been presented on the basis that it is a going  concern,  which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal course of business. The Company's ability to continue in existence is
dependent upon its ability to obtain  additional  long-term  financing,  achieve
profitable  operations and to finalize a plan satisfactory to interested parties
in the  bankruptcy  proceeding.  The  financial  statements  do not  include any
adjustments  relating to the recoverability and classification of recorded asset
or liability  amounts  which might be necessary  should the Company be unable to
continue in existence.

     During the six months ended  December  31,  1996,  the Company had interest
income of $22,111, interest expense of $628, general and administrative expenses
of $337,434 and depreciation expense of $3,136. The Company's loss was $319,087,
or $.04 per share. The Company remains in the development

                                        5

<PAGE>


stage and had  incurred  a loss from  inception  through  December  31,  1996 of
$3,579,775. The ability of the Company to achieve revenues in the future will be
dependent  upon  realization  of its plans to develop a gaming  facility  on the
Property.


                                        6

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     I. The Company is the plaintiff and a  counterclaim  defendant in a lawsuit
pending in Denver, Colorado District Court, Case No. 95CV2310,  entitled Country
World Casinos,  Inc., a Nevada  corporation,  Plaintiff,  v. Tommyknocker Casino
Corp., a Colorado corporation and New Allied Development Corporation, a Colorado
corporation,  Defendants,  v. Country World Casinos, Inc., a Nevada Corporation,
Holly Products,  Inc., a New Jersey  corporation,  Ronald G. Nathan, Sal Lauria,
Roger  D.  Leclerc,   William  H.  Patrowicz  and  David  Singer,   Counterclaim
Defendants.  This  action has been  stayed  due to the  filing of the  Company's
Petition in Bankruptcy in the United States Bankruptcy Court for the District of
Colorado on October 12, 1995, Case No.  95-20563RJB which is currently  pending.
The District Court  litigation and the bankruptcy  petition arise as a result of
disputes  with  New  Allied   Development   Corporation   and  its   subsidiary,
Tommyknocker  Casino Corp.  (collectively  "NADC"). A claims hearing was held in
September  1996 to determine  the amount of NADC's  allowed  secured debt in the
proceeds of the Company's financing of the Property.  Prior to the hearing,  the
Company had paid to NADC the undisputed  portion of its secured debt against the
Property in the amount of  $998,391.  In November  1996,  the  Bankruptcy  Court
issued its  Memorandum  Opinion and Order  determining  the method and amount of
NADC's secured claim. The amount of $1,308,726,  as authorized by the Bankruptcy
Court,  has been paid by the  Company  to NADC,  for a total of  $2,307,117.  In
November  1996,  the  Bankruptcy  Court ordered that NADC was paid in full.  The
payment  was  without   prejudice  to  the  right  of  the  Company  to  seek  a
reconsideration and without prejudice to appeal the Order.

     In December  1996,  the Company filed a Motion for  Reconsideration  of the
Order of the  Bankruptcy  Court,  as well as a notice of appeal.  The Bankruptcy
Court  denied the  Motion for  Reconsideration.  In  December  1996 NADC filed a
cross-appeal of the Order of the Bankruptcy  Court. This appeal has been made to
the United  States  District  Court for the  District of  Colorado  and has been
assigned case number 96-AP- 2823.

     In  February   1997,   the  Company   filed  its  Third   Amended  Plan  of
Reorganization  and its  Fourth  Amended  Disclosure  Statement  for the Plan of
Reorganization.

     NADC has filed a Motion to Convert the Company's  pending  bankruptcy  case
pursuant  to Chapter 11 to a Chapter 7  bankruptcy  proceeding.  The  Bankruptcy
Court  will  conduct a hearing on this  Motion to Convert on March 3, 1997.  The
Company opposes this Motion to Convert.  If the Motion to Convert is successful,
a Chapter 7 Trustee  would be appointed to liquidate  the assets of the Company,
including  the  Property.  In that event,  it would be unlikely  that the common
shareholders of the Company would receive any proceeds.



                                        7

<PAGE>



                                   SIGNATURES

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

                                         COUNTRY WORLD CASINOS, INC.


Dated:  February 18, 1997                 By:  /S/  ROGER D. LECLERC
                                              ----------------------------------
                                               Roger D. Leclerc, President
                                               and Chief Financial Officer



<PAGE>



                           COUNTRY WORLD CASINOS, INC.

                              Financial Statements
                                December 31, 1996




<PAGE>





                           COUNTRY WORLD CASINOS, INC.


                                Table of Contents
                                -----------------


                                                                        Page
                                                                        ----

Financial Statements:

     Accountants Report .................................................F-1

     Balance Sheet.......................................................F-2

     Statements of Operations........................................... F-3

     Statements of Stockholders' Equity................................. F-4

     Statements of Cash Flows........................................... F-7

     Notes to Financial Statements...................................... F-8







<PAGE>


               [Letterhead of Gene Fuehrer & Associates Omitted]






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


I have compiled the accompanying balance sheet of Country World Casinos, Inc. (a
development stage company) as of December 31, 1996 and the related  consolidated
statements of operations, stockholders' equity and cash flows for the six months
then ended in accordance  with Statements on Standards for Accounting and Review
issued by the American Institute of Certified Public Accountants.

A  compilation  is limited to  presenting  in the form of  financial  statements
information  that is the  representation  of  management.  I have not audited or
reviewed the accompanying financial statements and, accordingly,  do not express
an opinion or any other form of assurance on it.

