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: December 31, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of1934
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.)
Rivercourt
17-19 Sir John Rogersons Quay
Dublin 2
Ireland
(3531) 679-0222
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
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 December 31, 1998: 20,048,000 shares
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
LS CAPITAL CORPORATION AND SUBSIDIARIES
QUARTER ENDED DECEMBER 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 December 31, 1998 3
Statements of income for the six months
ended December 31, 1998 and 1997 4
Statements of income for the three months
ended December 31, 1998 and 1997 5
Statements of cash flow for the three months
ended December 31, 1998 and 1997 6
Notes to condensed consolidated financial statements 7
Item 2.
Management's Discussion and Analysis 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURE 10
<PAGE>
12
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
December 31, 1998
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 1
Marketable securities 2
Total current assets 3
Property and equipment, net 2
Equity in gold mining ventures 104
Other assets 13
------
122
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 1,402
Redemption payable - redeemable preferred stock 75
------
Total current liabilities 1,477
Stockholders' equity:
Common stock 201
Additional paid-in capital 27,003
Accumulated deficit (28,559)
-------
( 1,355)
Commitments, contingencies and other matters
$ 122
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated
Statements of Income
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months
Ended December 31
1998 1997
---- ----
<S> <C> <C>
OPERATING EXPENSES
Equity in loss of unconsolidated mining subsidiaries $ 93 378
General and administrative
350 641
Depreciation and amortization
1 30
----- -----
444 1,049
----- ------
OPERATING LOSS (444) (1,049)
OTHER INCOME AND EXPENSE
Gain on sale of marketable securities 79
Interest expense, net ( 282)
Other 4
NET INCOME (LOSS) $ (361) $ (1,331)
======== =========
NET INCOME (LOSS) PER COMMON SHARE $(0.02) $ (0.11)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 18,398 12,307
</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 December 31
1998 1997
---- ----
<S> <C> <C>
OPERATING EXPENSES
Equity in loss of unconsolidated mining subsidiaries $ 69 227
General and administrative 186 314
Depreciation and amortization 2 14
------ -----
257 555
----- -----
OPERATING LOSS (257) (555)
OTHER INCOME AND EXPENSE
Gain on sale of marketable securities 52
Other 4
Interest expense, net (145)
NET INCOME (LOSS) $ (201) $ (700)
======== ========
NET INCOME (LOSS) PER COMMON SHARE $(0.01) $ (0.06)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
17,598 12,496
</TABLE>
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Unaudited Condensed Consolidated
Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended December 31
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($361) ($1,332)
Adjustments:
Depreciation and amortization 1 30
Stock issued for services 122 446
Changes in:
Accounts receivable 109 (60)
Accounts payable and accrued expenses 50 285
-------- --------
( 79) (632)
CASH FLOWS OF INVESTING ACTIVITIES
Gain on sale of marketable investments 80
Proceeds from sale of Clutch Games 65
Proceeds from collection of stock
subscription receivable 266
Cash (used) provided by investing activities 80 331
CASH FLOWS FROM FINANCING ACTIVITIES
Reimbursement by attorneys of receivable collections
held in escrow 73
Proceeds from issuance of convertible debentures 346
Payment of redeemable preferred redemption ( 25)
Cash provided by financing activities 394
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1 92
CASH AND CASH EQUIVALENTS
Beginning of period 5
End of period $ 1 $ 97
SUPPLEMENTAL CASH FLOW INFORMATION
Prepaid legal and other services $446
Reduction in stock subscription receivable (41)
Cancellation of investment in securities
of gold mining company (50)
</TABLE>
See accompanying notes
<PAGE>
LS Capital Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Three Months Ended December 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, 1998 included in the Company's Annual Report on Form
10-KSB. 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 six months ended December 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 on September 30, 1996 and has not reopened
because of a dispute between the Company and Papone's 24.5% minority
shareholder. In April, 1997, following the failed restructuring of the repayment
terms of the principal secured creditor of Papone=s, who is currently owed
$1,196,000, Papone=s filed for bankruptcy under Chapter 11 of the federal
bankruptcy laws. In August, 1997, a Plan of Reorganization was filed with the
bankruptcy court followed by a Disclosure Statement in October, 1997, which
propose that the Company acquire 100% ownership and eventually repay all
creditors, including its largest secured creditor who would have to accept a
disputed receivable due from the 24.5% owner. In October, 1997, the secured
creditor filed a motion in the Bankruptcy Court to dismiss the bankruptcy citing
the perceived inability of Papone=s to reorganize. In October, 1997, the court
ruled in favor of the Creditor lifting the bankruptcy stay against Papone's
property and the creditor foreclosed on the property in early 1998. In March,
1999, the Company reached an agreement with the above secured creditor
confirming that the Company is not liable for any deficiency which may have been
due on that judgment for $1,101,337 obtained in 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIGNIFICANT EVENTS
During first half of fiscal 1999, the Company continued to focus its
efforts on developing precious metals mining prospects which were undertaken in
separate corporate entities with minority ownership of each entity by various
partners.
