SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X] Filed by a party other than the Registrant [ ] Check
the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use
of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy
Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant
to ss. 240.14a-11(c) or ss. 240.14a-12
LS CAPITAL CORPORATION
...............................................................................
(Name of Registrant as Specified In Its Charter)
...............................................................................
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
..............................................................................
(2) Aggregate number of securities to which transaction applies:
...............................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which the
filing fee is calculated and state how it was determined):
<PAGE>
...............................................................................
(4) Proposed maximum aggregate value of transaction:
...............................................................................
(5) Total fee paid:
...............................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
..............................................................................
(2) Form, Schedule or Registration Statement No.:
...............................................................................
(3) Filing Party:
...............................................................................
(4) Date Filed:
...............................................................................
<PAGE>
LS CAPITAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 21, 1998
To All Stockholders of
LS Capital Corporation
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of LS
Capital Corporation, a Delaware corporation (the "Company"), will be held on
Tuesday, January 21, 1998 at the Longstreet Inn in Armagosa Valley, Nevada at
10:00 a. m. local time for the following purposes:
1. To elect a Board of Directors to hold office until the next
annual meeting or until a successor board is duly elected and
qualified;
2. To consider and vote on a proposal to approve the appointment
of Malone & Bailey, PLLC as the Company's independent public
accountants for fiscal 1998; and
3. To consider and vote on such other business as may properly
come before the Annual Meeting and any adjournment thereof.
All stockholders will be entitled to vote on all matters submitted for
a vote at the Annual Meeting. The Board of Directors has fixed the close of
business on November 15, 1997 as the record date for determining the
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
All stockholders of the Company are cordially invited to attend the
Annual Meeting. Whether or not you plan to attend the Annual Meeting, it is
important that your shares be represented. Accordingly, please sign and date the
enclosed Proxy Card and return it promptly in the envelope provided herewith.
Even if you return a Proxy Card, you may revoke the proxies appointed thereby at
any time prior to the exercise thereof by filing with the Chairman of the Board
of the Company a written revocation or duly executed Proxy Card bearing a later
date or by attendance and voting at the Annual Meeting. Attendance at the Annual
Meeting will not, in itself, constitute revocation of the proxies.
By Order of the
Board of Directors,
Paul J. Montle,
Chairman of the Board
Houston, Texas
November 30, 1997
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED POST-PAID ENVELOPE.
<PAGE>
LS CAPITAL CORPORATION
15915 Katy Freeway, Suite 250
Houston, Texas 77094
(281) 398-5588
PROXY STATEMENT
GENERAL
This Proxy Statement and the accompanying Proxy Card are furnished in
connection with the solicitation of proxies by order of the Board of Directors
of LS Capital Corporation (the "Company") to be voted at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the time and place, and for
the purposes set forth in the accompanying notice. Such notice, this Proxy
Statement and the Proxy Card are being mailed to Stockholders beginning on or
about November 30, 1997.
The Company will bear the costs of soliciting proxies. In addition to
the solicitation made hereby, proxies may also be solicited by telephone,
telegram or personal interview by officers of the Company. The Company will
reimburse brokers or other persons holding stock in their names or in the names
of their nominees for their reasonable expenses in providing beneficial
ownership information and in forwarding proxy material to beneficial owners of
stock who have objected to the disclosure of information regarding them.
All duly executed Proxy Cards received prior to the Annual Meeting will
be voted in accordance with the choices specified thereon, unless revoked in the
manner provided hereinafter. As to any matter for which no choice has been
specified on a Proxy Card, except with respect to broker non-votes, the related
shares will be voted by the persons named therein (1) FOR the election of the
four nominees listed herein as directors; (2) FOR the proposal to approve the
appointment of Malone & Bailey, PLLC, as independent certified public
accountants of the Company for the fiscal year ending June 30, 1998; and (3) in
the discretion of such persons in connection with any other business that may
properly come before the Annual Meeting. Stockholders may revoke their proxy at
any time prior to the exercise thereof by written notice to Mr. Paul J. Montle,
Chairman of the Board of the Company, at the address of the Company stated
above, by the execution and delivery of a later dated Proxy Card, or by
attendance at the Annual Meeting and voting their shares in person.