The  accompanying  statements have been prepared  assuming that the Company will
continue as a going  concern.  The ability of the Company to continue as a going
concern  depends on the Company's  ability to obtain  additional  long-term debt
and/or equity financing. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

The accompanying  financial  statements have been prepared assuming that Country
World Casinos,  Inc. will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company has filed for Bankruptcy under Chapter 11,
is in the development  stage, and has suffered  recurring losses from operations
and has a working capital deficiency of $1,753,686 that raises substantial doubt
about the Company's ability to continue as a going concern.  Management's  plans
in regard to these matters are discussed in Note 2. The financial  statements do
not include any adjustments that might result from this uncertainty.



Gene Fuehrer
Certified Public Accountant

February 5, 1997
Englewood, CO


<PAGE>
                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)
                                  Balance Sheet


                                     Assets
Current assets:
      Cash                                                         $     11,747
      Cash in Escrow                                                    451,895
                                                                   ------------
                                                                        463,642
Property and Equipment (Notes 3 and 4)
      Land                                                            7,475,475
      Casino under development                                        4,937,298
      Furniture and equipment                                            48,068
                                                                   ------------
                                                                     12,460,841
            Less accumulated depreciation                               (17,271)
                                                                   ------------
                                                                     12,443,570
Other assets
      Prepaid interest (Note 4)                                         312,500
      Deposits                                                              440
                                                                   ------------
Total assets                                                       $ 13,220,152
                                                                   ============





<PAGE>


                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)
                                  Balance Sheet


                      Liabilities and Stockholders' Equity


Current liabilities:
      Current maturities of long-term debt (Notes 3 and 4)         $    727,728
      Accounts payable                                                  864,732
      Advances - stockholders                                           433,418
      Accrued interest                                                  116,000
      Other accrued expenses                                             75,450
                                                                   ------------
                  Total current liabilities                           2,217,328


Long term liabilities
      Notes Payable (Notes 4 and 10)                                  5,006,963
                                                                   ------------
                  Total liabilities                                   7,224,291

Commitments and contingency (Notes 3, 7 and 8)

Stockholders' equity (Notes 2, 3 and 5)
      Preferred stock, $.001 par value, 25,000,000
        shares authorized Convertible Preferred,
        2,250,000 shares issued and outstanding
        (Liquidation preference $7,492,500)                               2,250
      Common stock, $.001 par value, 50,000,000
        shares authorized, 10,836,187 issued
        and outstanding                                                  10,836
      Additional paid-in capital                                      9,562,550
      Deficit accumulated during the development stage               (3,579,775)
                                                                   ------------
                     Total stockholders' equity                       5,995,861
                                                                   ------------

Total liabilities and stockholders' equity                         $ 13,220,152
                                                                   ============



                        See notes to financial statements
                                       F-2


<PAGE>
                                              COUNTRY WORLD CASINOS, INC.

                                              (A Development Stage Company)

                                                 Statement of Operations
<TABLE>
<CAPTION>
                                                                              For the Period
                                                                            From November 9, 1982
                                                                             (Date of Inception)
                                                 For Six Months Ended              Through
                                                   December 31, 1996           December 31, 1996
                                                   -----------------           -----------------
<S>                                                 <C>                         <C>    
Costs and expenses                              
  Research and development costs                    $      --                    $   122,000
  Bad debt expense                                         --                        175,000
  General and administrative expenses                   337,434                    3,314,671
  Depreciation expense                                    3,136                       17,271
                                                    -----------                  -----------
           Total                                    $   340,570                  $ 3,628,942

Other income (expense)
  Other income                                             --                         45,727
  Interest expense                                         (628)                      (2,592)
  Interest income                                        22,111                       88,880
  Gain on forgiveness of debt                              --                         17,152
  Forfeited deposit (Note 3)                               --                       (100,000)
                                                    -----------                  -----------
           Total                                         21,483                  $    49,167
                                                                                 -----------

Loss from continuing operations                        (319,087)                  (3,579,775)

Discontinued operations (Note 7)
  Gain on disposal of subsidiaries                         --                        389,286
  (Loss) from discontinued operations                      --                       (389,286)
                                                    -----------                  -----------

Net (loss) income                                   $  (319,087)                 $(3,579,775)
                                                    ===========                  ===========

Net (loss) income per share                         $      (.04)                 $      (.53)
                                                    ===========                  ===========

Weighted average number of shares
(Note 5)                                              6,694,097                    6,694,097
                                                    ===========                  ===========
                                                                                           




                                             See notes to financial statements
                                                            F-3

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                          COUNTRY WORLD CASINOS, INC.

                                         (A Development Stage Company)

                                       Statement of Stockholder's Equity
                     From November 9, 1982 (Date of Inception) Through December 31, 1996

                                                                                                   
                                                                                                   
                                                                                        Common Stock 
                                                                    -------------------------------------------------------- 
                                              Preferred Stock                                            Subscribed
                                           ----------------------                               ----------------------------       
                                             Shares      Amount        Shares        Amount       Shares            Amount
                                           ----------  ----------   ------------  ------------  ----------        ----------

<S>                                         <C>           <C>         <C>           <C>             <C>               <C>
November 9, 1982 (date of inception)              -      $     -          --        $      -          -            $       -

Issuance of shares for cash                       -            -       104,000            520         -                    -

Issuance of common stock to the public            -            -        51,600            258         -                    -

Deferred offering costs                           -            -             -              -         -                    -

Cancellation of common stock                      -            -       (28,000)          (140)        -                    -

Issuance of shares for services                   -            -     3,000,000         15,000         -                    -

Issuance of common stock at a discount            -            -    46,872,400        234,362         -                    -

Capital contribution                              -            -             -              -         -                    -   

Net loss for the period from November 9,
  1982 (date of inception) through
  June 30, 1992                                   -            -             -              -         -                    - 
                                             ------       ------    ----------       --------     -----              -------

