<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1995 Commission File Number 0-21566
LONE STAR CASINO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
84-1219819
(I.R.S. Employer Identification No.)
One Riverway, Suite 2550, Houston, Texas 77056, (713) 960-9881
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
----------------------------
Common Stock, $.01 Par Value
Indicate by check mark whether registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on May 31, 1996 was $7,124,008. The number of shares outstanding
of the registrant's Common Stock, $.01 par value, as of May 31, 1996 was
42,832,094.
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INDEX
PAGE
NUMBER
PART III.
Item 10. Directors and Executive Officers of the Registrant. 3
Item 11. Executive Compensation. 4
Item 12. Security Ownership of Certain Beneficial Owners and
Management. 10
Item 13. Certain Relationships and Related Transactions. 11
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. 12
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PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
NAME AGE POSITIONS
---- --- ---------
Paul J. Montle 48 Chairman of the Board and
Chief Executive Officer
C. Thomas Cutter 56 Director
Kent E. Lovelace, Jr. 60 Director
Roger W. Cope 55 Director
Paul J. Montle has served as the Chairman of the Board and Chief
Executive Officer of the Company since 1992. From 1991 to October 15, 1994,
Mr. Montle served as President and Chief Executive Officer of Viral Testing
Systems Corporation, a distributor of a FDA-licensed AIDS test and other
medical diagnostic products, and from 1991 to 1992, he also served as
Chairman of the Board of such company. Since 1987, Mr. Montle has been a
Managing Director of Montle International Incorporated, a privately-held
merchant banking firm.
C. Thomas Cutter has served as a Director of the Company since December
1992. Since 1968, he has served as President, Director and sole shareholder
of Cutter Fire Brick Co., Inc., which is engaged in the repair and
maintenance of industrial heat enclosures. Since 1975, Mr. Cutter has served
as President, Director and sole shareholder of both Cutter Ceramics, Inc., a
manufacturer and distributor of art clay, and ADC Supply Corp., a distributor
of industrial insulation materials. Since 1985, Mr. Cutter has served as
President, Director and sole shareholder of Cutter Northern Refractories,
Inc., which is engaged in the repair and maintenance of industrial heat
enclosures.
Kent E. Lovelace, Jr. has served as a Director of the Company since
August 1993. Since 1975, he has served as President and Chief Executive
Officer of Equitrust Mortgage Corporation, formerly Hancock Mortgage
Corporation.
Roger W. Cope has served as a Director of the Company since 1993. He now
serves as Vice President - Business Development with Lamb Technicon Machining
Systems. From June 30, 1993 until January 16, 1996, Mr. Cope served as
President of the Company and Manager of Papone's Palace, Ltd. Liability Co.
During 1991 and 1992, he served as Director of Strategic Planning for the
Applied Technology Division of Litton Systems, Inc., a provider of electronic
warfare products to the defense industry. From 1986 to 1991, Mr. Cope served
as President of Cope Development Corp., a privately-held consulting firm. He
also serves as a Director of Waste Recovery, Inc., a publicly-held
corporation engaged in specialized resource recovery.
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Each Director holds office until the Annual Meeting of Stockholders
following his election and until his successor has been duly elected and
qualified or until he has resigned or been removed as provided for in the
By-Laws. There are no understandings or arrangements relating to any
person's service or prospective service as a Director of the Company. No
family relationships exist between any of the above named Directors or
between any such Director and any Executive Officer of the Company.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers and directors, and
person who own more than ten percent of a registered class of the Company's
equity securities, file reports of ownership and changes in ownership with
the Securities and Exchange Commission and furnish the Company with copies of
all such Section 16(a) forms. Based solely on its review of the copies of
such forms received by it and written representations from certain reporting
person, the Company believes that, during the period of July 1, 1994 through
June 30, 1995, each of its officers, directors and greater than ten percent
stockholders complied with all such applicable filing requirements.
ITEM 11. EXECUTIVE COMPENSATION.
