UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934: For the quarterly period ended: March 31, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934: For the transition period from _______ to ______
Commission file number: 0-21566
LS CAPITAL CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 84-1219819
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15915 Katy Freeway, Suite 250, Houston, Texas 77094
(Address of principal executive officer) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of common stock, $0.01 par value, outstanding as
of March 31, 1998: 13,863,861 shares
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
LS CAPITAL CORPORATION AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1998
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed consolidated financial statements of LS Capital Corporation
and Subsidiaries:
Balance sheet as of March 31, 1998 3
Statements of income for the three months ended
March 31, 1998 and 1997 4
Statements of income for the nine months ended
March 31, 1998 and 1997 5
Statements of stockholders' equity for the nine months
ended March 31, 1998 and 1997 6
Statements of cash flow for the three months ended
March 31, 1998 and 1997 7
Notes to condensed consolidated financial statements 9
Item 2. Management's Discussion and Analysis 10
PART II. OTHER INFORMATION
Item 1. Legal proceedings 13
Item 6. Exhibits and Reports on Form 8-K. 13
(a)Exhibits
(b)Reports on Form 8-K
SIGNATURE 15
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
March 31, 1998
(in thousands)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22
Receivable from unaffiliated parties, net 153
Total current assets 175
Property and equipment, net 2
Equity in gold mining ventures 319
Other assets 6
-----------
$ 502
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,297
Redemption payable - redeemable preferred stock 75
Convertible debenture payable 200
------
Total current liabilities 1,572
Stockholders' equity:
Common stock 138
Additional paid-in capital 26,147
Accumulated deficit (27,355)
-------
( 1,070)
Commitments, contingencies and other matters
$
502
</TABLE>
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated
Statements of Income(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
---- ----
<S> <C> <C>
OPERATING REVENUES
OPERATING EXPENSES
Equity in loss of unconsolidated mining subsidiaries 195 281
General and administrative 230 416
Depreciation and amortization - 68
------ -----
425 765
----- ------
OPERATING LOSS (425) (765)
OTHER INCOME AND EXPENSE
Interest expense, net ( 6) (131)
Other, net - ( 40)
-------- -----
( 6) (171)
NET INCOME (LOSS) $ ( 431) $( 936)
======== =======
NET INCOME (LOSS) PER COMMON SHARE $ 0.03 $(0.10)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,396 9,832
</TABLE>
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated
Statements of Income(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
<S> <C> <C>
1998 1997
OPERATING REVENUES
Gaming $ - $ 224
Food, beverage, etc. - 16
--------- ----
- 240
OPERATING EXPENSES
Gaming - 41
Food, beverage, etc. - 21
Equity in loss of unconsolidated mining subsidiaries 573 341
General and administrative 871 995
Depreciation and amortization 30 210
------- ----
1,474 1,608
OPERATING LOSS (1,474) (1,368)
OTHER INCOME AND EXPENSE
Interest expense, net (288) ( 363)
Gain on transfer of partnership interest
to creditor - 590
Gain on sale of properties - 175
Other, net - 20
(288) 422
NET INCOME (LOSS) $ (1,762) $( 946)
========== =======
NET INCOME (LOSS) PER COMMON SHARE $(0.14) $(0.16)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,671 5,959
</TABLE>
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated
Statements of Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Common Stock Paid-in Subs. Rec. Accum.