Balance - June 30, 1992                           -            -    50,000,000        250,000         -                    -

Issuance of common stock at a discount
  for services (Note 5)                           -            -    25,000,000        125,000         -                    -

Net loss for year ended June 30, 1993             -            -             -              -         -                    -  
                                             ------       ------    ----------       --------     -----              -------

Balance - June 30, 1993                           -            -    75,000,000        375,000         -                    -

Reverse stock split 1:35 (Note 5)                 -            -   (72,857,142)      (364,285)        -

Change in par value from $.005 to
  $.001 (Note 5)                                  -            -             -         (8,572)        -                    -

Issuance of stock for cash (Note 5)               -            -       600,000            600         -                    -

Issuance of stock for cash (Note 5)               -            -     1,500,000          1,500         -                    -


Continued on next page

</TABLE>

                                      See Notes to financial statements
                                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                          COUNTRY WORLD CASINOS, INC.

                                         (A Development Stage Company)

                                       Statement of Stockholder's Equity 
                     From November 9, 1982 (Date of Inception) Through December 31, 1996

                                                                             Deficit
                                                                           Accumulated
                                                       Additional           During the
                                                         Paid-In           Development   
                                                         Capital              Stage              Total
                                                       ----------          -----------           -----

<S>                                                    <C>                 <C>                 <C>      
November 9, 1982 (date of inception)                   $      --           $      --           $      --

Issuance of shares for cash                                  1,005                --                 1,525

Issuance of common stock to the public                     644,742                --               645,000

Deferred offering costs                                   (115,690)               --              (115,690)

Cancellation of common stock                                   140                --                  --   

Issuance of shares for services                               --                  --                15,000

Issuance of common stock at a discount                    (214,362)               --                20,000

Capital contribution                                         2,850                --                 2,850

Net loss for the period from November 9,
  1982 (date of inception) through                            --              (221,169)           (221,169)
  June 30, 1992                                        -----------         -----------         -----------   


Balance - June 30, 1992                                    318,685            (221,169)            347,516

Issuance of common stock at a discount
  for services (Note 5)                                   (112,500)               --                12,500

Net loss for year ended June 30, 1993                         --              (373,401)           (373,401)
                                                       -----------         -----------         -----------

Balance - June 30, 1993                                    206,185            (594,570)            (13,385)

Reverse stock split 1:35 (Note 5)                          364,285                --                  --   

Change in par value from $.005 to
  $.001 (Note 5)                                             8,572                --                  --

Issuance of stock for cash (Note 5)                        599,400                --               600,000

Issuance of stock for cash (Note 5)                      1,498,500                --             1,500,000


Continued on next page


                                           See Notes to financial statements.
                                                             F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                          COUNTRY WORLD CASINOS, INC.
                                         (A Development Stage Company)

                                       Statement of Stockholder's Equity
                     From November 9, 1982 (Date of Inception) Through December 31, 1996
Continued from previous page.                                                                                                   
                                                                                   Common Stock   
                                                                    ---------------------------------------------------  
                                            Preferred Stock                                            Subscribed 
                                         ----------------------                                 -----------------------             
                                          Shares      Amount          Shares        Amount        Shares        Amount        
                                         ----------  ----------     ----------     ---------    ---------     ---------  

<S>                                      <C>             <C>             <C>        <C>          <C>             <C>
Issuance of Convertible Preferred
  Stock for acquisition of land
  valued at $1.00 per share
  (Note 5)                               2,250,000       2,250             -              -            -              -      

Issuance of stock for cash and
  services pursuant to exercise
  of options (Note 5)                            -           -        250,000            250           -              -        

Purchase and cancellation of
  treasury stock (Note 5)                        -           -       (125,000)          (125)          -              -       

Issuance of stock for cash (Note 5)              -           -        200,662            200           -              -         

Issuance of common stock for acquisition
  of land valued at $1.00 per share (Note 5)     -           -       250,0009            250           -              -        

Issuance of common stock for cash and
  services pursuant to exercise of options
  (Note 5)                                       -           -         95,000             95           -              -     

Issuance of common stock for services
  rendered valued at $2.50 per share (Note 5)    -           -        200,000            200           -              -      

Subscription of common stock pursuant to
  private placement offering (Note 5)            -           -              -              -      262,667           263       

Net loss for year ended June 30, 1994            -           -              -              -            -             -       
                                           --------    -------      ---------        -------     --------       --------

Balance - June 30, 1994                   2,250,000      $2,250     5,113,520       $  5,113      262,667           $263    

Subscription of common stock pursuant
  to private placement offering (Note 5)          -           -       460,000            460            -              -     

Issuance of stock for outstanding note            -           -     5,000,000          5,000            -              -      

Convert subscribed stock to common
   and record fees                                -           -       262,667            263     (262,667)          (263)    

Net loss for twelve months ended
 June 30, 1995                                    -           -             -              -            -              -        
                                          ---------    --------    ----------        -------     --------        -------       

Balance - June 30, 1995                  2,250,000     $  2,250    10,836,187        $10,836            0         $    0    

                                             See notes to financial statements.
                                                           F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                    COUNTRY WORLD CASINOS, INC.
                                   (A Development Stage Company)

                                 Statement of Stockholder's Equity
                  From November 9, 1982 (Date of Inception) Through December 31, 1996
Continued from previous page.          