As of the close of business on November 15, 1997, the record date (the
"Record Date") for determining Stockholders entitled to vote at the Annual
Meeting, the Company had outstanding and entitled to vote 12,207,776 shares of
the Company's common stock (the "Common Stock"), and these shares are the only
outstanding shares of the Company entitled to vote. Each share of Common Stock
is entitled to one vote with respect to each matter to be acted upon at the
Annual Meeting. Stockholders personally present, or represented by proxy, and
holding more than one-third of the outstanding Common Stock will constitute a
quorum. Abstentions, or with respect to the election of directors withholds, are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business while broker non-votes are not so counted.
-1-
<PAGE>
Additionally, abstentions and/or withholds are counted in tabulations of the
votes cast on proposals presented to shareholders, whereas broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
The Board of Directors expects that all shares of Common Stock owned by the
Company's directors, officers and affiliates will vote for the nominees listed
in Proposal 1 and for the appointment of the auditors named in Proposal 2. The
number of these shares equals 5,482,117 constituting 43.83% of the total
outstanding shares of Common Stock.
PROPOSAL 1
ELECTION OF DIRECTORS
General
Four directors will be elected at the Annual Meeting to serve until
their successors shall be duly elected and qualified. Directors are elected by a
plurality of votes cast at the Annual Meeting. All of the nominees are currently
directors of the Company. Unless contrary instructions are set forth in the
enclosed Proxy Card, the proxy appointed thereby will vote all shares relating
to such Proxy Card for the election as directors of the nominees named below.
Should any of the nominees become unable or unwilling to accept nomination or
election, the ap pointed proxy will vote for the election, in the nominee's
stead, of such other person as the Board of Directors of the Company may
recommend. The management has no reason to believe that any of the nominees will
be unable or unwilling to stand for election or serve if elected.
Currently, the Company's directors receive no remuneration for their
service as such, but the Company will reimburse reasonable travel expenses
incurred in connection with attendance at Board meetings.
Meetings and Committees of the Board
The Board of Directors held two meetings during the year ended June 30,
1997. Both of these meetings were held telephonically, and all directors
attended both these meetings in this manner.
The Board of Directors has a standing Audit Committee currently
composed of C. Thomas Cutter and Roger W. Cope. The functions of the Audit
Committee include recommending to the Board of Directors the engagement of a
firm of independent auditors for the Company; reviewing the proposed scope of
the audit, the reports to be rendered and the fees to be charged by the
Company's independent auditors; reviewing the annual financial statements and
the results of the audit with management and the independent auditors; reviewing
with management and the independent auditors the recommendations made, if any,
by the auditors with respect to significant changes in accounting policies,
procedures and internal controls; and holding themselves available to meet with
the independent auditors to resolve matters that arise in connection with the
audit if and when it should become necessary. The Audit Committee did not meet
during the year ended June 30, 1997.
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<PAGE>
The Company has a standing Compensation Committee currently composed of
Kent E. Lovelace, Jr. and C. Thomas Cutter. The functions of the Compensation
Committee include reviewing management performance and making recommendations to
the Board of Directors concerning management compensation and other corporate
benefits. The Compensation Committee met one time during fiscal 1997.
The Company does not have a standing Nominating Committee.
Nominees
Set forth below is certain information concerning the four nominees for
election as directors, including the business experience of each for at least
the past five years: <TABLE> <CAPTION>
Present Position Director
Name Age With the Company Since
<S> <C> <C> <C>
Paul J. Montle 50 Chairman of the Board, President 1993
and Chief Executive Officer
Kent E. Lovelace, Jr. 61 Director 1993
Roger W. Cope 56 Director 1993
C. Thomas Cutter 57 Director 1993
</TABLE>
Paul J. Montle has served as the Chairman of the Board and Chief
Executive Officer of the Company from 1992 to October, 1995 and has held the
additional title of President from October, 1995 to present. From 1991 to
October 15, 1994, Mr. Montle served as President and Chief Executive Officer of
Viral Testing Systems Corporation ("VTS"), 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. VTS filed for protection under
Chapter 11 of the Bankruptcy Code on January 4, 1995. Eventually this bankruptcy
proceeding was converted to a proceeding under Chapter 7, and the remaining
assets of VTS have been liquidated.
