UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

               [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 1999           Commission File Number 0-21566

                             LS CAPITAL CORPORATION
                 (Name of small business issuer in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   84-1219819
                      (I.R.S. Employer 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)

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:

                               Title of Each Class
                          Common Stock, $.01 Par Value

Indicate by check mark whether  registrant (1) has filed all reports to be filed
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. YES [X] NO [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenues for the fiscal year ended June 30, 1999 were $3,000.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on October 7, 1999 was  $556,400,  based on the closing price of such
stock  of  $.022  on  such  date.  The  number  of  shares  outstanding  of  the
registrant's Common Stock, $.01 par value, as of October 7, 1999 was 30,209,789.

Transitional Small Business Disclosure format (Check one): YES [ ]  NO [X]


<PAGE>


                                                        INDEX
<TABLE>
<CAPTION>

                                                                                                        Page Number
                                                       PART I.

<S>                                                                                                             <C>
Items 1. & 2.     Business and Properties.                                                                        3

Item 3.           Legal Proceedings.                                                                              3

Item 4.           Submission of Matters to a Vote of Security Holders.                                            5

                                                      PART II.

Item 5.           Market for the Registrant's Common Equity and Related
                  Stockholder Matters.                                                                            5

Item 6.           Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.                                                            5

Item 7.           Financial Statements.                                                                           8

Item 8.           Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure.                                                            8

                                                      PART III.

Item 9.           Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(a) of the Exchange Act.                                     8

Item 10.          Executive Compensation.                                                                         9

Item 11.          Security Ownership of Certain Beneficial Owners and
                  Management.                                                                                    11

Item 12.          Certain Relationships and Related Transactions.                                                13

                                                      PART IV.

Item 13.          Exhibits and Reports on Form 8-K.                                                              14

</TABLE>

<PAGE>


                     ITEMS 1 and 2. BUSINESS AND PROPERTIES.

         LS Capital Corporation  ("Company") was organized under the laws of the
State of  Delaware  on  December  30,  1992  under the name  "Lone  Star  Casino
Corporation" to develop,  own and operate casinos and related resort facilities.
Prior to May 3, 1993, the Company was a wholly-owned subsidiary of Viral Testing
Systems Corporation ("VTS"),  then a publicly traded company. The Company became
publicly-held  through the distribution of certain of its shares of common stock
to the  stockholders  of VTS on May 3, 1993.  The  Company  adopted  its current
corporate name in June 1996 as a result of the change in its corporate direction
described below.

          From its  inception  and until shortly after the start of fiscal 1997,
the Company was involved exclusively in the gaming industry. 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  subsidiary.  The Company organized a
number of wholly-owned or partially-owned  precious  metals/mining  subsidiaries
that held  rights in certain  mining  claims or  properties  believed to contain
precious metals or in certain mineral extraction technologies. In February 1999,
primarily  due to  the  unavailability  of  capital  to  develop  the  Company's
technologies  further, the Company decided to discontinue its mineral activities
and furlough its remaining personnel in the U.S. The Company allowed its mineral
interests to lapse.  The Company  continues to own a five-acre  tract of land in
Tecopa,  California,  miscellaneous equipment believed to have an aggregate fair
market value of $25,000 and rights in certain  technologies  believed to have no
meaningful commercial value. The Company intends to dispose of the tract of land
and the remaining  equipment as purchasers  can be procured.  The Company has no
present intentions regarding its technologies.

         In the future, the Company intends to explore  opportunities to develop
or acquire one or more  businesses in other  industries.  The Company expects to
focus specifically on Internet-related  businesses. The Company does not now any
particular  prospect under  consideration in any meaningful sense. The nature of
the  business  in which the Company  will  engage in the  future,  the terms and
circumstances  under which the Company  will  engage in such  business  and even
whether or not the Company will engage in a future business, are now uncertain.

          The  principal  executive  offices  of  the  Company  are  located  at
Rivercourt,  17-19 Sir John Rogersons Quay, Dublin 2, Ireland, and its telephone
number is (3531) 679-0222. The Company currently has only one employee.

ITEM 3.  LEGAL PROCEEDINGS

         On May 14,  1998,  the U.S.  Securities  and Exchange  Commission  (the
"Commission")  filed a complaint in the United States District  Court,  Southern
District of New York (98 Civ.  3446) against Paul J. Montle (the Chairman of the
Board of Directors and President of the Company),  the Company,  Paul V. Culotta
(a former Executive Vice President and Chief Financial  Officer of the Company),
Carol C. Martino,  CMA Noel, Ltd.,  Mario J. Iacoviello,  Ilan Arbel, and Europe
American Capital Corporation,  alleging numerous violation of federal securities
laws.  With  regard to the  Company,  the  Commission  alleged  that the initial
registration  statement  of the Company  filed and  declared  effective  in 1993
contained omissions of material information  regarding certain sales of stock in
the  Company  allegedly  occurring  prior  to  the  date  of  such  registration
statement.  The Commission  sought a permanent  injunction  against the Company,
barring it from making future  violations  of certain  provisions of the federal
securities laws. On December 28, 1998, the Company, without admitting or denying
the  Commission's  allegations  and without the payment of any monetary  amount,
consented to the entry of a final judgment of permanent injunction of the nature
sought by the Commission.

         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 October 6, 1999,  no setting  has been  entered for the
trial of the claims being  remanded.  The Company is currently in the process of
retaining new counsel to proceed with this lawsuit.

         Mississippi Ventures II ("MVII") filed a lawsuit against the Company on
August 7, 1995 in a Nevada District Court (case no. 32012)  regarding a proposed
joint venture  between the Company and MVII.  The Company had a lease on certain
property  located in  Mississippi  and had intended on  developing a casino site
with MVII. MVII had required that the lease be amended in order to provide for a
joint venture, and MVII agreed to place $100,000 in an escrow account to be used
for rents owed.  Before the lease was amended and the escrow deposit released to
the landlord,  the  Mississippi  Supreme Court declared the original leased site
could not be used as a legal  casino  site.  The  $100,000  was  released to the
Company, and the Company retained the $100,000 on the basis that MVII interfered
with the negotiation of the amended lease and its timely execution. MVII alleged
breach of the  implied  covenant of good faith and fair  dealing,  and breach of
fiduciary  duty. The Company denied all causes of actions.  Due to an unexpected
resignation of the Company's  counsel,  the Company defaulted on this lawsuit in
fiscal 1997. The Company appealed this judgment. However, on September 24, 1999,
the Nevada Supreme Court dismissed the Company's appeal.

         In fiscal 1997, Oriental Crystal (Holding) Ltd.  ("Oriental") brought a
lawsuit against the Company and the subsidiary  formerly  pursuing the Company's
Tinian  gaming  business.  The lawsuit was brought in the Superior  Court of the
Commonwealth  of  the  Northern   Marianas  Islands  (C.A.   96-173)  seeking  a
declaratory  judgment  that an  agreement  previously  made by  Oriental  not to
compete  with the Company on Tinian was a restraint  of trade and was  therefore
unenforceable. The attorney representing Oriental attempted to serve the Company
at its 1994  business  address in Houston and when it was not possible to obtain
service  on the  Company  at that  address,  a  default  judgment  granting  the
declaratory  judgment was entered in June 1996.  The Company sought to have this
judgment  set aside on the basis  that  service  was not  properly  made and the
default  judgment  was  improperly  entered.  The Supreme  Court of the Northern
Marianas  Islands  declined to render a decision  based on its belief that issue
was moot  because  the  Company was no longer  doing  business  in the  Northern
Marianas  Islands.  Because of this decision,  the Company appealed the Northern
Marianas  Islands court's  decisions to the United States Ninth Circuit.  On May
10, 1999,  the Ninth Circuit ruled that it lacked  jurisdiction  to consider the
Company's appeal and consequently dismissed the appeal.