                                                                          Deficit 
                                                                        Accumulated
                                                Additional               During the
                                                  Paid-In               Development
                                                  Capital                  Stage             Total
                                                ----------              ------------         -----
<S>                                               <C>                       <C>             <C> 
Issuance of Convertible Preferred    
  Stock for acquisition of land      
  valued at $1.00 per share          
  (Note 5)                                         2,247,750                  -              2,250,000         
                                     
Issuance of stock for cash and       
  services pursuant to exercise      
  of options (Note 5)                                249,750                  -                250,000      
                                     
Purchase and cancellation of         
  treasury stock (Note 5)                           (124,875)                 -               (125,000)          
                                     
Issuance of stock for cash (Note 5)                  499,800                  -                500,000
                                     
Issuance of common stock for acquisition
  of land valued at $1.00 per share (Note 5)         249,750                  -                250,000
                                     
Issuance of common stock for cash and
  services pursuant to exercise of options           237,405                  -                237,500
  (Note 5)                           
                                     
Issuance of common stock for services
  rendered valued at $2.50 per share (Note 5)        499,800                  -                500,000
                                     
Subscription of common stock pursuant
  private placement offering (Note 5)                787,737                  -                788,000
                                     
Net loss for year ended June 30, 1994                      -         (1,490,785)            (1,490,785)
                                                   ----------        ----------             ---------- 
                                     
Balance - June 30, 1994                           $7,324,059        $(2,085,355)            $5,246,330         
                                     
Subscription of common stock pursuant
  to private placement offering (Note 5)           1,229,040                  -              1,229,040
                                     
Issuance of stock for outstanding note             1,009,451                  -              1,014,451
                                     
Convert subscribed stock to common   
   and record fees                                         -                  -                      -      
                                     
Net loss for twelve months ended     
 June 30, 1995                                             -           (757,659)              (757,659)                    
                                                  ----------         ----------             ----------
                                     
Balance - June 30, 1995                           $9,562,550        $(2,843,014)            $6,732,622
                                     
                                     See notes to financial statements.
                                                    F-5

</TABLE>

<PAGE>                               
<TABLE>
<CAPTION>
                            COUNTRY WORLD CASINOS, INC.
                            (A Development Stage Company)
 
                       Statement of Stockholder's Equity
        From November 9, 1982 (Date of Inception) Through December 31, 1996

  
  Continued from previous page.                                                           
                                                                                                                          
                                                                          Common Stock   
                                                            --------------------------------------------------------    
                                       Preferred Stock                                         Subscribed  
                                   ----------------------                              -----------------------------          
                                     Shares      Amount        Shares        Amount       Shares         Amount
                                   ----------  ----------   ------------  ------------ -------------  --------------  
 
<S>                                <C>           <C>         <C>           <C>            <C>         <C>
Net loss for twelve months
 ended June 30, 1996                        -           -             -              -            -              -        
  
 
Balance - June 30, 1996             2,250,000      $2,250    10,836,187        $10,836            0         $    0    
                                    ---------      ------    ----------        -------  -----------         ------     

  
Net Loss for six months
 ended Dec. 31, 1996                        -           -             -              -            -              -           
                                                                                                                          
 
 
Balance December 31, 1996          2,250,000       2,250    10,836,187         10,836            0              0      
                                   =========       =====    ==========         ======            =              =      

 

                            COUNTRY WORLD CASINOS, INC.
                            (A Development Stage Company)
 
                       Statement of Stockholder's Equity
        From November 9, 1982 (Date of Inception) Through December 31, 1996

  
  Continued from previous page.   
                                                          Deficit
                                                         Accumulated 
                                 Additional              During the
                                   Paid-In               Development
                                   Capital                 Stage                  Total
                                 ----------              -----------             -----
  
<S>                               <C>                     <C>                    <C> 
Net loss for twelve months     
 ended June 30, 1996                       -                (417,673)             (417,673) 
                             
                             
Balance - June 30, 1996           $9,562,550             $(3,260,687)           $6,314,949
                                   ---------             -----------            ----------
                                     
Net Loss for six months    
 ended Dec. 31, 1996                      -                 (319,087)            (319,087)
                                                          ----------             --------

Balance December 31, 1996          9,562,550              (3,579,775)            5,995,861  
                                   =========              ==========             =========  
</TABLE>
                             


                        See notes to financial statements
                                       F-6


<PAGE>
<TABLE>
<CAPTION>
                                                COUNTRY WORLD CASINOS, INC.

                                               (A Development Stage Company)
                                                 Statements of Cash Flows
                                                                                                          For the Period From
                                                                                                           November 9, 1982
                                                                                                          (Date of Inception)
                                                                             For Six Months Ended              Through
                                                                               December 31, 1996           December 31, 1996
                                                                               -----------------           -----------------
<S>                                                                             <C>                         <C>   
Cash flows from operating activities:
  Continuing operations
     Net (loss)                                                                  $  (319,087)                $(3,579,775)
     Adjustments to reconcile net (loss) to net cash from
     operating activities -
        Depreciation                                                                   3,136                      40,018
        Common stock issued for interest                                                --                        14,451
        Common stock issued for services                                                --                       837,500
        Decrease in noncurrent assets                                                   --                       237,000
        Decrease in accounts payable                                                 214,379                     864,732
        Increase in accrued expenses                                                (470,705)                    191,450
        Increase in prepaid expenses                                                 375,000                    (312,500)
  Discontinued operations
     Net (loss)                                                                         --                      (389,286)
     Adjustments to reconcile net loss to net cash (used in) provided by
     operating activities -
        Gain on disposal of assets                                                      --                       389,286
        Changes in assets and liabilities                                               --                          --
                                                                                 -----------                 -----------
           Total cash (used in) provided by operating activities                    (197,277)                 (1,707,124)

