SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended July 31, 1996 Commission File No. 0-8299
CAMELOT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0691531
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Camelot Place, 17770 Preston Road, Dallas, Texas 75252
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (214) 733-3005
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.
Shares outstanding at
Class July 31, 1996
Common stock, $0.01 par value 23,677,431
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
I N D E X
Page No.
Part I FINANCIAL INFORMATION (UNAUDITED):
Item 1. Consolidated Balance
Sheets 3
Consolidated Statements of
Operations 5
Consolidated Statements of
Cash Flows 6
Notes to Consolidated
Financial Statements 8
Items 2. Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 9
Part II OTHER INFORMATION 11
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS
July 31, 1996 April 30, 1996
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $7,563,598 $9,870,599
Trading securities 6,851,451 1,341,508
Securities available for sale 8,268 945,777
Accounts receivable, net of allowance
for doubtful accounts of $2,353 and
$11,415 at July 31, 1996 and
April 30, 1996 632,029 241,837
Prepaid expenses 132,430 215,073
Inventories, net of allowance for
obsolescence of $196,710 and $198,000
at July 31, 1996 and April 30, 1996 1,265,483 1,272,973
Total current assets 16,453,259 13,887,767
PROPERTY, PLANT AND EQUIPMENT - AT COST
Office equipment and fixtures 1,482,676 1,363,484
Leasehold improvements 223,439 222,124
Less accumulated depreciation (461,239) (453,450)
Total property, plant and
equipment - at cost 1,244,876 1,132,158
OTHER ASSETS
Preferred stock - related party 530,917 530,917
Licenses and product development, net
of $287,106 and $151,979 accumulated
amortization July 31, 1996 and
April 30, 1996 1,245,784 1,141,021
Other 37,575 10,000
Total other assets 1,814,276 1,681,938
$19,512,411 $16,701,863
</TABLE>
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
July 31, 1996 April 30, 1996
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 619,521 $ 777,181
Accrued expenses 473,441 194,329
Net current liabilities of
discontinued operations 20,185 50,185
Total current liabilities 1,113,147 1,021,695
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
50,000,000 shares authorized,
24,827,237 and 19,452,191
shares issued at July 31, 1996 and
April 30, 1996, respectively 248,272 194,522
Preferred stock, $.01 par value,
100,000,000 shares authorized,
1,233,056 and 10,143,389
shares issued and outstanding at
July 31, 1996 and April 30, 1996
respectively 12,331 101,434
Additional paid-in capital 30,373,104 30,410,954
Accumulated deficit (9,442,457) (12,186,463)
Unrealized gain (loss) on
available-for-sale securities - (50,548)
Less: treasury stock, at cost,
1,149,806 and 1,149,806 shares at
July 31, 1996 and April 30, 1996 (2,714,575) (2,714,575)
Notes receivable related to purchase of
common stock (77,411) (75,156)
Total stockholders' equity 18,399,264 15,680,168
$19,512,411 $16,701,863
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
Three Months Ended
July 31,
1996 1995
<S> <C> <C>
REVENUE $8,355,826 $ 56,309
COST OF SALES 299,400 34,438
GROSS PROFIT 8,056,425 21,871
OPERATING EXPENSES:
General and administrative 2,023,438 573,440
Depreciation and amortization 217,869 29,645
2,241,307 603,085
INCOME (LOSS) FROM OPERATIONS 5,815,118 (581,214)
OTHER INCOME (EXPENSES):
Interest expense - (11,346)
Interest income 111,166 4,939
Dividend income - affiliate 11,664 7,776
Unrealized loss - Trading securities (2,549,231) -
Loss on disposition of assets (643,878) -
Other - 2,505
Total other income (expense) (3,070,279) 3,874
INCOME (LOSS) FROM CONTINUING
OPERATIONS 2,744,839 (577,340)
DISCONTINUED OPERATIONS:
Loss on disposal (833) (35,675)
(833) (35,675)
NET INCOME (LOSS) 2,744,006 (613,015)
DIVIDENDS ON PREFERRED STOCK (73,202) (26,915)
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS $2,670,804 $ (639,930)
INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations $ .122 $ (0.048)
Loss from discontinued operations (.001) (0.003)
Dividends on preferred stock (.003) (0.002)
NET INCOME (LOSS) PER COMMON SHARE $ 0.118 $ (0.053)
WEIGHTED AVERAGE OF COMMON
STOCK OUTSTANDING 22,572,590 11,997,162
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Three Months Ended
July 31,
<S> 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net income (loss) $2,744,006 $(613,015)
ADJUSTMENTS TO RECONCILE NET GAIN (LOSS)
TO NET CASH FROM OPERATING ACTIVITIES:
Securities receive as revenue (7,627,000) -
Depreciation and amortization 217,869 29,645
Gain on sale of subsidiary - (41,033)
(Gain) loss on disposal of assets 643,878 -
Write down (up) of securities to
market value 2,549,231 -
Write-off (provision) uncollectible
accounts receivable (5,051) (10,000)
Provision for inventory obsolescence (1,290) -
Change in assets and liabilities