         On February  24,  1997,  Papone's  Palace  Acquisition  Corporation,  a
Colorado corporation  wholly-owned by the Company ("PPAC"),  commenced an action
against Earl Neudecker in the Denver County  District Court (case no.  97CV1021)
on a  promissory  note  originally  payable  to the  Hill  Family  Trust  in the
principal  amount  of  $1,450,000  due and  payable  on  January  14,  1997 (the
"Neudecker  Note").  The  rights  as the  holder  of  the  Neudecker  Note  were
eventually  assigned to PPAC,  and  eventually  PPAC  collaterally  assigned its
rights in the Neudecker  Note to a creditor of an affiliate.  On March 22, 1999,
the parties filed a Stipulated  Dismissal  Without  Prejudice  with the Court in
this  case.  As a result,  on April 5, 1999,  the Court  dismissed  this  action
without prejudice.

         On September 25, 1998, Genesee Holdings, Inc. ("Genesee"), as successor
in interest to GFL Ultra Fund,  Ltd.,  brought an action against the Company and
Paul J. Montle,  the Company's  President,  in the 61st Judicial District Court,
Harris County,  Texas (case no. 98-46203),  alleging that the Company breached a
settlement agreement reached in a previous lawsuit to pay an aggregate amount of
$75,000 in two future  installments.  On September 1, 1999,  Genesee, on the one
hand,  and the  Company  and Mr.  Montle,  on the  other  hand  entered  into an
agreement to settle this second lawsuit. This settlement involved the payment of
an amount of $3,500 and the issuance of up to 1,200,000  shares of the Company's
common stock.  This cash amount and number of shares are in addition to the cash
paid and shares issued in connection with the settlement of the first lawsuit.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

                                    PART II.

ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The  Company's  common stock is traded on the OTC Bulletin  Board under
the symbol "CHIP". As of June 30, 1999, the Company had 1,803 holders of record.
Presented below are the high and low closing bid prices of the Company's  common
stock for the two years ended June 30, 1999.
<TABLE>
<CAPTION>

                                                                                High                      Low
<S>                                                                             <C>                        <C>
Fiscal  year  ended June
30, 1998:
         First Quarter                                                          $1.15                     $  .57
         Second Quarter                                                          1.03                        .52
         Third Quarter                                                            .59                        .20
         Fourth Quarter                                                           .35                        .13

Fiscal year ended June 30, 1999:
         First Quarter                                                         $ .145                    $  .055
         Second Quarter                                                          .090                       .040
         Third Quarter                                                           .057                       .032
         Fourth Quarter                                                          .050                       .030
</TABLE>


         The Company has never paid cash  dividends,  and has no  intentions  of
paying cash dividends in the foreseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

         The  following   discussion  provides  information  to  assist  in  the
understanding  of the Company's  financial  condition and results of operations,
and should be read in  conjunction  with the selected  financial  data in Item 6
above and the  consolidated  financial  statements  and related notes  appearing
elsewhere herein

Significant Events

                   From its  inception  and  until  shortly  after  the start of
fiscal 1997, the Company was involved exclusively in the gaming industry. 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 subsidiary.  The
Company  organized  a  number  of  wholly-owned  or   partially-owned   precious
metals/mining  subsidiaries  that  held  rights  in  certain  mining  claims  or
properties  believed to contain precious metals or in certain mineral extraction
technologies.  In February 1999,  primarily due to the unavailability of capital
to  develop  the  Company's   technologies   further,  the  Company  decided  to
discontinue its mineral  activities and furlough its remaining  personnel in the
U.S. The Company allowed its mineral  interests to lapse. The Company  continues
to own a five-acre tract of land in Tecopa, California,  miscellaneous equipment
believed to have an aggregate fair market value of $25,000 and rights in certain
technologies  believed  to have no  meaningful  commercial  value.  The  Company
intends  to  dispose  of the  tract  of land  and  the  remaining  equipment  as
purchasers can be procured.  The Company has no present intentions regarding its
technologies.

         In the future, the Company intends to explore  opportunities to develop
or acquire one or more  businesses in other  industries.  The Company expects to
focus specifically on Internet-related  businesses. The Company does not now any
particular  prospect under  consideration in any meaningful sense. The nature of
the  business  in which the Company  will  engage in the  future,  the terms and
circumstances  under which the Company  will  engage in such  business  and even
whether or not the Company will engage in a future business, are now uncertain.

                              RESULTS OF OPERATIONS

                       Years ended June 30, 1999 and 1998

Overview

Operations  for fiscal 1999 are not comparable to the operations for fiscal 1998
because of the  discontinuance  of its mining operations and the Company had two
one-time gains on forgiveness of debt of $632,000 and gain on sale of marketable
securities  of $106,000.  The Company had revenue of $3,000 from  operations  in
fiscal 1999,  none in fiscal 1998,  and had a net loss of $12,000 in fiscal 1999
and $2,605,000 in fiscal 1998. The decrease in net loss is largely  attributable
to  lower  mining   exploration   costs  of  $773,000  and  lower   general  and
administrative  expenses of  $1,064,000,  together  with higher gains  discussed
above  totaling  $674,000.  Of the total  general and  administrative  expenses,
$127,000 and $906,000 in fiscal 1999 and 1998, respectively,  represented shares
of  common  stock  issued  for  services  valued at market at the time they were
issued.

Operating Revenues

         There were  operating  revenues  of $3,000 from  mining  operations  in
fiscal 1999 and none in fiscal 1998.

Operating Expenses

        General and administrative  expenses decreased $1,064,000 in fiscal 1999
compared to fiscal  1998,  due to  decreased  legal fees and related  litigation
costs. Mining operation costs decreased $773,000 in fiscal 1999 compared to 1998
due to the discontinuance of mining operations in fiscal 1999.

Other Income (Expense)

            Other income (expense) increased significantly in fiscal 1999 versus
1998,  due primarily to debt  forgiveness  income of $632,000 in fiscal 1999 and
increased gain on the sale of marketable securities of $42,000.

Discontinued Business

         In fiscal 1998, the Company had a loss of $52,000  related to the
write-off  of the balance of the value of Papone's  Palace Casino LLC.




                              RESULTS OF OPERATIONS

                       Years ended June 30, 1998 and 1997

Overview

 Operations for fiscal 1998 are not comparable to the operations for fiscal 1997
because the Papone's  Palace casino was open for three months in fiscal 1997 and
the Company had two one-time gains on sales of assets of $1,603,000 and $203,000
and interest expense of $489,000 in fiscal 1998. The Company had no revenue from
operations in fiscal 1998 and had a net loss of $2,605,000. The Company incurred
a net loss of $72,000 on  revenues  of  $238,000  from its  discontinued  casino
business  after the gains  mentioned  above for fiscal 1997. The increase in net
loss is largely  attributable  to a loss from mining  operations  of $935,000 in
fiscal  1998  versus  $20,000 in fiscal  1997,  and an  increase  of $458,000 in
general  and   administrative   costs  in  fiscal  1998,   which  was  primarily
attributable to an increase in legal fees and related  litigation  costs. Of the
total loss of $2,605,000, $906,000 represented shares of common stock issued for
services valued at market at the time they were issued.