Shares Amount Capital Stock Sales Deficit Totals
<S> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1996 1,721 $ 17 $23,141 $ - $ (25,521) $(2,363)
Shares issued for cash 840 8 193 201
Shares issued for services 920 10 833 843
Shares issued in connection
with debt forgiveness by
related parties 6,069 61 224 285
Shares issued in connection
with acquisition of gold
mining ventures 500 5 932 937
Subscription receivable
for sale of shares ( 146) (146)
Payments on subscription
receivable 63 63
Net (loss) ( 945) (945)
Balances, March 31, 1997 10,066 $ 101 $25,324 $( 83)$ (25,466) $(1,124)
====== ====== ======= ====== ========== ========
Balances, June 30, 1997 12,150 $121 $25,374 $ - $(25,593 $( 98)
Shares issued for services 1,010 10 604 614
Shares issued for cash 447 4 101 105
Shares issued in connection with:
Partial conversion
of debenture 362 4 148 152
Acquisition of gold
mining ventures 150 2 8 10
Stock subscription
adjustment ( 255) ( 3) ( 38) ( 41)
Cancellation of investment
in gold mining securities ( 50) - ( 50) ( 50)
Net (loss) (1,762) (1,762)
---------- --------
Balances, March 31, 1998 13,814 $138 $26,147 $ - $ (27,356) $(1,070)
====== ==== ======= ========= ========== ========
</TABLE>
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated
Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,762) $ (945)
Adjustments:
Depreciation and amortization 30 210
Gain on sale of card club interest - (590)
Stock issued for services 614 827
Changes in:
Accounts receivable ( 92) ( 57)
Accounts payable and accrued expense s 275 360
------- ----
Net cash used by operating activities $ ( 921) $ (185)
CASH FLOWS OF INVESTING ACTIVITIES
Receivable from sale of Clutch Games 65 ( 80)
Capital expenditures - mining operations (143)
Collection of receivable from unaffiliated parties 87 -
Increase in deposits and other assets 263 (166)
------- ------
Cash (used) provided by investing activities 415 (389)
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of stock 105 126
Capital contribution by mining group 246
Payment on redeemable preferred obligation (25) -
Proceeds from notes payable to affiliates 82
Collection of receivables held in escrow 73
Proceeds from issuance of convertible debenture 350 -
---- --------
Cash provided by financing activities 503 454
------- ----
Increase (decrease) in cash 17 (120)
Beginning of period 5 139
------- -----
End of period $ 22 $ 19
</TABLE>
(continued)
<PAGE>
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated
Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
1998 1997
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Common stock issued for:
Prepaid legal and other services $446 $ 385
Mining operation consultation services 169 212
Reduction in related party payables 238
Reduction in liabilities resulting from foreclosure (2,110)
Convertible debenture converted into common stock 150
</TABLE>
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Three and Nine Months Ended March 31, 1998
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. The financial statements contained herein should
be read in conjunction with the audited consolidated financial statements for
the year ended June 30, 1997 included in the Company's Annual Report on Form
10-K. Accordingly, footnote disclosure which would substantially duplicate the
disclosure in the audited consolidated financial statements has been omitted.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary for a fair
statement of the results for the unaudited three and nine months ended March 31,
1998 and 1997. The results of operations for an interim period are not
necessarily indicative of the results to be expected for a full year.
2. Papone's Palace LLC was closed in September, 1996 because of a dispute
between the Company and Papone's 24.5% minority shareholder. Papone's filed for
bankruptcy under Chapter 11 of the federal bankruptcy laws. The secured creditor
requested Bankruptcy Court permission to foreclose on the casino real estate in
Colorado. The Bankruptcy Court dismissed the bankruptcy petition in March 1998
after granting the foreclosure request. Substantially all liabilities owned by
Papone's consist of debt owed to this secured creditor.
As a result of the foreclosoure request, Papone's has netted assets with a
book value of $2,110,000 against the note payable and related accrued interest
owed to this creditor. The Company maintains that such debt has been paid in
full, and is in the process of winding up the remaining affairs of Papone's.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT EVENTS
During fiscal 1997, the Company adopted a significant change in its
corporate direction. It decided to focus its efforts on developing precious
metals mining prospects, with each project undertaken in a separate corporate
entity. Currently, the Company has an ownership share of five corporations
(Griffin Gold Group, Inc., Desert Minerals, Inc. Shoshone Mining Co., Cochise
Mining Corporation and SWM Ventures, Inc.), formed to exploit certain adjacent
mining claims in eastern California. These operations are in the developmental
stage and will require minimal capital. To implement this strategy and finance
these projects, the Company intends to establish a public trading market in the
shares of each gold mining corporation, via an initial public offering and/or a
"spin-off" of their shares to the Company's shareholders in fiscal year 1998 so
they can do their own financing with their own shares. As this strategy is
implemented, the Company will essentially become a holding company owning large
share holdings in each gold mining corporation. The Company has retained a
consultant to evaluate the best structure to manage such activity and maximize
value for its shareholders. The Company has not received the report from the
consultant but such report may recommend conversion to closed-end
non-diversified investment holding company status.