REPORT FOR COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Company's compensation policies and the
compensation paid to its executive officers (including the executive officers
named below). The Company's compensation program for its executive officers
(including the Chief Executive Officer) is designed to provide levels of
compensation required to assist the Company in attracting and retaining
qualified executive officers. The Compensation Committee attempts to set an
executive officer's compensation at a level which is similar to such
officer's peers in the Company's industry. Generally, executive officer
compensation (including the Chief Executive Officer) is not directly related
to the Company's performance. Instead, the Compensation Committee has a
philosophy which recognizes individual initiative and achievement which can
significantly influence an officer's compensation level. The executive
compensation program is comprised of salary, annual cash incentives and stock
options. The following is a discussion of each of the elements of the
executive compensation program.
SALARY. Generally, base salary for each executive officer is similar to
levels within the industry and comparable to the level which could be
attained for equal positions elsewhere. Also taken into account are
benefits, years of service, responsibilities, Company growth, future plans
and the Company's current ability to pay.
ANNUAL CASH INCENTIVES. The annual cash incentive plan is a cash bonus
program designed to reward significant corporate accomplishments and
individual initiatives demonstrated by executive officers during the prior
fiscal year. The amount of each cash bonus is determined by the Compensation
Committee at the end of the fiscal year and is paid in cash in a single
payment.
STOCK OPTIONS. The 1993 and 1995 Stock Option Plans were adopted for
the purpose of promoting the interests of the Company and its stockholders by
attracting and retaining executive officers and other key employees of
outstanding ability. Options are granted to eligible participants based upon
their potential impact on corporate results and on their individual
performance. Generally, options are granted at market value, vest over a
number of years, and are dependent upon continued employment. The Committee
believes
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that the grant of time-vested options provides an incentive that focuses the
executive officers' attention on managing the business from the perspective
of owners with an equity stake in the Company. It further motivates
executive officers to maximize long-term growth and profitability because
value is created in the options only as the Company's stock price increases
after the option is granted.
The Compensation Committee:
Kent E. Lovelace, Jr.
C. Thomas Cutter
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SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company and
its subsidiaries to the Chief Executive Officer and the other four most
highly compensated executive officers whose total annual salary and bonus for
the fiscal year ended June 30, 1995 exceeded $100,000 for services in all
capacities to the Company and its subsidiaries during each of the fiscal
years ended June 30, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------- ---------------------------
(a) (b) (c) (d) (e) (g)
OTHER
FISCAL ANNUAL
NAME AND PRINCIPAL YEAR COMPENSA- SECURITIES UNDERLYING STOCK
POSITION ENDED SALARY BONUS TION OPTIONS (NUMBER OF SHARES)
- ------------------ ------- ----------- ------- --------- ---------------------------
<S> <C> <C> <C> <C> <C>
Paul J. Montle 6/30/95 $375,000 (3) 225,000
Chairman and Chief 6/30/94 $182,500 (3) 100,000
Executive Officer 6/30/93 $ 25,000(2) (3)
Roger W. Cope 6/30/95 $250,000(6) (3) 225,000
President and Chief 6/30/94 $150,000 $50,000 (3) 400,000
Operating Officer 6/30/93 $ 57,500(4) (3) 400,000
Paul V. Culotta 6/30/95 $ 75,000 $50,000
Former Executive 6/30/94 $ 85,000 $50,000 (3) 50,000
Vice President and 6/30/93 $ 12,500(4) (3)
Chief Financial
Officer
Robert L. Kelley 6/30/95 $ 20,000(5) $25,000
Former Vice 6/30/94 $100,000 $25,000 (3) 50,000
President, 6/30/93 $ 12,500(4) (3) 100,000
Operations
Othon I. Herrera 6/30/95 $120,000 $25,000 (3) 100,000
Former Vice 6/30/94 $ 25,000(4) (3) 100,000
President of
Marketing
</TABLE>
_________________
(1) The Columns designated by the SEC for the reporting of certain long-term
compensation, including awards of restricted stock, long term incentive
plan payouts, and all other compensation, have been eliminated as no such
awards, payouts or compensation were awarded to, earned by or paid to any
specified person during any fiscal year covered by the table.