Operating Revenues

         There were no operating revenues in fiscal 1998 compared to $238,000 in
fiscal  1997,  all of which  came from the  Company's  now  discontinued  casino
business.

Operating Expenses

         General and  administrative  expenses increased $458,000 in fiscal 1998
compared to fiscal 1997, due to an increase in legal fees and related litigation
costs. Mining operation costs increased $915,000 in fiscal 1998 compared to 1997
due to a greatly  increased  level of research and  development  activity at the
Company's pilot plant in Nevada.

Other Income (Expense)

            Other income (expense) declined  significantly in fiscal 1998 versus
1997, due primarily to fewer gains from non-recurring  items. The only income in
1998 was $64,000 from the sale of marketable  securities  compared to $1,623,000
gains in 1997. However, interest expense declined to $25,000 in 1998 compared to
$489,000  due to the  disposal of the casino  business  and related debt late in
fiscal 1997.  Litigation settlement costs increased to $153,000 in 1998 compared
to $88,000 in 1997.

Discontinued Business

         In fiscal  1998,  the  Company  had a loss of  $52,000  related  to the
write-off of the balance of the value of Papone's  Palace Casino LLC compared to
a net gain in disposal of the Clutch Games  business in 1997 of $135,000,  which
reflects a gain on sale of $203,000 less a $68,000 loss from  operations of that
business.



                         LIQUIDITY AND CAPITAL RESOURCES

Overview

         As of June 30, 1999,  the Company had a working  capital  deficiency of
$946,000  compared to $1,328,000 a year  earlier.  Throughout  fiscal 1999,  the
Company has been able to continue  meeting cash  requirements by selling assets,
renegotiating  existing debt obligations,  issuing new debt, paying for services
with  stock,  issuing  common  stock  through  private  placements  and  capital
contributions by subsidiary minority shareholders. The ability of the Company to
continue to pursue its  business  objectives  throughout  fiscal 2000 and beyond
will depend on the Company's  ability to continue to meet its cash  requirements
by the means  mentioned  above and the potential sale of its shares and warrants
in another  public  company which was spun off from the Company in May, 1998 and
ultimately  to achieve  profitability  with respect to its business  operations.
There can be no assurance  that the Company will sustain this ability or achieve
this goal.

Current Assets and Current Liabilities

         During fiscal 1999, current assets declined  approximately  $89,000 due
primarily to a reduction in marketable securities of $8,000 and receivables from
affiliated  parties of $81,000.  Current  liabilities  decreased  by $471,000 in
fiscal 1999  compared to fiscal 1998,  primarily due to  forgiveness  of debt of
$632,000.  Offsetting the reduction,  notes payable to related parties increased
by $113,000 during fiscal 1999 as a result of borrowings.

Stock Sales

         During  fiscal  1998,  the Company  issued  3,111,000  shares of its
common stock at an average  price per share of $.20.  The Company received net
proceeds of $607,000.

         During fiscal 1997,  the Company  issued  543,000  shares of its common
stock  outside the United  States at gross  prices per share of between $.10 and
$1.00. The Company received net proceeds of $128,000, an average price per share
of $.22.

During fiscal 1998,  the Company  issued  150,000  shares of its common stock in
connection  with  the  acquisition  of gold  mining  properties.  The  Company's
interest in such  ventures has been valued in the fiscal 1998  balance  sheet at
$181,000.

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The  reports  of  Company's  Independent  Auditors  appear  at Page F-1
hereof, and the Consolidated  Financial Statements of the Company appear at Page
F-2 through F-9 hereof.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         Not applicable.

                                    PART III.

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

        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>
                  Paul J. Montle                     52                1993             1993
                  Chairman of the
                  Board, President and
                  Chief Executive Officer

                  Roger W. Cope                      58                1993             -----
                  Director

                  C. Thomas Cutter                   59                1993             -----
                  Director
</TABLE>


         Paul J.  Montle  has  served  as the  Chairman  of the  Board and Chief
Executive  Officer of the Company since 1992. From 1991 to October 15, 1994, Mr.
Montle served as President and Chief Executive  Officer of Viral Testing Systems
Corporation ("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.  Since 1987, Mr. Montle has been a Managing  Director of Montle
International Incorporated, a privately-held merchant banking firm.

         Roger W. Cope has served as a Director  of the Company  since 1993.  He
now  serves  as Vice  President  -  Business  Development  with  Lamb  Technicon
Machining Systems. From June 30, 1993 until January 16, 1996, Mr. Cope served as
President  of the Company and Manager of Papone's  Palace,  Ltd.  Liability  Co.
During  1991 and 1992,  he served as  Director  of  Strategic  Planning  for the
Applied  Technology  Division of Litton Systems,  Inc., a provider of electronic
warfare products to the defense industry.  From 1986 to 1991, Mr. Cope served as
President of Cope Development  Corp., a privately-held  consulting firm. He also
serves as a  Director  of Waste  Recovery,  Inc.,  a  publicly-held  corporation
engaged in specialized resource recovery.

         C. Thomas Cutter has served as a Director of the Company since December
1992.  For  over 14  years,  he has  served  as  President,  Director  and  sole
shareholder  of Cutter Fire Brick Co.,  Inc. and Cutter  Northern  Refractories,
Inc., both of which are engaged in the repair and maintenance of industrial heat
enclosures. For over 24 years, Mr. Cutter has served as President,  Director and
sole shareholder of Cutter Ceramics, Inc., a manufacturer and distributor of art
clay.

        Each  officer of the  Company  generally  serves at the  pleasure of the
Board of Directors.

         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.

ITEM 10.  EXECUTIVE COMPENSATION.

                        Report for Compensation Committee
                            on Executive Compensation

         The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Company's compensation policies and the compensation
paid to its executive  officers  (including the executive officers named below).
The Company's  compensation  program for its executive  officers  (including the
Chief Executive Officer) is designed to provide levels of compensation  required
to assist the Company in attracting and retaining  qualified executive officers.
The Compensation  Committee attempts to set an executive officer's  compensation
at a level which is similar to such officer's  peers in the Company's  industry.
Generally,   executive  officer  compensation  (including  the  Chief  Executive
Officer) is not directly  related to the  Company's  performance.  Instead,  the
Compensation  Committee has a philosophy which recognizes  individual initiative
and  achievement  which can  significantly  influence an officer's  compensation
level. The executive  compensation  program is comprised of salary,  annual cash
incentives  and stock  options.  The  following is a  discussion  of each of the
elements of the executive compensation program.

         Salary. Generally, base salary for each executive officer is similar to
levels  within the industry and  comparable to the level which could be attained
for equal positions  elsewhere.  Also taken into account are benefits,  years of
service,  responsibilities,  Company  growth,  future  plans  and the  Company's
current ability to pay.

         Annual Cash Incentives.  The annual cash incentive plan is a cash bonus
program designed to reward significant corporate  accomplishments and individual
initiatives demonstrated by executive officers during the prior fiscal year. The
amount of each cash bonus is determined by the Compensation Committee at the end
of the fiscal year and is paid in cash in a single payment.