On November 20, 1997, the Company entered into a letter of
intent (the "Letter of Intent") with Au Consolidated, Inc. ("Consolidated") with
respect to a newly-formed Delaware subsidiary named "Cochise Mining Corporation"
("Cochise"). Cochise is initially to be owned 60% by the Company and 40% by
Consolidated. Under the terms of the Letter of Intent, Consolidated agreed to
lease to Cochise mineral leasehold interests in Arizona's Cochise and Graham
counties covering 79 square miles. Pursuant to the Letter of Intent,
Consolidated and Cochise entered into a definitive Mineral Lease - Private Land
(the "Lease Agreement") implementing the terms of the Letter of Intent. The
Lease Agreement has a term continuing until the latter to occur of the end of
ten years or the cessation of production of minerals in commercial quantities
for any calendar quarter. Cochise is obligated to pay to Consolidated a
production royalty equal to 5.0% of the net smelter returns for all minerals
mined, removed and sold from the leased acreage. Cochise is also obligated to
pay to Consolidated quarterly royalties (credited against the production
royalty) in amounts of $54,000 for the first three quarterly periods and
$100,000 for each quarterly period thereafter.
The Letter of Intent requires the Company to invest in, or
raise $1.4 million in equity for, Cochise by May 1, 1998, which was subsequently
extended to August 1, 1998. The equity should enable Cochise to commence
production within 60 days of the construction of its placer plant, expected to
be completed in fiscal 1999. If the Company fails to invest or raise the $1.4
million by August 1, 1998 or if the Company is unsatisfied with the results of
its assay sampling program relating to the acreage leased to Cochise, the
transaction provided for by the Letter of Intent and the Lease Agreement might
be terminated.
In December, 1997, Griffin Gold Group, Inc. ("Griffin Gold") filed a
registration statement with the Securities and Exchange Commission regarding the
contemplated spin-off of 20% of the Company's ownership in Griffin Gold to the
Company's shareholders. Griffin Gold is currently awaiting the final approval of
its registration statement, as amended.
In January, 1998, JVWeb, Inc. ("JVWeb"), a company formed to pursue
electronic commerce opportunities, filed a registration statement with the
Securities and Exchange Commission regarding the spin-off of JVWeb to the
Company's shareholders. The final approval of its registration statement was
received on May 12, 1998 and JVWeb expected to begin trading on the OTC
Electronic Bulletin Board shortly thereafter. The Company expects to distribute
to its stockholders approximately 280,000 shares and 1,120,000 Class A warrants
and retained ownership of 220,000 shares and 380,000 warrants.
MATERIAL CHANGES IN FINANCIAL CONDITION
At March 31, 1998, the Company had a working capital deficiency of
$944,,000 compared to a deficit of $3,479,000 at March 31, 1997. The lower
deficiency was primarily due to the reduction in current liabilities resulting
from the foreclosure on the Papone's Palace property and the conversion of the
preferred stock redemption liability into common stock.
2. Papone's Palace LLC was closed in September, 1996 because of a dispute
between the Company and Papone's 24.5% minority shareholder. Papone's filed for
bankruptcy under Chapter 11 of the federal bankruptcy laws. The secured creditor
requested Bankruptcy Court permission to foreclose on the casino real estate in
Colorado. The Bankruptcy Court dismissed the bankruptcy petition in March 1998
after granting the foreclosure request. Substantially all liabilities owned by
Papone's consist of debt owed to this secured creditor.
As a result of the foreclosoure request, Papone's has netted assets with a
book value of $2,110,000 against the note payable and related accrued interest
owed to this creditor. The Company maintains that such debt has been paid in
full, and is in the process of winding up the remaining affairs of Papone's.