Cash flows from investing activities:
  Purchase of land and casino development costs                                     (200,097)                 (5,737,773)
  Purchase of furniture, vehicle and equipment                                          --                       (70,815)
  Investment in non-marketable securities                                               --                       (85,000)
  Loans receivable                                                                      --                       (90,000)
  Investment in patent-                                                                 --                       (62,000)
  Deposits and other                                                                    --                          (440)
  Cash into escrow                                                                 1,365,317                    (451,896)
                                                                                 -----------                 -----------
           Total cash used in investing activities:                                1,165,220                  (6,497,924)

Cash flows from financing activities:
  Proceeds advances stockholders                                                     148,350                     433,418
  Proceeds from long-term debt                                                          --                     6,010,690
  Repayments on long-term borrowings                                              (1,110,837)                 (3,450,999)
  Proceeds from stock issuance                                                          --                     5,220,835
  Capital contribution                                                                  --                         2,850
                                                                                 -----------                 -----------
           Total cash provided by (used in) financing activities:                   (962,487)                  8,216,794
                                                                                 -----------                 -----------

Net (decrease) increase in cash                                                        5,456                      11,747

Cash - beginning of period                                                             6,291                        --
                                                                                 -----------                 -----------

Cash - end of period                                                             $    11,747                 $    11,747
                                                                                 ===========                 ===========

</TABLE>

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

During  the year ended June 30,  1995,  the  Company  converted  a note  payable
($1,000,000)  plus accrued  interest  ($14,451)  totaling  $1,014,451  owed to a
shareholder, into 5,000,000 common shares. (Note 1)

During the year ended June 30, 1994 the Company  issued common stock of $250,000
and Convertible Preferred stock of $2,250,000 and incurred $4,175,000 of debt to
acquired land with a cost of $6,675,000 (Note 3).

                        See notes to financial statements
                                       F-7


<PAGE>
                           COUNTRY WORLD CASINOS, INC.

                          (A Development Stage Company)

                          Notes to Financial Statements

Note 1 - Summary of Significant Accounting Policies and Business Activity
-------------------------------------------------------------------------

Organization and Business
-------------------------

Country World Casinos,  Inc. (formerly Monolite  Industries) (the "Company"),  a
Nevada  corporation,  was  incorporated  on  November  9,  1982,  and  is in the
development  stage.  The original  planned  operation of the Company was for the
purpose of development, licensing and production of products on a subcontracting
basis,  and the sale of products and devices in or related to the medical and/or
biotechnical  fields.  In May of 1990,  the  Company  acquired  another  company
through the issuance of 40,000,000  shares of its common stock. This acquisition
was accounted for using the pooling of interests method. The newly merged entity
formed a subsidiary on November 29, 1990,  called  Trail-Lite,  Inc. The planned
operation  through  the new  subsidiary  was for the  purpose  of  manufacturing
monolithic  composite  panels.  In September  1992, the Company  disposed of its
subsidiary, Trail-Lite, Inc. (Note 8).

In fiscal year 1994, the Company changed its focus of business operations and in
two separate transactions, acquired approximately 79,000 and 375,000 square feet
of vacant land located in the city of Black Hawk, Gilpin County, Colorado. As of
December  31,  1996,  the Company has not  realized any revenue from its planned
operations and, accordingly, is considered to be in the development stage.

The Company is a majority-owned subsidiary of Holly Products, Inc. (Note 5)

Concentration of Credit Risk
----------------------------

The Company maintains cash balances in bank deposit  accounts,  which, at times,
exceed federally  insured limits.  The Company has not experienced any losses in
such accounts.

Hotel and Casino Under Development
----------------------------------

The Company has purchased land and has begun construction of a hotel and casino.
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.

Furniture and Equipment
-----------------------

Furniture  and  equipment  is  stated  at  cost  and  will be  depreciated  on a
straight-line basis over their estimated useful lives.




                                       F-8



<PAGE>

                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements


Note 1 - Summary of Significant Accounting Policies and Business Activity
cont.)
--------------------------------------------------------------------------------

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.

Statement of Cash Flows
-----------------------

The Company  considers  all highly  liquid  debt  instruments  purchased  with a
maturity  of  three  months  or less  to be cash  equivalents  for  purposes  of
statement of cash flows.

Note 2 - Continued Operations and Realization of Assets
-------------------------------------------------------

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of  approximately  $3,580,000  for the  period  from  November  9, 1982 (date of
inception)  through  December 31, 1996. The Company filed for  bankruptcy  under
Chapter  11 on October  12,  1995.  The  Company is  currently  looking  for the
required  funding to complete the construction of the casino and hotel described
in (Note 3). These  factors,  among others,  indicate the  Company's  ability to
continue  in  existence  is  dependent  upon its  ability  to obtain  additional
long-term debt and/or equity financing and achieve  profitable  operations.  The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification of recorded asset or liability amounts which
might be necessary should the Company be unable to continue in existence.

Note 3 - Casino Under Development
---------------------------------

On August 6, 1993, the Company closed on an acquisition of approximately  79,000
square feet of vacant land located within the city of Black Hawk, Gilpin County,
Colorado.  The Company paid $550,000 cash,  delivered a promissory note (Note 5)
in the amount of $3,450,000,  and delivered  2,250,000 shares of its Convertible
Preferred  stock  (Note 6) which is  convertible  to  common  stock on a 1 for 1
basis.  The  acquisition  of the land is 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.

On June 28, 1994, 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 (Note 5)
in the amount of  $725,000,  and  delivered  250,000  shares of its common stock
(Note 6).