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
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<PAGE>
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.
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.
Current Directors and Executive Officers
The following table sets forth certain information regarding the
directors and executive officers of the Company and its subsidiaries, including
the business experience of each for at least the past five years:
<TABLE>
<CAPTION>
Director Officer
Name Age Since Since
<S> <C> <C> <C> <C>
Paul J. Montle 50 1993 1993
Chairman of the
Board, President and
Chief Executive Officer
Kent E. Lovelace, Jr. 61 1993 ----
Director
Roger W. Cope 56 1993 ----
Director
C. Thomas Cutter 57 1993 ----
Director
Richard W. Lancaster 55 ---- 1997
President of Griffin
Gold Group, Inc, Desert
Minerals, Inc. and Shoshone
Mining Co.
</TABLE>
For additional information on Messrs. Montle, Lovelace, Cope and Cutter,
see "Nominees" above.
-4-
<PAGE>
Mr. Lancaster has served as President and Chief Executive Officer of
all three of its mining subsidiaries, Griffin Gold Group, Inc., Desert Minerals,
Inc. and Shoshone Mining Co. since June 1, 1997. From 1992 to May 31, 1997, Mr.
Lancaster has served as President of Remediation Services of America, Inc.,
which is engaged in environmental remediation of industrial waste. From 1988 to
1992, Mr. Lancaster served as Engineering Manager for Walk/Haydel's Satellite
Engineering for Shell Offshore, an offshore exploration and production company.
Each officer of the Company generally serves at the pleasure of the
Board of Directors, other than Mr. Lancaster with whom the Company has entered
into a written employment agreement.
There are no family relationships among the officers and directors, and
there are no present arrangements or understandings pursuant to which any of
them were elected as officers or directors.
Other than otherwise described herein, there have been no events under
any bankruptcy act, no criminal proceedings, and no judgments or injunctions
material to the evaluation of the ability and integrity of any director or
executive officer during the past five years.
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.
-5-
<PAGE>
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 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
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, 1997, 1996 or 1995 exceeded $100,000 for services in
all capacities to the Company and its subsidiaries.
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
(a) (b) (c) (d) (e) (g)
<S> <C> <C> <C> <C> <C>
Other
Name and Fiscal Annual Securities Underlying
Principal Year Compen- Stock Options
Position Ended Salary Bonus ation (Number of Shares)
- -------- ------ -------- ------- ----- ------------------
Paul J. Montle 6/30/97 $200,912 (2) 500,000
Chairman and 6/30/96 169,062 (2) 13,000
Chief Executive 6/30/95 375,000 (2) 225,000
Officer
Roger W. Cope 6/30/97
Former President 6/30/96 $ 22,833(3) (2) 16,000
and Chief Oper- 6/30/95 250,000 (2) 225,000
ating Officer
-6-
<PAGE>
Paul V. Culotta 6/30/97
Former Executive 6/30/96 $ 7,500(4)
Vice President and 6/30/95 75,000 $ 50,000 (2) 50,000
Chief Financial
Officer
Robert L. Kelley 6/30/97
Former Vice 6/30/96 $ 20,000(5) $ 25,000 (2) 50,000
President, 6/30/95 100,000 25,000 (2) 50,000
Operations
Othon I. Herrera 6/30/97
Former Vice 6/30/96 $ 2,500(6) (2)
President of 6/30/95 $120,000 $ 25,000 (2) 100,000
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) Nominal perquisites not meeting the applicable disclosure threshold. (3)
Effective August 1, 1995 voluntarily accepted a 50% reduction in annual
salary, and resigned effective January 16, 1996.
(4) Resigned effective November 15, 1994.
(5) Resigned effective August 31, 1994.
(6) Resigned effective July 31, 1995.