In October and December, 1997, the Company received $350,000 from
a private investor as convertible debt, which matures in one year and bears
interest at 8%. The debt is convertible into the Company's common stock at 70%
of the average closing bid for the previous five days. In December, 1997 and
January, 1998, the investor converted $150,000 of the convertible debt into
362,105 shares of common stock.
In February, 1998, the Company issued 46,667 shares of the Company's common
stock to an officer and a director of one of the Company's subsidiaries at a
purchase price of $.30 per share. The Company also issued to this person a
warrant permitting this person to acquire on or before March 1, 2000 up to
46,667 shares of the Company common stock at a purchase price of $.60 per share.
Management believes that it can obtain the funds necessary to
meet its working capital needs for the remainder of fiscal 1998 and the $1.4
million required for the Cochise project, primarily through the sale of common
stock and from the sale of other non-revenue producing assets.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
The Company had net income of $36,000 for the three months ended
March 31, 1998 as compared to a net loss of $936,000 or $0.10 per share for the
comparable period in the prior year. The change of $972,000 was primarily
attributable to the gain on the foreclosure of the Papone's Palace assets of
$453,000 and the resulting reduction in interest expense of $125,000. In
addition, operating expenses declined $354,000 as compared to the comparable
quarter in the prior year.
General and administrative expenses totaled $230,000 during the
quarter ended March 31, 1998, as compared with $416,000 for the comparable prior
year quarter.
Nine Months Ended March 31, 1998 and 1997
The Company had incurred a net loss of $1,295,000 or $.10 a share, as
compared to a net loss of $946,000 for the comparable period in the prior year.
The change of $349,000 was attributable to the gains totaling $665,000 in the
1997 period offset by the gain on the foreclosure of Papone's Palace assets of
$453,000 in the 1998 period.
General and administrative expenses totaled $871,000 during the nine
months ended March 31, 1998, as compared with $995,000 for the 1997 period.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As reported in the Company's Quarterly Report on Form 10-QSB for the
quarter ended December 31, 1997, a judgment was entered, on February 21, 1997,
against Papone's Palace LLC (the "Limited Liability Company"), the indirect
majority-owned subsidiary that heretofore owned Papone's Palace casino located
in Central City, Colorado (the "Property"). The judgment was entered in favor of
the Limited Liability Company's largest creditor (the"Creditor") in the
principal amount of $1,101,337, together with interest and costs, and the
judgment included a decree permitting the foreclosure of the Property. This
judgment required the Limited Liability Company to file for bankruptcy
protection under Chapter 11 of the federal bankruptcy laws on April 23, 1997.
However, in October, 1997, the bankruptcy court granted a motion filed by the
Creditor to lift the bankruptcy stay against the Property allowing the Creditor
to foreclose on the Property, subject to a 75-day redemption period which ended
on March 5, 1998. The Company did not appeal this ruling, and in March 1998, the
Creditor foreclosed on the Property.
On December 14, 1994, the Company filed a lawsuit in Harris County,
Texas against Full House Resorts, Inc. ("Full House"), Allen E. Paulson,
Donaldson, Lufkin & Jenrette Securities Corporation and My Dang to enforce the
terms of a preliminary agreement executed on September 8, 1994 between the
Company and Full House to jointly acquire and relocate a casino to the Company's
site in Biloxi, Mississippi. With the agreement of the Company, this litigation
was continued in the District Court of Harrison County, Mississippi under case
no. A-2402-95-0142. Eventually, the Company's counsel untimely withdrew from the
case without the substitution of new counsel. The Company's proposed new counsel
conditioned its representation of the Company upon the issuance of a new
scheduling order allowing such counsel to prepare. The presiding judge refused
to issue a new scheduling order. Because of the Company's lack of
representation, the presiding judge granted the defendants' motions for summary
judgment in March 1996. The Company, with new counsel, immediately filed an
appearance and an appeal with the Mississippi Supreme Court. On April 7, 1998,
the Mississippi Court of Appeals affirmed the lower court's decision in part
while reversing and remanding such decision in other parts. Essentially, the
Court of Appeals reversed the summary judgment against the Company for its
claims of breach of contract and breach of fiduciary duties asserted against
Full House and remanded these claims to the lower court for a trial on the
merits. However, the Court of Appeals affirmed the summary judgment against the
Company as to all of its claims against My Dang, Allen B. Paulson and Donaldson,
Lufkin & Jenrette Securities Corporation and its claims of common law fraud
against Full House. As May 12, 1998, no setting has been entered for the trial
of the claims being remanded.