                                       F-9


<PAGE>

                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements

Note 3 - Casino Under Development (continued)
---------------------------------------------

The Company is in the process of  constructing  a casino on the land and intends
to construct a hotel  subsequent to the  completion  of the casino.  On July 11,
1994, the Company  entered into a contract to construct the casino.  The Company
has capitalized the following costs related to the casino  construction  through
December 31, 1996:

    Interest on long-term debt                              $2,052,156
    Architectural fees and fees for construction
      and design services                                    2,885,142
                                                            ----------
                                                            $4,937,298
                                                            ==========

In December of 1993,  the Company  entered into a letter of intent to acquire an
existing   casino  in  Black  Hawk   County  and  paid  the  seller  a  $100,000
non-refundable  deposit  which was to be applied  against the purchase  price at
closing.  As of June 30, 1994, the letter of intent had expired and the $100,000
was expensed.

Note 4 - Long-Term Debt
-----------------------


$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  collaterized
by  a  first   deed  of  trust  on  real
property   with  a  net  book  value  of
approximately $1,175,000                                            725,000

$5,000,000  note  payable - interest  at
15%  until  May  19,  1997  and  at  24%
thereafter.  Interest for the first year
was  paid in  advance  at  closing.  The
principal is due May 19, 1999.  The note
is collaterized by a first deed of trust
on real  property  with a net book value
of   $6,250,000.   The   financing   was
obtained  from a group of lenders  which
included  Norlar,  Inc, a related party.
The   Norlar,   Inc.   portion   of  the
financing amounted to $2,350,000.                                 5,000,000








                                      F-10


<PAGE>

                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements

$10,445  note  payable - interest at 15%
payable  in equal  monthly  installments
over  four  (4)   years.   The  note  is
collaterized by a copy machine                                        9,691
                                                                   --------
                                                                  5,734,691
Less current portion                                                727,728
                                                                  ---------
                                                                  5,006,963
                                                                  =========

The first payment on the $725,000 note due September 28, 1995 was not made,  and
accordingly, the entire amount is considered current (Note 10).


Note 5 - Stockholders' Equity
-----------------------------

Issuance of Common Stock at a Discount
--------------------------------------

On  May  31,  1993,  the  Company  authorized  the  issuance  of  its  remaining
authorized,  but  unissued,  common stock to the Company's  former  president as
compensation,  which the Company  valued at $12,500.  Since the par value of the
25,000,000  shares issued was $.005 per share, the stock was issued at less than
its par value. Theses 25,000,000 shares, even though issued below par, are fully
paid and  non-assessable  according to legal counsel for the Company,  under the
Laws of the State of Nevada as long as the  action is  ratified  by the Board of
Directors and has otherwise  complied with  applicable  law. Legal counsel cites
NRS Sections 78.211,  78.220 and 78.215. In addition,  legal counsel states such
discounts do not make the stock assessable, and cites NRS Section 78.220.

Reverse Stock Split
-------------------

During the year ended June 30,  1993,  the  Company  declared a 1 for 35 reverse
stock  split.  This split was  effective  with the  commencement  of business on
August 9, 1993,  with respect to all shares which were issued and outstanding as
of August 6, 1993.  The Company  also  changed its par value per share of common
stock from $.005 to $.001 per share.  All share and per share  amounts have been
restated to retroactively reflect the stock split.

Preferred Stock
---------------

In July 1993, the Company amended its Articles of  Incorporation  to provide for
25,000,000  shares of  preferred  stock,  $.001  par  value,  with such  rights,
preferences, designations and to be issued in such series as to be determined by
the Company's Board of Directors.

                                      F-11


<PAGE>
                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements


Note 5 - Stockholders' Equity (continued)
-----------------------------------------

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

The  Convertible  Preferred  stockholders,  in the event of  liquidation  of the
Company will receive an amount equal to $3.33 per share plus declared and unpaid
dividends before any holder of common stock.

Each  Convertible  Preferred share is convertible into one share of common stock
anytime after  distribution or automatically upon the conversion of the majority
of the  Convertible  Preferred stock or in the event of a public offering of the
Company's  common  stock at not less  than  $6.66 per  share,  or at the time of
registration.

Casino Property
---------------

In  connection  with the  acquisition  of Casino  property,  the Company  issued
2,250,000  shares of convertible  preferred  stock to a third party.  The Casino
property was independently appraised at $11,850,000 prior to the acquisition. At
the date of the acquisition,  the Company's stock was selling at $1.00 per share
and  therefore,  the  transaction  was  recorded at the fair value of the stock,
$1.00 per share as determined by the Board of Directors.

In order to raise funds to make the down  payment for the purchase of the casino
property  (Note 3), the Company has sold  600,000  shares of its common stock at
$1.00 per share in conjunction with two private placement offerings.  The shares
are restricted.

Sales of Common Stock
---------------------

In August  1993,  the  Company  sold five  units of  Company  stock to  offshore
investors for $300,000 per unit.  Each unit  consisted of 300,000  shares of the
Company's  common stock and warrants to purchase  300,000 shares of common stock
at $3.50 per share within two years of August 31, 1993.

During  November and December of 1993,  the Company sold an  additional  140,000
shares of common stock at $2.50 per share for a total of $350,000, pursuant to a
private  offering.  During January 1994,  the Company sold an additional  60,662
shares  at  $2.47  per  share  for a total of  $150,000  pursuant  to a  private
offering.



                                      F-12

<PAGE>


                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements

Note 5 - Stockholders' Equity (continued)
-----------------------------------------

Issuances of Stock for Services
-------------------------------

The Company entered into a management  agreement with a company owned by certain
stockholders  and  officers of the  Company  (Note 8). In  conjunction  with the
agreement,  the Company paid the related company approximately $146,000 in fees,
granted an option to acquire  250,000 shares of common stock at $.01 and granted
a warrant to purchase 1,000,000 shares of common stock at $3.50 per share.