         Stock Options.  The 1993, 1994 and 2000 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:
                                              Paul J. Montle
                                              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.  No other executive  officer
whose total  annual  salary and bonus for the fiscal  year ended June 30,  1999,
1998 or 1997 exceeded $100,000 for services in all capacities to the Company and
its subsidiaries.
<TABLE>
<CAPTION>

                                                 Summary Compensation Table (1)

                                                    Annual                                       Long-Term
                                                    Compensation                                 Compensation

         (a)                        (b)              (c)                        (g)

         Name and                   Fiscal                            Securities Underlying
         Principal                  Year                              Stock Options
         Position                   Ended           Salary            (Number of Shares)
<S>                                 <C>                <C>                 <C>                        <C>
         Paul J. Montle             6/30/99          $124,019(2)                                     -0-
         Chairman and               6/30/98          $183,225          290,000
         Chief Executive            6/30/97          $200,912          500,000
         Officer
-----------------
</TABLE>

(1)      The Columns  designated by the SEC for the reporting of certain  annual
         compensation  (including  bonuses and other  annual  compensation)  and
         certain long-term  compensation  (including awards of restricted stock,
         long term incentive plan payouts, and all other compensation) have been
         eliminated  as no such  bonuses,  other  annual  compensation,  awards,
         payouts  or  compensation  were  awarded  to,  earned by or paid to any
         specified person during any fiscal year covered by the table.
(2)      Of this amount, only $29,673 was actually paid while the remaining
         $94,346 was accrued.

                               Stock Option Grants

         The  Company  did not grant any stock  options  during the fiscal  year
ended June 30, 1999.

                  Option Exercises/Value of Unexercised Options

         The  following  table sets forth the  number of  securities  underlying
options  exercisable  at June  30,  1999,  and the  value  at June  30,  1999 of
exercisable in-the-money options remaining outstanding as to the Chief Executive
Officer of the Company. No SAR's of any kind have been granted.
<TABLE>
<CAPTION>

                                         Aggregated Option Exercises in Last
                                    Fiscal Year and Fiscal Year End Option Values

(a)                                         (d)                                         (e)

                                    Number of Securities
                                    Underlying Unexercised                      Value of Unexercised
                                    Options at June 30, 1999                    In-the-Money Options at
                                    (Numbers of Shares)                         June 30, 1999
Name                                Exercisable      Unexercisable              Exercisable      Unexercisable

<S>                                         <C>               <C>                          <C>                        <C>
Paul J. Montle                              591,600           200,000                      (2)                        (2)
---------------------
</TABLE>

(1)      The Columns  designated  by the SEC for the  reporting of the number of
         shares  acquired on exercise,  the value  realized,  and the number and
         value of unexercisable  options have been eliminated as no options were
         exercised and no  unexercisable  options existed during the fiscal year
         covered by the table.
(2)      The  average of the  closing  bid and ask prices of the Common  Stock
         on June 30,  1999 on the NASDAQ  Stock  Market was $.04, which was less
         than the exercise price of all options reported in the table.

                                   Other Plans

         The Company has no other deferred  compensation,  pension or retirement
plans in which executive officers participate.

                             Compensation Agreements

         The Company  currently  has no written  employment  contracts  or other
written compensation agreements with any of its current executive officers.

                        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, 1999,  all filing  requirements  applicable to the Company's  officers,
directors and greater than 10 percent shareholders were satisfied.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following  table sets forth certain  information as of June 30, 1999
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>
         Paul J. Montle                                                 2,111,434(2)              9.86%
           Rivercourt
           17 - 19 Sir John Rogersons Quay
           Dublin 2
           Ireland

         Roger W. Cope                                                1,355,798(3)               6.33%
           5663 East Nine Mile Rd.
           Warren, Michigan 48901

         C. Thomas Cutter                                                 2,200(4)                (5)
           82 Olympia Ave.
           Woburn, Massachusetts 01801

         Kent E. Lovelace, Jr.                                        2,497,058(6)              11.66%
           1105 30th Ave., Suite 200
           Gulfport, Mississippi 39501

         David W. Tice & Associates, Inc.                             1,573,000(7)               7.34%
           8140 Walnut Hill Lane, Suite 405
           Dallas, Texas 75231

         Prudent Bear Fund, Inc.                                      1,420,000(8)               6.63%
           8140 Walnut Hill Lane, Suite 405
           Dallas, Texas 75231

         All directors and officers
         as a group (three persons)                                   3,469,432(9)              16.20%
</TABLE>

---------------------

(1)      Includes  shares of Common  Stock  beneficially  owned  pursuant to
         options and warrants  exercisable  on the June 30, 1999 or within 60
         days thereafter.
(2)      Includes 1,502,483 shares of Common Stock directly owned, 17,351 shares
         of Common Stock held by Travis Partners, 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 591,600 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,  all such
         shares of which Mr. Montle disclaims beneficial ownership.
(3)      Includes  1,349,398  shares  directly  owned and 6,400 shares of Common
         Stock   beneficially   owned   pursuant  to  stock  options   currently
         exercisable.  Does not include  12,000 shares owned by Elizabeth  Cope,
         Mr. Cope's wife, all such shares of which Mr. Cope disclaims beneficial
         ownership.
(4)      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.
(5)      Less than 1%
(6)      Includes  2,064,658  shares  directly  owned,  358,000 shares of Common
         Stock  beneficially  owned  pursuant  to  non-qualified  stock  options
         currently  exercisable,  68,000 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.  Does not include 36,000 shares
         owned by Cheryl Lovelace, Mr. Lovelace's wife, all such shares of which
         Mr. Lovelace disclaims beneficial ownership.
(7)      Shares beneficial ownership over 1,420,000 shares with Prudent Bear
         Fund, Inc. Moreover, the information set forth with respect to this
         stockholder was obtained from a Schedule 13D filed by such stockholder
         with the U.S. Securities and Exchange Commission.
(8)      Shares beneficial ownership over 1,420,000 shares with David W. Tice &
         Associates, Inc. Moreover, the information set forth with respect to
         this stockholder was obtained from a Schedule 13D filed by such
         stockholder with the U.S. Securities and Exchange Commission.
(9)      Includes 2,852,081 shares directly owned;  600,000 shares  beneficially
         owned pursuant to stock options and warrants currently exercisable; and
         17,351  shares   beneficially   owned  indirectly   through  affiliated
         entities.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         None.


<PAGE>


                                    PART IV.

ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Documents filed as part of this report:
<TABLE>

1.  Consolidated Financial Statements:

<S>                                                                                                               <C>
         Report of Independent Auditor .........................................................................F-1

         Consolidated Balance Sheets as of June 30, 1999 ...................................................... F-2

         Consolidated Statements of Income for the years ended
         June 30, 1999 and 1998 ............................................................................... F-3

         Consolidated Statements of Stockholders' Equity for the
         years ended June 30, 1999 and 1998 ....................................................................F-4

         Consolidated Statements of Cash Flows for the years
         ended June 30, 1999 and 1998 ......................................................................... F-5

         Notes to Consolidated Financial Statements ............................................................F-6
</TABLE>

2.  Financial Statement Schedule:

         Schedule II - Valuation and Qualifying Accounts

3.  Exhibits:

         The  following  exhibits  are  filed  with  this  Annual  Report or are
incorporated herein by reference:
<TABLE>
<CAPTION>

         Exhibit
         Number            Description

<S>      <C>               <C>
         4.01              Certificate  of  Incorporation  of the Company filed December 30, 1992 is  incorporated  herein by
                           reference from the Company's (SEC File No. 33-57998-D) Form SB-2  Registration  Statement filed April 29,
                           1993, Item 27(a), Exhibit 3.1.
         4.02              Bylaws of the Company are  incorporated  herein by reference from the Company's (SEC File No. 33-57998-D)
                           Form SB-2 Registration Statement filed April 29, 1993, Item 27(a), Exhibit 3.2.
         4.03              Certificate of Amendment of Certificate of Incorporation of the Company is incorporated  herein by
                           reference from the Company's (SEC File No.  33-57998-D)  Form SB-2  Registration  Statement filed April
                           29, 1993, Item 27(a), Exhibit 3.5..
         4.04              Amendment to Certificate of Incorporation filed February 2, 1995 is incorporated herein by reference from
                           the Company's (SEC File No.  0-21566) Report on Form 10-Q for the period ended December 31, 1994, Item 6,
                           Exhibit 3.01
         4.05              Certificate of Designation, Preferences, Rights and Limitations of 12% Senior Convertible Preferred Stock
                           of the Company filed January 25, 1993, is incorporated  herein by reference from the Company's (SEC File
                           No. 33-57998-D) Form SB-2 Registration Statement filed April 29, Item 27(a), Exhibit 4.1.
         4.06              Certificate of Amendment of Certificate of  Incorporation of the Company filed June 26, 1996 is
                           incorporated herein by reference from the Company's (SEC File No. 0-21566) Annual Report on Form 10-K for
                           the year ended June 30, 1996, Part IV, Item 14(c), Exhibit 4.06.
         10.01             The Company's 1993 Stock Option Plan is  incorporated
                           herein by reference  from the Company's (SEC File No.
                           33-57998-D ) Form SB-2  Registration  Statement filed
                           April 29, 1993, Item 27(a), Exhibit 10.8.
         10.02             Amendment  to the Company  1993 Stock  Option Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC  File No.  0-21566)  Report on Form 10-Q for the
                           period  ended  September  30,  1994,  Item 6, Exhibit
                           10.8.
         10.03             Amendment  No. 2 to the  Company  1993  Stock  Option  Plan is  incorporated  herein by  reference  from
                           the Company's  (SEC File No.  0-21566)  Report on Form 10-Q for the period  ended  December  31,  1994,
                           Item 6, Exhibit 10.02.
         10.04             Amendment  No. 3 to the  Company  1993  Stock  Option  Plan is  incorporated  herein by  reference  from
                           the Company's  (SEC File No.  0-21566)  Report on Form 10-Q for the period  ended  December  31,  1994,
                           Item 6, Exhibit 10.03.
         10.05             The Company's  1994 Employee  Stock  Purchase Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC  File No.  0-21566)  Report on Form 10-Q for the
                           period ended December 3, 1994, Item 6, Exhibit 10.06.
         10.06             The Company's  Capital  Accumulation  Plan is incorporated  herein by reference from the Company's (SEC
                           File No. 0-21566) Report on Form 10-Q for the period ended December 31, 1994, Item 6, Exhibit 10.07.
         10.07             The Company's 1994 Stock Option Plan for Non-Employee Directors is incorporated  herein by reference from
                           the Company's (SEC File No.0-21566) Report on Form 10-Q for the period ended  December 31, 1994,  Item 6,
                           Exhibit 10.08.
         10.08             The Company's 1998  Consultant  Compensation  Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC File No.  333-31963)  Registration  Statement on
                           Form S-8 filed July 24, 1997, Exhibit 4.2.
         10.09             The Company's Fiscal 2000 Non-Qualified  Stock Option Plan is incorporated  herein by reference  from the
                           Company's (SEC File No. 333-87825) Registration Statement on Form S-8 filed  September 27, 1999,  Exhibit
                           4.2.
         10.10             The Company's 1999  Consultant  Compensation  Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC File No.  333-65761)  Registration  Statement on
                           Form S-8 filed October 15, 1998, Exhibit 4.2.
         10.11             Letter Employment Agreement dated March 13, 1998 between the Company and Terry Christopher is
                           incorporated herein by reference  from the  Company's  (SEC File No.  0-21566)  Annual Report on Form
                           10-SBK for the year ended June 30, 1998, Part IV, Item 14(c), Exhibit 10.28.
         10.12             Letter  Employment  Agreement  dated  June  11,  1998
                           between  the  Company,  Desert  Minerals,  Inc.,  SWM
                           Ventures,  Inc.  and  Martin  Blake  is  incorporated
                           herein by reference  from the Company's (SEC File No.
                           0-21566)  Annual  Report on Form  10-SBK for the year
                           ended June 30,  1998,  Part IV, Item  14(c),  Exhibit
                           10.29.
         10.13             Amended and Restated Agreement dated September  1, 1999  between  Genesee  Holdings,  Inc.,  successor in
                           interest to GFL Ultra Fund, Ltd., on the one hand, and the Company and Paul J. Montle, on the other hand.
         21.01             Subsidiaries of Registrant.
         27                Financial Data Schedule

</TABLE>

          (b)     Reports on Form 8-K

                  The  Registrant  filed no report on Form 8-K  during  the last
quarter of its 1999 fiscal year.



<PAGE>










                          Independent Auditors' Report


To the Board of Directors and Stockholders
  LS Capital Corporation
  Houston, Texas

We have  audited  the  accompanying  consolidated  balance  sheets of LS Capital
Corporation  as of  June  30,  1999  and  1998,  and  the  related  consolidated
statements of income,  stockholders'  equity,  and cash flows for the years then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  LS  Capital
Corporation  as of June 30, 1999 and 1998, and the results of its operations and
its cash flows for the years then ended, in conformity  with generally  accepted
accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 2. The  consolidated  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.


October 5, 1999

Malone & Bailey, PLLC
Houston, Texas


<PAGE>


                             LS CAPITAL CORPORATION
                                 Balance Sheets
<TABLE>
<CAPTION>


                                                                                - As of June 30, -
         (in thousands)                                                           1999    1998
-----------------------------------------------------------------------------------------------

                           ASSETS
Current Assets
<S>                                                                               <C>     <C>
  Marketable securities                                                                   $          8
  Receivable from affiliated parties                                                                81
                                                                                            ----------

         Total Current Assets                                                                       89


Land held for resale                                                   $        22                  22
Equity investment in gold mining ventures                                                          181
Other assets                                                                                         9
                                                                       -----------         -----------

         TOTAL ASSETS                                                  $        22        $        301
                                                                       ===========         ===========



                  LIABILITIES
Current Liabilities
  Accounts payable                                                     $      586         $      1,136
  Accrued expenses                                                            237                  196
  Notes payable to related parties                                            123                   10
  Redemption payable - redeemable preferred stock                                                   75
                                                                       -------------         ---------

         Total Current Liabilities                                            946                1,417
                                                                       -------------         ---------