(2) Salary paid for the fiscal year ended June 30, 1993 is for the period from
May 1, 1993 to June 30, 1993.
(3) Nominal perquisites not meeting the applicable disclosure threshold.
(4) Salary paid for the fiscal year is for the period from employment date to
June 30.
(5) Resigned effective August 31, 1994.
(6) Effective August 1, 1995 voluntarily accepted a 50% reduction in annual
salary, and resigned effective January 16, 1996.
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STOCK OPTION GRANTS
The following table sets forth certain information concerning stock
options granted during the fiscal year ended June 30, 1995 to each of the
executive officers named in the Summary Compensation Table under the
Company's 1993 Stock Option Plan. The option price of each option disclosed
in the following table was not less than the market price of the underlying
securities on the date of grant of each option. The Company has not granted
stock appreciation rights ("SAR's") of any kind.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (1)
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(a) (b) (c) (d) (e) (f) (g)
NUMBER OF
SECURITIES
UNDERLYING PERCENT OF
OPTIONS TOTAL OPTIONS EXERCISE
GRANTED GRANTED TO PRICE
(NUMBER OF EMPLOYEES IN ($ PER EXPIRATION
NAME (SHARES) FISCAL YEAR SHARE) DATE 5%($) 10%($)
- ---- ---------- ------------ -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul J. Montle 225,000 20% $0.625 1/12/2005 $99,891 $224,120
Roger W. Cope 225,000 20% 0.625 1/24/2005 99,891 224,120
Paul V. Culotta none
Robert L. Kelley none
Othon I. Herrera 100,000 8.7% 0.625 1/24/2005 44,396 99,609
</TABLE>
(1) These amounts represent assumed rates of stock price appreciation of 5% and
10% which are specified in applicable federal securities regulations.
Actual gains, if any, on stock option exercises and Common Stock holdings
are dependent on the future performance of the Common Stock and overall
stock market conditions. There can be no assurance that the amounts
reflected in the table will be achieved or maintained through the life of
the option. The amounts shown represent the assumed value of the stock
options, less the exercise price, at the expiration date of the option,
beginning on the date of grant and ending on the option expiration date.
The amounts set forth for Mr. Cope assume that the options expire on the
latest date set forth in each option agreement.
OPTION EXERCISES/VALUE OF UNEXERCISED OPTIONS
The following table sets forth the number of securities underlying
options exercised during the fiscal year ended June 30, 1995 and the value
realized upon such exercise, the number of securities underlying options
exercisable and unexercisable at June 30, 1995, and the value at June 30,
1995 of exercisable and unexercisable in-the-money options remaining
outstanding as to each executive officer named in the Summary Compensation
Table. No named executive officer has been granted any SAR's. The "Value
Realized"
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column reflects the difference between the market price on the date of
exercise and the exercise price for the option for all options exercised.
Thus, the "Value Realized" does not necessarily reflect what the executive
officer might receive, should he choose to sell the shares acquired by the
option exercise, because the market price of the shares so acquired may at
any time be higher or lower than that price on the exercise date of the
option.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT JUNE 30, 1995 IN-THE-MONEY OPTIONS AT
SHARES (NUMBER OF SHARES) JUNE 30, 1995 ($)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul Montle None 40,000 285,000 (2) (2)
Roger W. Cope None(3) 160,000 465,000 (2) (2)
Paul Culotta None 20,000 30,000 (2) (2)
Roger Kelley None(4)
Othon I. Herrera None 40,000 160,000 (2) (2)
</TABLE>
____________________
(1) Based upon the difference between the closing bid price of the Common Stock
on the NASDAQ Stock Market on the date of exercise and the exercise price
of the options.
(2) The closing bid price of the Common Stock on June 30, 1995 on the NASDAQ
Stock Market was $0.594 per share which was less than the exercise price of
all options reported in the table.
(3) Mr. Cope resigned effective January 16, 1996.
(4) Mr. Kelley resigned effective August 31, 1994.