The related company  exercised its option to purchase the 250,000 shares at $.01
with the difference  between fair market value of the stock on the date of grant
of $1 and the exercise price of $.01 or $247,500, capitalized in construction in
progress.  Subsequently,  the agreement  with the company was terminated and the
former President and  Secretary/Treasurer of the Company resigned. As stipulated
in the agreement, the Company repurchased 125,000 shares of common stock at $.01
and canceled the shares.

The  financial  statements  reflect a reduction of $247,500 in  construction  in
progress ($123,750 against additional paid in capital for the difference between
the fair  market  value  of the  125,000  shares  repurchased  and the  original
exercise price and $123,750 as compensation expenses as the construction project
will no  longer  benefit  from  the  management  agreement).  Additionally,  the
1,000,000 share warrant was canceled.

In April 1994,  the Company issued 200,000 shares of common stock in conjunction
with a financial  advisory and investment banking agreement (Note 5). The shares
had a fair  market  value of $2.50  resulting  in  compensation  expense  to the
Company of $500,000.

Issuance/Exchange of Stock
--------------------------

Holly Products,  Inc. (Note 1) acquired 2,250,453 shares of the Company's common
stock from  certain  existing  shareholders  of Country  World,  in exchange for
744,592 shares of its common stock.  Holly  Products,  Inc. also acquired 16,667
shares of Country World common stock in a separate  transaction for $50,000.  As
of June 30, 1996 Holly Products,  Inc. owned 66.9% of the outstanding  shares of
Country  World  common  stock and 55.4% of the total  voting  stock  (common and
preferred) of Country World.

Additional Land Acquisition
---------------------------

In August 1993,  the Company  entered into a letter of intent to acquire  vacant
land with an  independently  appraised  value of $1,089,000 when the fair market
value of the Company's  common stock was $1. The Company closed the  acquisition
in June 1994,
                                      F-13


<PAGE>
                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements


Note 5 - Stockholder's Equity (continued)
-----------------------------------------

and in conjunction with the  acquisition,  issued 250,000 shares of common stock
to the seller.  The  transaction  was  recorded at the fair market  value of the
stock at the date the letter of intent was signed,  $1 per share,  as determined
by the Board of Directors.

Exercise of Options
-------------------

Two stockholders and officers of the Company exercised options to acquire 95,000
shares of common  stock for $.25.  The options  were  granted at a time when the
fair market value of the stock was $2.50. The difference between the fair market
value and the exercise price of $.25 is reflected as compensation expense in the
financial statements.

Private Placement Offering
--------------------------

In June 1994, the Company has undertaken a private placement  offering for up to
5,000,000  shares of common stock at $3 per share.  At December  31,  1996,  the
Company had received  $2,017,500,  net of offering costs of $150,000 for 722,667
shares.

Note 6 - Income Taxes
---------------------

Effective July 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes," which requires  recognition of deferred tax  liabilities  and assets for
the expected  future tax  consequences  of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and  assets  are  determined  based  on the  difference  between  the  financial
statement and tax basis of assets and  liabilities  using  expected tax rates in
effect  for the year in which the  differences  are  expected  to  reverse.  The
measurement  of deferred tax assets is reduced,  if necessary,  by the amount of
any tax  benefits  that,  based on  available  evidence,  are not expected to be
realized.

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

At June 30, 1996,  the Company had net operating  loss carry forwards for income
tax purposes of  approximately  $3,261,000  which expire  through 2012.  The net
operating  losses are  limited due to a more than 50% change in  ownership.  The
Company has approximately  $1,110,000  deferred tax asset as a result of the net
operating  losses  which has been fully  impaired due to  uncertainty  as to its
utilization.


                                      F-14


<PAGE>
                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements


Note 7 - Discontinued Operations
--------------------------------

On  September  15,  1992,  the Company  entered  into an  agreement  to transfer
ownership in its subsidiary, Trail-Lite, Inc. for a general release agreement of
existing claims.  This represented a reduction of accounts  payable,  short-term
borrowings  and other related debt in the amount of $389,286,  which is the full
amount of losses  incurred  by the  Company to date from the  operations  of the
subsidiary.

The decision was  precipitated by the large losses incurred from the business of
manufacturing  monolithic  composite panels.  Based on the initial operations of
the business,  the Board of Directors and management  determined that profitable
operations  would  not  be  realized  from  the  business  as it  was  currently
structured  and  decided  to sell  the  subsidiary.  Management  determined  the
subsidiary had no value and they were transferred to an entity controlled by the
prior  principal  shareholders,  officer  and  director  of the  Company for the
related debt that had been incurred.


Note 8 - Commitments and Contingency
------------------------------------

Consulting Agreements
---------------------

In  September  1993,  the Company  entered into a  consulting  agreement  with a
company to assist and advise the Company in construction  and development of the
hotel  and  casino  project  as well as  selection  of the  general  contractor,
architect, interior designer and engineers. The Company began paying the company
$5,000 per month in October,  1993 for six months and  capitalized  the costs as
construction in progress. In addition, the Company was to issue 50,000 shares of
common stock to the company.  On March 10, 1994,  the Company  renegotiated  the
consulting and construction  management agreement and the 50,000 shares of stock
previously due were canceled.

Further,  compensation  for the  consultant  services  pursuant to the agreement
shall be paid equal to five  percent of the gross  expenditures  (excluding  any
expenditures  for the acquisition or leasing of gaming devices) paid or incurred
by the  Company  (including  the  value of any  in-kind  services  or  materials
contributed by any person) through  completion of  construction  with respect to
any  project of the  Company  for which  consultant  provides  services to or on
behalf of the Company pursuant to the agreement.  This consulting  agreement has
expired.