Minority interest in subsidiaries
Contingent liabilities

Stockholders' Equity
  Preferred stock, par value $.01, 10,000,000
    shares authorized, no shares issued or
    outstanding
  Common stock, par value $.01, 50,000,000
    shares authorized, 21,718,000 and
    17,598,000 shares issued and outstanding                                  217                  176
  Paid in capital                                                          27,068               26,906
  Accumulated deficit                                                     (28,210)             (28,198)
                                                                          --------              --------

         Total Stockholders' Equity Deficit                               (   924)             ( 1,116)
                                                                           --------              --------

         TOTAL LIABILITIES AND STOCKHOLDERS'
                  EQUITY                                            $          22          $       301
                                                                      =============        ===========

</TABLE>






      See summary of accounting policies and notes to financial statements.
                                       F-2


<PAGE>

<TABLE>
<CAPTION>

                             LS CAPITAL CORPORATION
                                Income Statements


                                                                                          Year Ended June 30,
         (in thousands)                                                                    1999          1998
---------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>           <C>
REVENUES                                                                                 $      3         -

OPERATING EXPENSES
  Mining exploration costs                                                                    162          935
  General and administrative                                                                  588        1,652
  Depreciation and amortization                                                                 3            5
                                                                                         ---------       -----

         OPERATING (LOSS)                                                                 (   750)     ( 2,592)
                                                                                          --------     --------

Other Income (Expense)
  Debt forgiveness income                                                                     632
  Gain on sale of marketable equity securities                                                106           64
  Interest expense                                                                                       (  25)
                                                                                          --------      -------
         (LOSS) FROM CONTINUING OPERATIONS                                                (    12)      (2,553)

DISCONTINUED BUSINESS - Papone's Casino, LLC
  Loss on foreclosure                                                                                  (    52)
                                                                                          ---------  ----------

         NET (LOSS)                                                                      $(    12)     $( 2,605)
                                                                                           ========    ========




NET (LOSS) PER COMMON SHARE
  Continuing operations                                                                  $(  0.00)    $(  0.19)
  Discontinued operations                                                                                 0.00
Weighted average common shares outstanding                                             19,143,000   13,481,000



</TABLE>
















      See summary of accounting policies and notes to financial statements.
                                       F-3


<PAGE>

                             LS CAPITAL CORPORATION
                       Statements of Stockholders' Equity

<TABLE>
<CAPTION>

                                              Common Stock       Paid in    Accum.
         (in thousands)                 Shares          Amount  Capital     Deficit    Totals

<S>                                       <C>            <C>    <C>        <C>            <C>
         Balances, June 30, 1997        12,150       $   121    $25,374   $(25,593)  $(   98)

Shares issued for cash                   3,111            31        586                  617
  Less:  commission paid                                         (   10)              (   10)

Shares issued for services               2,413            24        882                  906

Shares issued in connection with
-        acquisition of gold
          mining ventures                  150             2        110                  112
-        accrued interest on
          convertible debentures            28                        6                    6

Stock dividend - JVWeb spinoff                                   (    3)              (    3)

Cancellation of share
  Subscriptions                         (  254)      (    2)     (   39)               (   41)

Net (loss)                                                                  ( 2,605)   (2,605)
                                          -------    -------    ---------    -------    -------


         Balances, June 30, 1998        17,598          176      26,906     (28,198)   (1,116)


Shares issued for services               2,620           26         102                   127

Shares issued for debt
  cancellation                           1,500           15          60                    75

Net income                                                                  (    12)   (   12)
                                         -------      -------     -------    --------   -------


         Balances, June 30, 1999       17,598       $   217     $27,068    $(28,210)  $(  924)
                                       ======        =======    =======    ========   =======



</TABLE>













      See summary of accounting policies and notes to financial statements.
                                       F-4

<PAGE>


                             LS CAPITAL CORPORATION
                             Statements of Cash Flow

<TABLE>
<CAPTION>

                                                                                     Year Ended June 30,
         (in thousands)                                                               1999         1998
-------------------------------------------------------------------------------------------------------

Cash Flows from Operating Activities
<S>                                                                                  <C>           <C>
  Net (loss)                                                                     $(   12)        $(2,605)
  Adjustments to reconcile net income (loss)
    To net cash used in operating activities
         Depreciation and amortization                                                 3               5
         Debt forgiveness income                                                  (  632)
         Gain on sale of marketable securities                                    (  106)
         Stock issued for services                                                   128             906
         Stock issued for mining claims                                              113
         Writedown of mining venture investments                                     184             179
         Writeoff of stock subscriptions receivable                                   41
         Loss on foreclosure of Papone's Casino, LLC                              (   52)
         Stock issued to pay interest expense                                                          6
         Changes in:
           Funds held in law firm trust accounts                                                      73
           Marketable securities                                                                       7
           Receivable from affiliated parties                                         81             365
           Other current assets                                                                        8
           Accounts payable                                                           83             289
           Accrued expenses                                                           41             161
                                                                                  -------          ------
                                                                                  (  230)         (  530)
                                                                                  -------          ------
Cash Flows from Investing Activities
  Proceeds from sale of marketable securities                                        117
  Purchase of mining claims                                                                       (   10)
  Purchase of JVWeb common stock                                                                  (    5)
                                                                                  -------           ------
                                                                                     117           (   15)
                                                                                  -------            ------
Cash Flows from Financing Activities
  Loans from shareholders                                                            113
  Sales of Company common stock                                                                       516
  Reimbursements by attorneys of excess fees
    paid in S-8 stock                                                                                  49
  Payments on redemption payable                                                                   (   25)
                                                                                ----------        --------
                                                                                     113               540

Net increase (decrease) in cash                                                        0            (    5)
         Cash at beginning of year                                                     0                 5
                                                                           --------------          --------

         Cash at end of year                                                    $     0            $     0
                                                                                ========            =======


SUPPLEMENTAL INFORMATION
  Interest paid                                                                 $     0            $     0
  Income taxes paid                                                                   0                  0

</TABLE>




      See summary of accounting policies and notes to financial statements.
                                       F-5

<PAGE>


                             LS CAPITAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

Business.  LS Capital Corporation  ("Company") is a Delaware  corporation formed
December 30, 1992, to develop and operate casinos and related resort facilities.
During the past three  years,  the  Company  acquired  interests  in gold mining
claims and exploration and development of those claims.  Currently,  the Company
has no operations. The fiscal year-end is June 30.

Basis of Presentation.  The consolidated  financial  statements  include varying
ownership   interests  in  nine  different   currently  inactive   corporations.
Significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

Use of Estimates.  Preparing  financial  statements  requires management to make
estimates  and  assumptions   that  affect  the  reported   amounts  of  assets,
liabilities,  revenues,  and  expenses.  Actual  results could differ from those
estimates.

Cash includes  demand deposit bank accounts.  Company policy includes any highly
liquid investments with original maturities of three months or less.

Marketable Securities are shown at market value.

Receivables are written down, where  appropriate,  to the estimated  collectible
amount in the opinion of management.

Depreciation is calculated using the straight-line  method over the useful lives
of property and equipment.

Equity Investment in Gold Mining Ventures includes the Company's approximate 50%
ownership  share of the net book value of each of three  different  corporations
formed to exploit certain  adjacent mining claims in eastern  California.  Costs
incurred  procuring  mining claims are considered  exploration  and  development
costs and are  capitalized  until the claims are producing or are written off as
unproductive.  Costs incurred in extraction  process methods testing are written
off as incurred.