Stock Option Grants
The following table sets forth certain information concerning stock options
granted during the fiscal year ended June 30, 1997 to each of the executive
officers named in the Summary Compensation Table under the Company's 1993 and
1995 Stock Option Plans. 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 the grant of the each option. The Company has not granted stock
appreciation rights ("SAR's") of any kind.
-7-
<PAGE>
Options Granted in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realization
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term (1)
(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 500,000 63% $0.625 12/19/01 $15,625 $31,250
Kent E. Lovelace, Jr. 300,000 37% $0.625 12/19/01 $9,375 $18,750
</TABLE>
- ----------
(1) The 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.
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, 1997 and the value realized upon
such exercise, the number of securities underlying options exercisable and
unexercisable at June 30, 1997, and the value at June 30, 1997 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" 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.
-8-
<PAGE>
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year End Option Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities
Number of Underlying Unexercised Value of Unexercised
Shares Options at June 30, 1997 In-the Money Options at
Acquired Value (Number of Shares) June 30, 1997 ($) (2)
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Paul J.
Montle None $ 0 106,800 406,200 (2) (2)
Roger W. None(3) (2) (2)
Cope
Paul Culotta None(4) (2) (2)
Robert None(5) (2) (2)
Kelley
Othon I. None(6) (2) (2)
Herrera
Richard W. None (2) (2)
Lancaster
</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, 1997 on the NASDAQ
Stock Market was $0.51 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. Culotta resigned
effective November 15, 1994. (5) Mr. Kelley resigned effective August 31,
1994.
(6) Mr. Herrera resigned effective July 31, 1995.
Other Plans
The Company has no other deferred compensation, pension or retirement plans
in which executive officers participate.
-9-
<PAGE>
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 30, 1997 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.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
May-93 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97
<S> <C> <C> <C> <C> <C> <C>
LS Capital Corporation 100 137 63 17 2 1
NASDAQ Composite 100 103 103 136 173 210
Index
GAX Gaming Index 100 106 71 106 132 92
</TABLE>
Compensation Agreement with Officers
The Company currently has no employment contracts or other compensation
agreements with any of its current officers other than Richard W. Lancaster,
President and Chief Operating Officer of Griffin Gold Group, Inc, Desert
Minerals, Inc. and Shoshone Mining Co., the Company's gold mining subsidiaries.
Pursuant to his employment agreement (the "Employment Agreement"), Mr. Lancaster
is to receive an initial annual salary of
-10-
<PAGE>
$72,000.00. Mr. Lancaster's salary will be reviewed annually in January by the
Company's compensation committee. Pursuant to the Employment Agreement, the
Company issued to Mr. Lancaster 50,000 shares of Common Stock, and the Company
agreed to grant to Mr. Lancaster options to acquire shares of Common Stock.
These options cover 250,000 shares of Common Stock, which may be purchased at an
option price of $1.00 per shares and which will vest in increments of 50,000
shares every 90 days commencing June 24, 1997. These options also cover an
additional 250,000 shares of Common Stock, which may be purchased at an option
price of $2.00 per shares and which will vest in increments of 50,000 shares
every 90 days commencing September 24, 1997. Notwithstanding the preceding, all
options will be vested upon the sale or merger of the Company. Mr. Lancaster is
also entitled to participate in all executive health, disability, life insurance
and pension plans created for the officers of the Company. The Employment
Agreement is terminable by either Mr. Lancaster or the Company at any time;
provided, however, that Mr. Lancaster has agreed to give to the Company two
months prior written notice. In the Employment Agreement, the Company has agreed
(unless Mr. Lancaster's employment is terminated by the Company for cause) to
pay to Mr. Lancaster his salary under the Employment Agreement for three months
after termination or until the commencement of his new employment, whichever
occurs sooner. If the Company terminates Mr. Lancaster's employment, one-half of
the current period's unvested options will vest, but if Mr. Lancaster terminates
his employment, all unvested options will be canceled as of the date of his
termination notice. The Employment Agreement does not contain a covenant not to
compete.