ITEM 2. CHANGES IN SECURITIES.
On or about January 15, 1998, the Company issued 100,000 shares of the
Company's common stock to an officer and a director of one of the Company's
subsidiaries at a purchase price of $.01 per share. The 100,000 shares were
issued in reliance on the exemption provided for by Regulation D of the
Securities Act of 1933 (the "Act").
On or about February 18, 1998, the Company issued 300,000 shares of the
Company's common stock to an institutional investor at a purchase price of $.30
per share. The Company also issued to this person a warrant permitting this
person to acquire on or before March 1, 2000 up to 300,000 shares of the Company
common stock at a purchase price of $.60 per share. The 300,000 shares and the
warrant were issued in reliance on the exemption provided for by Section 4(2) of
the Act.
On or about February 23, 1998, the Company issued 46,667 shares of the
Company's common stock to an officer and a director of one of the Company's
subsidiaries at a purchase price of $.30 per share. The Company also issued to
this person a warrant permitting this person to acquire on or before March 1,
2000 up to 46,667 shares of the Company common stock at a purchase price of $.60
per share. The 46,667 shares and the warrant were issued in reliance on the
exemption provided for by Regulation D under the Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 First Amendment to Letter of Intent dated
November 20, 1997 among the Company, Cochise
Mining Corporation and Au Consolidated, Inc.
10.2 Second Amendment to Letter of Intent dated
November 20, 1997 among the Company, Cochise
Mining Corporation and Au Consolidated, Inc.
and First Amendment to Mineral Lease -
Private Land dated effective January 1, 1998
between Au Consolidated, Inc., as lessor,
and Cochise Mining Corporation, as lessee.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K dated
January 6, 1998, reporting on the sale of certain
shares of the Company's common stock pursuant to the
exemption provided for Regulation S under the Act.
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LS CAPITAL CORPORATION
(Registrant)
By: /s/ Paul J. Montle
Paul J. Montle
President, Chief Executive Officer
and Chief Financial Officer
Dated: May 15, 1998
<PAGE>
EXHIBITS INDEX
Exhibit Number Description
10.1 First Amendment to Letter of Intent dated
November 20, 1997 among the Company, Cochise
Mining Corporation and Au Consolidated, Inc.
10.2 Second Amendment to Letter of Intent dated
November 20, 1997 among the Company, Cochise
Mining Corporation and Au Consolidated, Inc.
and First Amendment to Mineral Lease -
Private Land dated effective January 1, 1998
between Au Consolidated, Inc., as lessor,
and Cochise Mining Corporation, as lessee.
27 Financial Data Schedule
<PAGE>
EXHIBITS INDEX
Exhibit
Number Description
10.1 First Amendment to Letter of Intent dated November 20, 1997 among
the Company, Cochise Mining Corporation and Au Consolidated, Inc.
10.2 Second Amendment to Letter of Intent dated November 20, 1997 among the
Company, Cochise Mining Corporation and Au Consolidated, Inc. and
First Amendment to Mineral Lease - Private Land dated effective January
1, 1998 between Au Consolidated, Inc., as lessor, and Cochise Mining
Corporation, as lessee.
27 Financial Data Schedule
EXHIBIT 10.1 - FIRST AMENDMENT AU CONSOLIDATED AGREEMENT
FIRST AMENDMENT TO LETTER OF INTENT
THIS FIRST AMENDMENT TO LETTER OF INTENT (the "First Amendment")
is made and entered into as of this the 20th day of February, 1998 by and
among Au Consolidated, Inc. ("Lessor"), Cochise Mining Corporation ("Lessee")
and LS Capital Corporation ("LS Capital").