Earnings  (Loss)  Per  Share  calculations  are  presented  in  accordance  with
Financial Accounting Standards Statement 128, and are calculated on the basis of
the weighted average number of common shares  outstanding  during the year. They
include the dilutive  effect,  of common stock  equivalents,  principally  stock
options, in years with net income.

Income  taxes are not due since the Company  has had  substantial  losses  since
inception.

Reclassifications  of certain  prior year  amounts were made to conform with the
current year presentation.


                                       F-6

<PAGE>


                             LS CAPITAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

NOTE 2 - GOING CONCERN

Since inception, the Company has incurred substantial recurring operating losses
resulting in cash flow problems.  The Company's principal  operating  subsidiary
and sole casino  operation,  Papone's  Casino,  was lost through  foreclosure in
October 1998.

All current gold mining leases have expired,  and all related mining assets have
been written off, excepting one real estate tract currently held for sale.

The Company has no present  intentions  regarding its gold mining  technologies,
and  intends  to  pursue  other  business  prospects,  although  none are as yet
identified.

Ther  Company has in the past relied to a large extent upon cash  proceeds  from
stock sales for working  capital  requirements.  There can be no assurance  that
present  or future  conditions  will be  conducive  to funding  current  working
capital needs from proceeds from stock sales. Absent stock sales, the Company is
uncertain how it is going to fund working  capital  requirements.  The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.


NOTE 3 - FORGIVENESS OF DEBT

In the early 1990s, the Company incurred  substantial unpaid debts in connection
with its casino site exploratory  activities  through its various  subsidiaries.
The  Company's  policy  is to  recognize  as debt  forgiveness  income  any such
liabilities  for which no attempt at collection  has been made for more than the
statute of  limitations  period in each state in which the debts were  incurred.
During the years ended June 30, 1999 and 1998, $632,000 and $0, respectively, of
such liabilities were written off as forgiveness of debt income.


NOTE 4 - INCOME TAXES

Net operating  losses of $2,800,000 are available as of June 30, 1999, to offset
future  taxable  income.  Of this amount,  about $260,000 is restricted to about
$15,000 per year,  due to the  Internal  Revenue  Code  Section  382  limitation
relating to  significant  changes in ownership,  which occurred in October 1996.
These net operating losses expire mostly in the years 2012 and 2013.


NOTE 5 - REDEEMABLE PREFERRED STOCK

On June 30,  1997,  54  remaining  shares of  convertible  preferred  stock were
converted into 600,000 common shares valued at $504,800,  plus $100,000  payable
in 3 installments due on or before December 31, 1997. $25,000 of this obligation
was paid in 1998,  and the  balance was repaid  with the  issuance of  1,500,000
shares of Company common stock in early 1999.
                                       F-7

<PAGE>


                             LS CAPITAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 6 - COMMITMENTS AND CONTINGENCIES

As a result of casino  development  efforts  in the years  1993 - 1995 and other
business  investment  transactions,  the Company and its subsidiaries  have been
sued by a number of entities during the past few years.  Several of the lawsuits
were settled  without  significant  cost to the Company in fiscal 1998 and 1999.
During fiscal 1998,  three  lawsuits were reduced to judgment  liens against the
Company and are included in accounts  payable.  There is currently one remaining
active lawsuit with a maximum exposure to the Company estimated by management at
$30,000. Management believes the likelihood of significant losses on this or any
other  possible  lawsuits  is remote,  and that any  possible  future  losses in
aggregate are not significant.


NOTE 7 - STOCK OPTIONS AND WARRANTS

Beginning in 1997, the Company adopted the disclosure  requirements of SFAS 123,
Accounting for Stock Based Compensation Plans. The Company's 1993 and 1995 Stock
Option Plans provide for the grant of incentive stock options  qualifying  under
the Internal  Revenue Code to officers and other  employees of the Company,  the
grant of  non-qualified  options to directors,  employees and consultants of the
Company, and opportunities for directors, officers, employees and consultants of
the Company to make purchases of stock in the Company. In addition,  the Company
issues stock warrants from time to time to employees, consultants,  stockholders
and  creditors  as  additional  financial  incentives.  The plans  and  warrants
issuances  are  administered  by a committee  of the Board of  Directors  of the
Company,  who have substantial  discretion to determine which persons,  amounts,
time, price, exercise terms, and restrictions, if any. Both options and warrants
carry certain  anti-dilution  provisions  concerning  stock dividends or splits,
mergers and  reorganizations.  Options  differ from warrants in that most of the
options awards have employment termination restrictions, vesting periods and are
non-transferable.  In contrast, all warrants issued are immediately  exercisable
and are assignable.

The Company uses the intrinsic value method of calculating compensation expense,
as  described  and  recommended  by APB  Opinion 25, and allowed by SFAS 123. No
options or warrants were issued  during fiscal 1999.  During the year ended June
30,  1998,  no  compensation  expense was  recognized  for the issuance of these
options and warrants  because no option  prices were below market  prices at the
date of grant.  In addition,  no options or warrants have been exercised  during
these periods. As of June 30, 1999, almost all outstanding warrants are payments
for consulting and  professional  services.  Summary  information on each are as
follows:
<TABLE>
<CAPTION>
                                                              Weighted                           Weighted
                                                                Average                            Average
                                              Options         Share Price         Warrants       Share Price

<S>                                             <C>              <C>              <C>             <C>
Outstanding at June 30, 1997:                  818,200          $1.63            472,800         $16.15
Year ended June 30, 1998:
  Granted                                    1,260,000            .44
  Expired                                                                        (38,000)         71.63
                                             ------------       -----            -------         ------

Outstanding at June 30, 1998:                2,078,200          $ .98            434,800         $12.65
</TABLE>
                                       F-8

<PAGE>


                             LS CAPITAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 7 - STOCK OPTIONS AND WARRANTS (continued)
<TABLE>
<CAPTION>

                                                                Weighted            Weighted
                                                                Average             Average
                                                 Options     Share Price  Warrants  Share Price

<S>                                                <C>               <C>        <C>         <C>
Outstanding at June 30, 1998:               2,078,200         $  .98     434,800     $12.65
Year ended June 30, 1999:
  Expired                                    (   200)          25.00     (78,000)     75.00
                                                ---------     ------     -------     ------

Outstanding at June 30, 1999:              2,078,000          $  .98     364,800     $ 6.15
                                           =========          ======     =======     ======
</TABLE>


Additional disclosures as of June 30, 1999, are:
<TABLE>
<CAPTION>

                                             Options          Options            Options
                                            $.26-$.75         $1.00-$2.03        $15-$122
Total Options
<S>                                         <C>                 <C>               <C>
  Number of shares                          1,900,000           161,000           17,000
  Weighted average exercise price              $ 0.47            $ 1.01           $56.69
  Remaining life                               6 years          8 years          5 years
Currently exercisable options
  Number of shares                          1,100,000            81,000           15,200
  Weighted average exercise price              $ 0.41            $ 1.01           $71.69
</TABLE>
<TABLE>
<CAPTION>


                                            Warrants           Warrants     Warrants
                                            $.40-$.75          $2 - $5     $28-$62.50
Total warrants
<S>                                          <C>              <C>        <C>
  Number of shares                           106,000          230,000    28,800
  Weighted average exercise price             $ 0.58          $ 2.39     $56.75
  Remaining life                             2 years          2 years    1 year
</TABLE>

All warrants are currently exercisable.