-11-
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10
percent of a registered class of the Company's equity securities to file reports
of ownership and changes of ownership with the Securities and Exchange
Commission. Officers, directors and greater than 10 percent stockholders are
required to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on its review of the forms received by the Company, or
written representations from certain reporting persons that no Form 5 reports
were required for those persons, the Company believes that during the year ended
June 30, 1997, all filing requirements applicable to the Company's officers,
directors and greater than 10 percent shareholders were satisfied.
CERTAIN TRANSACTIONS
On June 17, 1996 at a Special Meeting of Stockholders, the stockholders
of the Company authorized issuances of Common Stock (the "Discretionary Stock
Issuances"), in the discretion of the Board of Directors but subject to certain
restrictions, to creditors of the Company (including officers and directors of
the Company) in satisfaction of amounts owed by the Company to such creditors,
whether in the form of loans or accrued salaries. The Board of Directors of the
Company submitted the Discretionary Stock Issuances to the stockholders for
their consideration on the belief that the Discretionary Stock Issuances were a
means by which the Company could eliminate certain outstanding claims that could
be asserted against the Company at any time and by which the Company could
eliminate certain liabilities reflected on the Company's financial statements.
At the time that the Discretionary Stock Issuances were approved by the Board of
Directors and stockholders, the Company did not have, and appeared as if it
would not have for the foreseeable future, financial resources sufficient to
satisfy these or any other liabilities of the Company.
Upon the terms and conditions approved by the Board of Directors and
stockholders, the Discretionary Stock Issuances could be made for one year after
stockholder approval to persons (including officers and directors of the
Company) owed amounts by the Company. The persons to be issued Common Stock, the
number of shares to be issued to them, the terms, provisions and conditions upon
which the Common Stock would be issued and the documentation memorializing the
issuances were all within the sole discretion of the Board of Directors, subject
to certain restrictions. These restrictions required that any Discretionary
Stock Issuance to a director of the Company be approved by a majority of
directors other than the director to receive the Discretionary Stock Issuance.
These restrictions also required that the number of shares of Common Stock being
issued not have an aggregate market value at the time of issuance exceeding the
amount being satisfied by the Common Stock if the Common Stock being issued were
freely tradeable immediately after issuance, or not have an aggregate market
value at the time of issuance twice the amount being satisfied by such issuance
if the
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<PAGE>
Common Stock being issued were not freely tradeable immediately after issuance.
The rationale for distinguishing between freely and non-freely tradeable stock
was that the Company had generally received for the sale of non-freely tradeable
Common Stock only 50% of the then current market value of freely tradeable
Common Stock. The Discretionary Stock Issuances were not subject to adjustments
increasing or decreasing the number of shares of Common Stock comprising them
based on changes in the market value of the Common Stock after the Discretionary
Stock Issuances.
Pursuant to the general authorization of stockholders and the specific
authorization of the Board of Directors, the Company issued to Paul J. Montle
("Montle"), the Chairman of the Board, President and Chief Executive Officer of
the Company, 2,549,481 shares of non-freely tradeable Common Stock on October 1,
1996 in satisfaction of $134,302 debt owed by the Company to the Montle. The
preceding debt amount was comprised of $90,000 in accrued salary owed to the
Montle (for which the Montle was issued 1,565,000 shares of Common Stock) and
$44,302 in principal and interest of a loan to the Company from an Individual
Retirement Account for the benefit of the Montle (for which 984,489 shares of
Common Stock were issued for the benefit of the Montle). In addition to the
foregoing, 435,000 shares of non-freely tradeable Common Stock were issued to
other persons by virtue of prior partial assignments of the Montle's claim for
accrued salary. The closing price for the Common Stock on October 1, 1996 was
$.09, and one-half of this closing price (or $.045) was used in computing the
number of shares of Common Stock to which Montle was entitled to receive in
connection with his Discretionary Stock Issuance.