OTHER PLANS
The Company has no other deferred compensation, pension or retirement
plans in which executive officers participate.
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PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return for the period commencing May 3, 1993 (the date on which the Company's
Common Stock first was registered under Section 12 of the Securities Exchange
Act of 1934, as amended) and ending on June 28, 1996 to the returns for all
companies in the NASDAQ Composite Index and the GAX Gaming Index. The return
values are based on an assumed investment of $100, as of the close of
business on May 3, 1993, in the Company's Common Stock and in each of the
comparator groups, with all dividends treated as reinvested.
The comparisons in this table are set forth in response to disclosure
requirements of the Securities and Exchange Commission and therefore are not
intended to forecast or to be indicative of future performance of the
Company's Common Stock.
[CHART]
- -----------------------------------------------------------------
5/93 6/93 6/94 6/95 6/96
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Lone Star Casino Corporation 100 137 63 17 2
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NASDAQ Composite Index 100 103 103 136 173
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GAX Gaming Index 100 106 71 106 132
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COMPENSATION AGREEMENT WITH OFFICERS
The Company currently has no employment contracts or other compensation
agreements with any of its current officers. The Company previously entered
into an agreement with Paul V. Culotta in connection with the termination of
Mr. Culotta's employment with the Company. The term of this agreement
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has been completed, and the Company and Mr. Culotta have no further
obligations under the agreement except for the Company's payment of
approximately $10,000 to Mr. Culotta.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company had outstanding 42,832,094 shares of Common Stock at the
close of business on May 15, 1996. The following table sets forth certain
information as of the Record Date concerning the beneficial ownership of the
Common Stock (i) by each stockholder who is known by the Company to own
beneficially in excess of 5% of the outstanding Common Stock; (ii) by each
director; (iii) by each executive officer named in the Summary Compensation
Table under "Executive Compensation," below; and (iv) by all executive
officers and directors as a group. Except as otherwise indicated, all
persons listed below have (i) sole voting power and investment power with
respect to their shares of Common Stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and beneficial
ownership with respect to their shares of Common Stock.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
--------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------ ----------- -------
Richard D. Corley 2,202,500 5.5%
1101 Main
Peoria, Illinois 61606
Paul J. Montle 1,724,560(2) 4.0%
One Riverway, Suite 2550
Houston, Texas 77056
Roger W. Cope 441,000(3) 1.0%
5663 East Nine Mule Rd.
Warren, Michigan 48901
Kent E. Lovelace, Jr. 917,500(4) 2.1%
3300 West Beach Street
Gulfport, Mississippi
C. Thomas Cutter 171,212(5) (6)
54 Emerson Road
Waltham, Massachusetts 02254-151
All directors and officers
as a group (six persons) 3,254,272(7) 7.6%
(1) Includes shares of Common Stock beneficially owned pursuant to options and
warrants exercisable on the Record Date or within 60 days thereafter.
(2) Includes 839,516 shares of Common Stock held by Travis Partners, G.P. in
which Mr. Montle has a 51.67% interest and the trust for the benefit of Mr.
Montle's children which has a 15% interest, 95,044 shares of Common Stock
directly owned; 40,000 shares of Common Stock beneficially owned pursuant
to non-qualified stock options currently exercisable and
(FOOTNOTES CONTINUED ON NEXT PAGE)
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(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
750,000 shares beneficially owned pursuant to warrants currently
exercisable by a limited partnership having Mr. Montle's children as
limited partners.
(3) Includes 181,000 shares directly owned; 100,000 shares owned by Mr. Cope's
wife; and 160,000 shares beneficially owned pursuant to stock options
immediately exercisable.
(4) Includes 267,500 shares directly owned; 300,000 shares owned by Mr.
Lovelace's wife 300,000 shares beneficially owned pursuant to warrants
currently exercisable; and 50,000 shares beneficially owned pursuant to
stock options immediately exercisable.
(5) Includes 5,000 shares directly owned; 116,212 shares owned by Mr. Cutter's
wife; and 50,000 shares beneficially owned pursuant to stock options
immediately exercisable.