Had compensaiton cost for the Company's two stock-based  compensation plans been
determined  based on the fair value at the grant  dates for awards  under  those
plans consistent with the Black-Scholes  option-pricing  model suggested by SFAS
123, the  Company's  net losses and loss per share would have been  increased to
the pro forma amount indicated below:
<TABLE>
<CAPTION>

                                                                                  1999     1998

<S>                                                                               <C>      <C>
         Net loss                   - As reported                               $(    12) $( 2,605)
                                    - Pro forma                                  (   196)  ( 3,069)
         Net loss per share         - As reported                               $(  0.00)  (  0.19)
                                    - Pro forma                                  (  0.01)  (  0.22)
</TABLE>

Variables  used in the  Black-Scholes  option-pricing  model  include  (1)  5.5%
risk-free  interest rate, (2) expected option life is the actual  remaining life
of the  options  as of each year end,  (3)  expected  volatility  is the  actual
historical stock price fluctuation volatility and (4) zero expected dividends.

                                       F-9


<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, LS Capital  Corporation has duly caused this annual report
on Form  10-KSB to be signed on its behalf by the  undersigned,  thereunto  duly
authorized.

Dated:   November 9, 1999                          LS Capital Corporation
                                                   (Registrant)

                                                   By:    /s/ Paul J. Montle
                                                   Paul J. Montle,
                                                   Chief Executive Officer
                                                   (Principal Executive Officer,
                                                   Principal Financial Officer
                                                   and Principal Accounting
                                                   Officer)

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Name                                Title                              Date

/s/ Paul J. Montle                  Chairman of              November 9, 1999
Paul J. Montle                      the Board



/s/ Roger W. Cope                   Director                 November 9, 1999
---------------------
Roger W. Cope



/s/ C. Thomas Cutter                Director                November 9, 1999
--------------------------
C. Thomas Cutter






<PAGE>


                                 EXHIBITS INDEX

         Exhibit
         Number            Description
<TABLE>
<CAPTION>

<S>      <C>                <C>
         4.01              Certificate of Incorporation of the Company filed December 30, 1992 is
                           incorporated  herein by reference from the Company's  (SEC File No.  33-57998-D)
                           Form SB-2 Registration Statement filed April 29, 1993, Item 27(a), Exhibit 3.1.
         4.02              Bylaws of the Company are  incorporated  herein by reference from the Company's (SEC File No. 33-57998-D)
                           Form SB-2 Registration Statement filed April 29, 1993, Item 27(a), Exhibit 3.2.
         4.03              Certificate  of  Amendment of  Certificate  of  Incorporation  of the
                           Company is  incorporated  herein by reference  from the Company's  (SEC File No.
                           33-57998-D) Form SB-2  Registration  Statement filed April 29, 1993, Item 27(a), Exhibit 3.5..
         4.04              Amendment to Certificate of  Incorporation  filed February 2,
                           1995 is  incorporated  herein  by  reference  from the  Company's  (SEC File No.
                           0-21566)  Report on Form 10-Q for the period ended  December  31, 1994,  Item 6, Exhibit  3.01
         4.05              Certificate  of  Designation,   Preferences,   Rights  and
                           Limitations  of 12% Senior  Convertible  Preferred  Stock of the  Company  filed
                           January 25, 1993, is  incorporated  herein by reference  from the Company's (SEC
                           File No.  33-57998-D)  Form SB-2  Registration  Statement  filed  April 29, Item 27(a),   Exhibit  4.1.
         4.06              Certificate   of  Amendment  of   Certificate  of
                           Incorporation  of the  Company  filed June 26,  1996 is  incorporated  herein by
                           reference from the Company's (SEC File No.  0-21566)  Annual Report on Form 10-K
                           for the year ended June 30, 1996, Part IV, Item 14(c), Exhibit 4.06.
         10.01             The Company's 1993 Stock Option Plan is  incorporated
                           herein by reference  from the Company's (SEC File No.
                           33-57998-D ) Form SB-2  Registration  Statement filed
                           April 29, 1993, Item 27(a), Exhibit 10.8.
         10.02             Amendment  to the Company  1993 Stock  Option Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC  File No.  0-21566)  Report on Form 10-Q for the
                           period  ended  September  30,  1994,  Item 6, Exhibit
                           10.8.
         10.03             Amendment No. 2 to the Company 1993 Stock Option Plan is incorporated
                           herein by reference  from the Company's  (SEC File No.  0-21566)  Report on Form
                           10-Q for the period  ended  December  31, 1994,  Item 6,  Exhibit  10.02.
         10.04             Amendment No. 3 to the Company 1993 Stock Option Plan is incorporated  herein by
                           reference from the Company's (SEC File No.  0-21566) Report on Form 10-Q for the
                           period ended December 31, 1994, Item 6, Exhibit 10.03.
         10.05             The Company's  1994 Employee  Stock  Purchase Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC  File No.  0-21566)  Report on Form 10-Q for the
                           period ended December 3, 1994, Item 6, Exhibit 10.06.
         10.06             The Company's  Capital  Accumulation  Plan is incorporated  herein by
                           reference from the Company's (SEC File No.  0-21566) Report on Form 10-Q for the
                           period ended December 31, 1994, Item 6, Exhibit 10.07.
         10.07             The Company's 1994 Stock Option Plan for Non-Employee Directors is incorporated herein by reference
                           from the  Company's  (SEC File No.  0-21566)  Report on Form 10-Q for the period
                           ended  December  31, 1994,  Item 6,  Exhibit  10.08.
         10.08             The  Company's  1998 Consultant Compensation Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC File No.  333-31963)  Registration  Statement on
                           Form S-8 filed July 24, 1997, Exhibit 4.2.
         10.09             The Company's  Fiscal 2000 Non-Qualified Stock Option Plan is incorporated  herein by reference  from the
                           Company's (SEC File No. 333-87825) Registration  Statement on Form S-8 filed September 27, 1999,  Exhibit
                           4.2.
         10.10             The Company's 1999  Consultant  Compensation  Plan is
                           incorporated  herein by reference  from the Company's
                           (SEC File No.  333-65761)  Registration  Statement on
                           Form S-8 filed October 15, 1998, Exhibit 4.2.
         10.11             Letter  Employment Agreement dated March 13, 1998 between the Company and Terry Christopher is
                           incorporated herein by reference  from the  Company's  (SEC File No.  0-21566)  Annual Report on Form
                           10-SBK for the year ended June 30, 1998, Part IV, Item 14(c), Exhibit 10.28.
         10.12             Letter  Employment  Agreement  dated  June  11,  1998
                           between  the  Company,  Desert  Minerals,  Inc.,  SWM
                           Ventures,  Inc.  and  Martin  Blake  is  incorporated
                           herein by reference  from the Company's (SEC File No.
                           0-21566)  Annual  Report on Form  10-SBK for the year
                           ended June 30,  1998,  Part IV, Item  14(c),  Exhibit
                           10.29.
         10.13             Amended and Restated  Agreement dated  September 1, 1999  between  Genesee  Holdings,  Inc., successor in
                           interest to GFL Ultra Fund, Ltd., on the one hand, and the Company and Paul J. Montle, on the other hand.
         21.01             Subsidiaries of Registrant.
         27                Financial Data Schedule
</TABLE>