In addition, pursuant to the general authorization of stockholders and
the specific authorization of the Board of Directors, the Company issued to Kent
E. Lovelace, Jr. ("Lovelace"), a director of the Company, 1,342,158 shares of
non-freely tradeable Common Stock on October 1, 1996 in satisfaction of $60,398
of an outstanding loan to the Company from Lovelace, and 400,000 shares of
non-freely tradeable Common Stock on October 8, 1996 in satisfaction of an
additional $30,000 of such loan. The Company still owes $10,000 to Lovelace on
various loans. The closing price for the Common Stock on October 1, 1996 was
$.09, and one-half of this closing price (or $.045) was used in computing the
number of shares of Common Stock to which Lovelace was entitled to receive in
connection with his October 1st Discretionary Stock Issuance. The closing price
for the Common Stock on October 8, 1996 was $.15, and one-half of this closing
price (or $.075) was used in computing the number of shares of Common Stock to
which Lovelace was entitled to receive in connection with his October 8th
Discretionary Stock Issuance.
Finally, pursuant to the general authorization of stockholders and the
specific authorization of the Board of Directors, the Company issued to Roger W.
Cope ("Cope") 1,342,158 shares of non-freely tradeable Common Stock on October
1, 1996 in satisfaction of $60,397.13 of an outstanding loan to the Company from
Cope. The Company still owes approximately $30,000 on this loan and
approximately $23,000 in accrued salary. The closing price for the Common Stock
on October 1, 1996 was $.09, and one-half of this closing price (or $.045) was
used in computing the number of shares of Common Stock to which Cope was
entitled to receive in connection with his Discretionary Stock Issuance.
-13-
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
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.
<TABLE>
<CAPTION>
Shares of
Common Stock Beneficially Owned (1)
Name and Address of Beneficial Owner Number Percent
<S> <C> <C> <C> <C> <C> <C>
Paul J. Montle 2,060,261(2) 16.36%
15915 Katy Freeway, Suite 250
Houston, Texas 77094
Kent E. Lovelace, Jr. 2,253,058(3) 17.89
%
3300 West Beach Street
Gulfport, Mississippi
Roger W. Cope 1,349,398(4) 10.72%
5663 East Nine Mile Rd.
Warren, Michigan 48901
C. Thomas Cutter 2,200(5) (6)
54 Emerson Road
Waltham, Massachusetts 02154
Richard W. Lancaster 200,000(7) 1.59%
1225 Neosho
Baton Rouge, LA 70802
All directors and officers
as a group (five persons) 5,864,917(8) 46.58%
</TABLE>
- ---------------------
-14-
<PAGE>
(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 1,903,281 shares of Common Stock directly owned, 48,580 shares
of Common Stock held by Travis Partnership, G.P., a general partnership
in which Mr. Montle has a 51.67% interest and a trust for the benefit
of Mr. Montle's children has a 15% interest, and 106,800 shares of
Common Stock beneficially owned pursuant to non-qualified stock options
currently exercisable. Does not include 400,000 shares of Common Stock
owned by trusts for the benefit of Mr. Montle's children and 30,000
shares of Common Stock which may be acquired upon the exercise of
currently exercisable warrants owned by ALDA F.L.P., a limited
partnership having Mr. Montle's children as limited partners, all such
shares of which Mr. Montle disclaims beneficial ownership.
(3) Includes 2,064,658 shares directly owned, 64,000 shares beneficially
owned pursuant to currently exercisable warrants, and 6,400 shares held
by Equitrust Mortgage Corporation, a corporation for which Mr. Lovelace
acts as President and Chief Executive Officer and 62,000 shares of
Common Stock beneficially owned pursuant to non-qualified stock options
currently exercisable. Does not include 36,000 shares owned by Cheryl
Lovelace, Mr. Lovelace's wife, all such shares of which Mr.
Lovelace disclaims beneficial ownership.
(4) Does not include 12,000 shares owned by Elizabeth Cope, Mr. Cope's
wife, all such shares of which Mr. Cope disclaims beneficial ownership.
(5) Includes 200 shares directly owned, and 2,000 shares beneficially owned
pursuant to stock options immediately exercisable. Does not include
14,345 shares owned by Sasiree Cutter, Mr. Cutter's wife, all such
shares of which Mr. Cutter disclaims beneficial ownership.
(6) Less than 1%
(7) Includes 50,000 shares directly owned, and 150,000 shares beneficially
owned pursuant to stock options immediately exercisable.