In February, 1999, primarily due to the lack of available capital to
pursue the further development of technological expertise to recover precious
metals, the Company decided to discontinue this activity and furlough its
remaining personnel in the U.S. The Company retains its interest in certain
Federal mineral leases and an option on a fee property contiguous to the Federal
leases near Tecopa, CA, and also own two tracts of land used as plant sites in
Armagosa, NV and Tecopa, CA.
As part of its plan to curtail activity at these plants, the Company
intends to dispose of certain surplus equipment at these plants.
In the future, the Company intends to explore opportunities to develop
or acquire businesses which may be related to the Internet, specifically
focusing on the European sector. To facilitate this effort the Company relocated
its corporate offices to Dublin, Ireland in September, 1998. Dublin was selected
due to its participation in the Euro currency markets as well as the presence of
numerous U.S. computer-related businesses and also the availability of a
well-educated workforce fluent in English and numerous foreign languages.
The Company believes that there will be attractive Internet-related
opportunities in Europe as access to personal computers by individuals in that
market is projected to increase to the 40% level currently prevalent in the U.S.
by 2003 versus an estimated 14% access at present in Europe.
In March, 1999, the Company reached an agreement with the creditor of
its casino property, who had secured a judgment and had foreclosed on this
property in early 1998. This agreement confirms that the Company is not liable
for any deficiency which may have been due on that judgment for $1,101,337
obtained in 1997.
MATERIAL CHANGES IN FINANCIAL CONDITION
At December 31, 1998, the Company has a working capital deficiency of
$1,474,000 compared to a deficit of $3,209,000 at December 31, 1997. The lower
deficiency was primarily due to the reduction in liabilities as a result of the
foreclosure on the Company's casino properties.
Papone=s Palace LLC was closed on September 30, 1996 and has not reopened
because of a dispute between the Company and Papone=s 24.5% minority
shareholder. In April, 1997, following the failed restructuring of the repayment
terms of the principal secured creditor of Papone=s, who is currently owed
$1,196,000, Papone=s filed for bankruptcy under Chapter 11 of the federal
bankruptcy laws. In August, 1997, a Plan of Reorganization was filed with the
bankruptcy court followed by a Disclosure Statement in October, 1997, which
propose that the Company acquire 100% ownership and eventually repay all
creditors, including its largest secured creditor who would have to accept a
disputed receivable due from the 24.5% owner. In October, 1997, the secured
creditor filed a motion in the Bankruptcy Court to dismiss the bankruptcy citing
the perceived inability of Papone=s to reorganize. In October, 1997, the court
ruled in favor of the Creditor and the creditor foreclosed on the property in
early 1998. In March, 1999, the Company reached an agreement with the above
secured creditor confirming that the Company is not liable for any deficiency
which may have been due on that judgment for $1,101,337 obtained in 1997.
<PAGE>
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended Dectember 31, 1998 and 1997
The Company had incurred a net loss of $201,000 or $.01 a share, as compared to
net loss of $700,000 or $0.06 per share for the comparable period in the prior
year. The change of $499,000 was attributable to the reduction in operating
expenses of $298,000 and the reduction in interest expense of $145,000.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed with this Quarterly Report or
are incorporated herein by reference:
Exhibit
Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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: March 12, 1999
<PAGE>
EXHIBITS INDEX
Exhibit
Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule comtains summary information extracted from Item 1
of Form 10-QSB for the quarter ended December 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-30-1999
<PERIOD-START> OCT-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 1
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<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3
<PP&E> 4
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<TOTAL-ASSETS> 122
<CURRENT-LIABILITIES> 1477
<BONDS> 0
0
0
<COMMON> 201
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<TOTAL-LIABILITY-AND-EQUITY> 122
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<NET-INCOME> (201)
<EPS-PRIMARY> (0.01)
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</TABLE>