(6) Less than 1%
(7) Includes 2,059,272 shares directly owned; 950,000 shares beneficially owned
pursuant to warrants currently exercisable; and 360,000 shares beneficially
owned pursuant to stock options immediately exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On May 4, 1993, the Company loaned $500,000 to RMS Titanic, Inc.
("Titanic"). This loan was evidenced by a secured promissory note. In
November 1993, the Company assigned to Glenville Properties Incorporated
("Glenville") all of its rights in, to and under the Titanic promissory note,
which at the time of the assignment had an outstanding balance, including
accrued interest, of $145,000. In exchange for the assignment of the Titanic
promissory note and other items, Glenville issued a promissory to the Company
in the amount of $185,000 which was due and payable on November 15, 1994.
Glenville is an entity controlled by Paul J. Montle, the Chairman of the
Board and Chief Executive Officer of the Company, who guaranteed repayment of
the Glenville promissory note. The Company wanted to assign the Titanic
promissory note because it appeared that litigation would arise out of such
note and the Company did not want to be involved in any litigation as it was
applying for a Nevada gaming license at the time of the assignment and would
have had to report any such litigation to the Nevada gaming authorities.
Glenville agreed to purchase the Titanic promissory note as an accommodation
to the Company.
The assignment of the Titanic promissory note was rescinded on October
19, 1995. The effect of the rescission was (a) to revest in the Company full
right, title and interest in the Titanic promissory note and other items
assigned, as if the original assignment of these items to Glenville had never
occurred, and (b) to cancel the Glenville promissory note and related
personal guarantee. The Company and Glenville decided to rescind the
transaction because Titanic was contesting the collectibility of the Titanic
promissory note on the basis that it was not assignable. The rescission was
viewed as essential in order to pursue the collection of the Titanic
promissory note without the possibility of being hampered by a possibly
dispositive affirmative defense. When the assignment of the Titanic
promissory note was rescinded, Mr. Montle was owed by the Company accrued
salary in an approximate amount of $26,000. The amount owed to Mr. Montle by
the Company was not offset by the amount guaranteed by Mr. Montle because
under Texas law regarding the payment of employee compensation, the Company
was legally prohibited from offsetting the accrued salary, and with the
entire transaction being rescinded, Mr. Montle's guarantee was no longer in
effect or relevant. Glenville received no interest under the Titanic
promissory note, and the Company did not require Glenville to pay any of the
interest on the Glenville promissory note that otherwise had become due and
payable. Moreover, while principal amount of the Glenville promissory note
became due on November 15, 1994, the Company did not seek to enforce the
payment of the Glenville promissory note because by the time such note became
due it already appeared that the original assignment of the Titanic
promissory note might have to be rescinded for the reasons stated above.
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PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
3. Exhibits:
The following exhibits are filed with this report:
21.01 Subsidiaries of Registrant.
(b) Reports on Form 8-K.
The Registrant filed a report on Form 8-K dated February 5, 1996, reporting
on the closing of Registrant's casinos in Central City, Colorado and on the
Island of Tinian, the Commonwealth of the Northern Marianas Islands.
The Registrant filed a report on Form 8-K dated April 4, 1996, amended
April 18, 1996, reporting on the resignation of KPMG Peat Marwick LLP, as
the Registrant's independent accountants.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Lone Star Casino Corporation has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: July 11, 1996 LONE STAR CASINO CORPORATION
(Registrant)
By: /s/ PAUL J. MONTLE
-------------------------------
Paul J. Montle,
Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------- ----
21.01 Subsidiaries of Registrant.
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EXHIBIT 21.01
SUBSIDIARIES OF REGISTRANT
Pacific American Casinos, Inc.
Lone Star Casino Corporation, CNMI (100% subsidiary)
Papone's Palace Acquisition Corporation
Papone's Palace Limited Liability Company (75% subsidiary)
Cotton Exchange Casino, Inc.
Lone Star Casino Corporation of Nevada, Inc.
LSCC of Nevada, Inc.
Lone Star Pine Hills Corporation