In April 1994,  the  Company  entered a three year  agreement  with an entity to
advise the Company in financial  matters.  The agreement requires the Company to
make equal  monthly  payments  over three  years of $2,770 and to issue  200,000
shares of the Company's common stock. This agreement was canceled.


                                      F-15

<PAGE>
                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements


Note 8 - Commitments and Contingency (continued)
------------------------------------------------

Employee Agreement
------------------

In  May,  1994,  the  Company  entered  into a three  year,  $120,000  per  year
employment  agreement with an officer of the Company.  The agreement granted the
officer options to purchase  800,000 shares of the Company's common stock over a
5 year  period  at  exercise  prices  ranging  from  $.25 to  $6.00  per  share.
Employment  was  terminated  during the year ended June 30, 1995 and pursuant to
the employment agreement, the options expired 30 days after termination.

SEC Investigation
-----------------

In the  fiscal  year  ended June 30,  1994,  the  Company  was  informed  by the
Securities  and Exchange  Commission  (the "SEC") that the SEC had  instituted a
formal order of  investigation  concerning the  possibility of violations of the
federal  securities  laws by the  Company.  Although no member of the  Company's
current  management was  affiliated  with the Company during the time period the
SEC was investigating, the pendency of such investigation, and the initiation of
any action by the SEC, has impeded,  the Company's  efforts to obtain financing,
and accomplish other tasks necessary to commence operations. In August 1996, the
Company was notified that the SEC has discontinued their  investigation and that
no enforcement action has been recommended by the staff of the SEC.

Note 9 - Related Party
----------------------

In May 1995, the Company  entered into a management  agreement with the majority
shareholder  whereby the Company owes the related  party  $15,000 per week for a
management  fee.  As of June 30,  1995,  the  Company  had not paid any  amounts
related to the contract and accordingly  owed the related party  $150,000.  This
agreement has been canceled because of the Chapter 11 filing. It has been agreed
that there is no monies due the related party.

Funding
-------

The Company  entered into an agreement with a majority  stockholder  whereby the
majority  stockholder will receive the right to purchase up to 20,000,000 shares
of common stock at $.20 per share if specified funding is provided  according to
the agreement.


                                      F-16
<PAGE>


                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements


Consulting Agreements
---------------------

The Company  entered into an agreement  with a company  related  through  common
ownership to serve as consultants with respect to the operation of the casino in
Black Hawk,  Colorado.  The  agreement  required  the Company to pay the related
entity  $20,000 per month for its services  (which  includes  reimbursement  for
expenses) through December 31, 1993, at which time the monthly payment increased
to $27,500.  The agreement  granted an option for 250,000 shares of common stock
at an  exercise  price of $.01 per  share and a warrant  to  purchase  1,000,000
shares of common  stock with an exercise  price of $3.50 per share.  On March 2,
1994, the agreement was terminated.

Note 10 - Note Default
----------------------

In July 1995, the note holder on the  $3,450,000  note payable (Note 4) declared
the note in  default  and began  foreclosure  proceedings  on the real  property
collateralizing  the note.  In addition,  the payments due on the $725,000  note
have not been  made and  accordingly  the note is  considered  in  default.  The
Company  filed a lawsuit  against  New Allied  Development  Corporation  and its
wholly owned subsidiary,  Tommyknocker Casino Corp. ("NADC"). In 1993, NADC sold
to the Company the land in Black Hawk,  Colorado upon which the Company plans to
construct  a gaming  entertainment  facility.  The  Company  believes  that NADC
committed  wrongful acts in connection  with the land  purchase.  In addition to
cash, NADC received  preferred stock and a promissory note (the "Note") from the
Company.  The Note is  secured  by a second  deed of  trust  on the  Black  Hawk
property. It was provided in the Note that when certain payments had been
 made by the Company to NADC, NADC would obtain the release of the first deed of
trust  which  secures  a  pre-existing  indebtedness  of  NADC  in the  original
principal  amount of  $475,000.  The first deed of trust has not been  released.
NADC has  declared  the  Company  in default on the Note.  In the  lawsuit,  the
Company has  requested a  declaration  that the Company is not obligated to make
any  additional  payments  to NADC  under the Note until  NADC has  secured  the
release of the first deed of trust.  The Company also seeks other relief against
NADC.

In March 1996 the  Bankruptcy  Court  approved  $5 million in  financing,  which
financing was obtained on May 31, 1996.

The Company received net proceeds of  approximately  $2,850,500 after payment of
loan commitment fees, loan servicing fees and points to Kennedy Funding, Inc. of
approximately  $812,000,  the First Year  Interest  Obligation  of $750,000  and
$610,000  for  release  of the prior  first deed of trust on the  Property.  The
holder of that deed of trust was the holder of a note which had not been paid by
NADC.


                                      F-17

<PAGE>


                           COUNTRY WORLD CASINOS, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements


Note 10 - Note Default (continued)
----------------------------------

Pursuant to the Order of the Bankruptcy Court, the Company received a credit for
the amount paid to the holder of the note from NADC as a direct  offset  against
the Note made by the  Company  to NADC.  The note from the  Company  to NADC was
secured  by a second  deed of  trust  against  the  Property.  The net  proceeds
received by the Company  from the loan  closing  have been paid into an interest
bearing account pending further order of the Bankruptcy  Court.  The Company and
NADC  had a  dispute  as to the  payoff  balance  on the note due to NADC by the
Company.  In November  1996,  the Company  received final rulings from the court
regarding the NADC dispute. The Company, in November 1996, tendered an amount of
approximately  $1,309,000 to NADC in what it believes is full  settlement of the
remaining amount of the $3,450,000 note including accrued interest.










                                      F-18