Recitals
WHEREAS, Lessor, Lessee and LS Capital entered into a Letter of Intent
(the "Letter of Intent") dated November 20, 1997 regarding the lease by Lessor
to Lessee of certain mineral rights on certain land under the control of Lessor;
WHEREAS, Section 2(g) of the Letter of Intent requires LS Capital to
invest in Lessee, or raise on behalf of Lessee, $1.4 million by May 1, 1998, and
if LS Capital fails to raise such funds by such date, Lessor is entitled to
terminate the lease described in the preceding recital;
WHEREAS, Lessor has requested LS Capital to advance an additional
$25,000 to Lessee to be used according to the estimated budget for the testing
described in the Proposed Plan and Budget from Richard and Michael Bradshaw for
recovery of gold and silver from Lessee's property, a copy of which is attached
hereto (the "Proposal");
WHEREAS, LS Capital is willing to advance the aforementioned additional
$25,000 amount on the condition that certain agreements contained herein are
entered into and the Letter of Intent is amended in the manner described herein;
and
WHEREAS, all of the parties named above desire to enter into the
agreements contained herein and to amend the Letter of Intent upon the terms,
provisions and conditions set forth hereinafter;
Agreement
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the undersigned parties to amend the Letter of Intent and LS Capital's
agreement to advance $25,000 to Lessee, the undersigned parties agree as follows
(all undefined, capitalized terms used herein shall have the meanings assigned
to such terms in the Letter of Intent):
1. Additional Advance. LS Capital hereby agrees to advance to Lessee up
to $25,000 for the purposes described in the Proposal, including the physical
delivery of the recovered gold and silver and the refiner's supporting statement
to Lessee. All parties hereto hereby agree that the amounts to be advanced
pursuant to this Section 1 of this First Amendment, and all other amounts that
LS Capital may advance to or behalf of Lessee from time to time, shall be
credited toward LS Capital's obligation to raise or invest $1.4 million, as
provided for in Section 2(g) of the Letter of Intent.
<PAGE>
2. Amendments to the Letter of Intent. So long as Lessee fulfills its
obligation to pay to Lessor the royalty payment in the sum of $54,000.00 on
April 1, 1998, the dates contained in the Letter of Intent shall be extended for
90 additional days (for example, the reference to "May 1, 1998" in Section 2(g)
of the Letter of Intent shall refer to "August 1, 1998," and LS Capital shall
have until August 1, 1998, for all purposes of the Letter of Intent, to fulfill
its obligations to invest in Lessee, or raise on behalf of Lessee, $1.4
million).
3. Confidentiality. Lessor hereby agrees to maintain on a confidential
basis and not to disclose to any person who is not a shareholder of Lessor or
Lessee and not to disclose to any other person, any of the results of the
testing, bulk sample production and recovery conducted on behalf of Lessee
pursuant to the Proposal or otherwise.
4. Miscellaneous. Except as otherwise expressly provided herein, the
Letter of Intent is not amended, modified or affected by this First Amendment.
Except as expressly set forth herein, all of the terms, conditions, covenants,
representations, warranties and all other provisions of the Letter of Intent are
herein ratified and confirmed and shall remain in full force and effect. On and
after the date on which this First Amendment becomes effective, the terms,
"Letter of Intent," "hereof," "herein," "hereunder" and terms of like import,
when used herein or in the Letter of Intent shall, except where the context
otherwise requires, refer to the Letter of Intent, as amended by this First
Amendment. This First Amendment may be executed into one or more counterparts,
and it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have set their hands hereunto
effective as of the first date written above.
LS CAPITAL CORPORATION, COCHISE MINING CORPORATION.
a Delaware corporation a Delaware corporation
By: /s/ Paul J. Montle By: /s/ Paul J. Montle
Paul J. Montle, President Paul J. Montle, Vice President
AU CONSOLIDATED, INC.