(8) Includes 5,067,537 shares directly owned; 209,600 shares beneficially
owned pursuant to stock options and warrants currently exercisable; and
54,980 shares beneficially owned indirectly through affiliated
entities.
PROPOSAL 2
APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Company's Audit Committee has recommended and the Board of
Directors has approved and now recommends the appointment of Malone & Bailey,
PLLC as independent certified public accountants to audit the Company's accounts
for the fiscal year ended June 30, 1998. The firm audited the Company's accounts
for fiscal 1996 and 1997. Approval of the appointment will require the
affirmative vote of a majority of the shares represented and voted at the Annual
Meeting.
-15-
<PAGE>
A representative of Malone & Bailey, PLLC will attend the 1997 Annual
Meeting with the opportunity to make a statement if such representative desires
to do so and to respond to appropriate questions presented at the Annual
Meeting.
CHANGES IN CERTIFYING ACCOUNTANTS
The Company's prior independent accountant, KPMG Peat Marwick LLP,
resigned on April 3, 1996. KPMG previously issued a qualified report dated
October 6, 1995 on the Company's financial statements for the period from July
1, 1994 through June 30, 1995. The accountant's report on the financial
statements for such period contained a going concern qualification. The audit
Committee of the Board of Directors accepted the resignation of KPMG Peat
Marwick. There were no disagreements with KPMG Peat Marwick on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure during the period from May 1993 (inception) to the date of
such resignation. On September 3, 1996, the Registrant engaged Malone & Bailey,
PLLC as its auditors for the fiscal year ended June 30, 1996.
OTHER MATTERS
The Board of Directors does not know of any other business to be
presented at the Annual Meeting. If any other matter properly comes before the
Annual Meeting, however, it is intended that the persons named in the enclosed
Proxy Card will vote said Proxy in accordance with the discretion and
instructions of the Board of Directors.
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR 1998 ANNUAL MEETING
Stockholders wishing to submit proposals for consideration by the
Company's Board of Directors at the Company's 1998 Annual Meeting of
Stockholders should submit them in writing to the attention of the Chairman of
the Board of the Company not later than July 18, 1998 so that they may be
considered by the Company for inclusion in its proxy statement and form of proxy
for that meeting.
By Order of the
Board of Directors,
Paul J. Montle,
Chairman of the Board
Houston, Texas
November 30, 1997
-16-
<PAGE>
PROXY CARD
PROXY LS CAPITAL CORPORATION PROXY
ANNUAL MEETING OF STOCKHOLDERS ON JANUARY 21, 1998
The undersigned hereby appoints Paul J. Montle and C. Thomas Cutter (to
act by unanimous decision if more than one shall act), each with the power to
appoint his substitute, and hereby authorizes them to represent and vote as
designated below, all the shares of common stock of LS Capital Corporation held
on record by the undersigned on November 15, 1997 at the special meeting of
shareholders to be held on January 21, 1998 or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
NOMINEES FOR DIRECTORS AND FOR PROPOSAL 2.
1. Election of Directors. FOR all
Nominees: nominees
Paul J. Montle (except as marked to WITHHOLD AUTHORITY
Kent E. Lovelace, Jr. the contrary below) to vote for all nominees
Roger W. Cope
C. Thomas Cutter _____ _____
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below)
- ------------------------------------------------------------------------------
2. Proposal to approve the appointment of Malone & Bailey, PLLC as the
independent certified public accountants of the Company
_____ FOR _____ AGAINST _____ ABSTAIN
3. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Please Sign and Date on Reverse Side)
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
proxy will be voted FOR Proposals 1 and 2.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO VOTE THEREON.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote such shares, and acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement relating to the January 21, 1998 Annual
Meeting.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as executor,
administrator, trustee, or guardian, please give full title as such, If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
DATE _____________________________ 199___
- ----------------------------------------- --------------------------------
PLEASE MARK SIGN DATE AND Signature
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE ________________________________
Signature if held jointly
This Proxy is Solicited on Behalf of the Board of Directors.
<PAGE>