By /s/ Frank Cobb
Name Frank Cobb
Title: President
EXHIBIT 10.2 - SECOND AMENDMENT TO AU CONSOLIDATED AGREEMENT
SECOND AMENDMENT TO LETTER OF INTENT AND
FIRST AMENDMENT TO MINERAL LEASE - PRIVATE LAND
THIS SECOND AMENDMENT TO LETTER OF INTENT AND FIRST AMENDMENT TO MINERAL
LEASE - PRIVATE LAND (the "Second Amendment") is made and entered into as of
this the 1st day of April, 1998 by and among Au Consolidated, Inc. ("Lessor"),
Cochise Mining Corporation ("Lessee") and LS Capital Corporation ("LS Capital").
Recitals
WHEREAS, Lessor, Lessee and LS Capital entered into a Letter of Intent
(the "Letter of Intent") dated November 20, 1997 regarding the lease by Lessor
to Lessee of certain mineral rights on certain land under the control of Lessor;
WHEREAS, Section 1(c) of the Letter of Intent requires Lessee to pa
to Lessor the amount of $54,000.00 on or about April 1, 1998;
WHEREAS, Lessor and Lessee entered into a Mineral Lease - Private Land
(the "Lease Agreement") dated January 1, 1998 to implement the lease of mineral
rights provided for by the Letter of Intent;
WHEREAS, Section 2b(iii) of the Lease Agreement also requires Lessee to
pay to Lessor on or about April 1, 1998 the $54,000.00 amount required by the
Letter of Intent;
WHEREAS, Lessor and Lessee have agreed to defer Lessee's obligation to
remit the $54,000.00 payment otherwise due on April 1, 1998 pursuant to Section
1(c) of the Letter of Intent and Section 2b(iii) of the Lease Agreement (the
"April Payment"); and
WHEREAS, all of the parties named above desire to enter into the
agreements contained herein and to amend the Letter of Intent and the Lease
Agreement upon the terms, provisions and conditions set forth hereinafter;
Agreement
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the undersigned parties to amend the Letter of Intent and the Lease
Agreement, the undersigned parties agree as follows:
1. Amendments to the Letter of Intent and Lease Agreement. Lessor and
Lessee hereby agree that, notwithstanding anything else contained in the Letter
of Intent or the Lease Agreement or any amendment to either, the April Payment
shall not be due until June 1, 1998.
2. Miscellaneous. Except as otherwise expressly provided herein, the
Letter of Intent and the Lease Agreement are not amended, modified or affected
by this Second Amendment. Except as expressly set forth herein, all of the
terms, conditions, covenants, representations, warranties and all other
provisions of the Letter of Intent and the Lease Agreement are herein ratified
and confirmed and shall remain in full force and effect. On and after the date
on which this Second Amendment becomes effective, the terms, "Letter of Intent,"
"hereof," "herein," "hereunder" and terms of like import, when used in the
Letter of Intent shall, except where the context otherwise requires, refer to
the Letter of Intent, as amended by this Second Amendment, and the terms,
"Lease," "hereof," "herein," "hereunder" and terms of like import, when used in
the Lease Agreement shall, except where the context otherwise requires, refer to
the Lease Agreement, as amended by this Second Amendment. This Second Amendment
may be executed into one or more counterparts, and it shall not be necessary
that the signatures of all parties hereto be contained on any one counterpart
hereof; each counterpart shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have set their hands hereunto
effective as of the first date written above.
LS CAPITAL CORPORATION, COCHISE MINING CORPORATION.
a Delaware corporation a Delaware corporation
By: /s/ Paul J. Montle By: /s/Paul J. Montle
Paul J. Montle, President Paul J. Montle, Vice President
AU CONSOLIDATED, INC.
By /s/ William F. Doran
Name: William F. Doran
Title: Attorney in fact
AU CONSOLIDATED, INC.
By /s/ Frank Cobb
Frank Cobb
ITS: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTIANS SUMMARY INFORMATION FROM ITEM 1 OF
FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000897545
<NAME> LS CAPITAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 153
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 175
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 502
<CURRENT-LIABILITIES> 1120
<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> (756)
<TOTAL-LIABILITY-AND-EQUITY> 502
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 22
<INCOME-TAX> 0
<INCOME-CONTINUING> 36
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