Accounts and accrued receivables (387,396) 31,320
Prepaid expenses 59,387 (166,000)
Inventories 8,780 61,242
Accounts payable and accrued
expenses 91,452 (170,046)
Net cash used by operating
activities (1,706,134) (877,887)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment (241,248) (41,328)
Purchases of marketable securities (772,003) (352,002)
Proceeds from sale of property and
equipment - -
Disposition of assets of
discontinued operations - 31,595
Proceeds from sale of marketable
securities 729,796 -
Deposits - (28,649)
Licenses and product development (244,210) -
Net cash used by investing
activities (527,665) (390,384)
CASH FLOW FROM FINANCING ACTIVITIES:
Sale of common stock - 975,000
Sale of preferred stock - 1,000,000
Dividends on preferred stock (73,202) (26,915)
Payments on debt - (636,000)
Net cash provided by financing
activities (73,202) 1,312,085
NET INCREASE (DECREASE) IN CASH (2,307,001) 43,814
CASH AT BEGINNING OF PERIOD 9,870,599 149,529
CASH AT END OF PERIOD $7,563,598 $ 193,343
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ - $ 11,346
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NONCASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
Three Months Ended
July 31,
1996 1995
<S> <C> <C>
During July 1995, the Company issued $ $ 450,000
600,000 shares of
restricted common stock to Forme Capital,
Inc. (`Forme') for $450,000. In connection
therewith, Forme applied principal of
$450,000 to certain promissory notes of the
Company owed to Forme.
During the quarter ended July 31, 1996, 7,627,000
the Company concluded a distribution
agreement with a Subsidiary of Meteor
Technology PLC in exchange for stock in
Meteor.
During the quarter ended July 31, 1996, (2,549,231)
the Company recognized an unrealized
writedown of it's investment in
Meteor Technology PLC.
During the quarter ended July 31, 1996, (643,878)
the Company recognized a loss on the
August 1996 disposal of the
remaining investment in Firecrest.
During the quarter ended July 31, 1996,
the Company's preferred stock was converted
to common stock as follows:
112,000 Series BB preferred for 76,877
shares of restricted common
333,332 Series G preferred for 224,770
shares of restricted common
8,783,333 Series H preferred for 5,073,399
shares of restricted common
</TABLE>
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 1. Financial Statements and Principles of Consolidation
The accompanying condensed consolidated financial statements have
been prepared in accordance with the instruction to Form 10-Q, and do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair
presentation have been included. These statements should be read in
conjunction with the audited financial statements and notes thereto
included in the Registrant's annual Form 10-K filing for the year
ended April 30, 1996.
The consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. All intercompany
transactions have been eliminated.
ITEM 2. Management Discussion and Analysis of Financial Condition
and Results of Operations
The Company made substantial progress during the quarter ending
July 31, 1996. The Company's revenue for the quarter was $8,355,826
compared with $56,309 in 1995. Net income for the three month period
was $2,744,006 compared with a loss for the previous year of $613,015.
These results are due to a combination of revenue from license fees
received from European distribution rights for DigiPhone(TM), revenues
from DigiPhone Deluxe(TM), and revenue from the retail division.
The consolidated balance sheets for the period show stockholders'
equity of $18,399,264 compared with $15,680,168 for the financial year
ended April 30, 1996. Total assets were $19,512,411 compared with
$16,701,863. The increase in stockholders' equity and total assets
was due to the receipt of license fees for distribution rights.
During the period under review, the Company concluded an
agreement whereby it appointed DigiPhone Europe, Limited as exclusive
distributor for DigiPhone in Europe excluding the United Kingdom and
Ireland. DigiPhone Europe is a subsidiary of Meteor Technology PLC, a
public company listed on the Alternative Investment Market of the
London Stock Exchange. The Company owns approximately 15% of Meteor
Technology. Meteor has recently acquired the UK and Ireland
distribution rights for DigiPhone from Firecrest Group PLC, following
which Meteor is now the exclusive European distributor for DigiPhone.
The Company has disposed of its shareholding in Firecrest.
<PAGE>
The consideration for the grant of the European distribution
rights to DigiPhone Europe was #5,000,000 which is represented by the
Company's shareholding in Meteor Technology PLC. Such shareholding
has been written down to current market value, resulting in an
unrealized loss of $2,549,231. DigiPhone, DigiPhone Deluxe and
DigiPhone for Mac(TM) will be launched throughout Europe in September
1996 in six localized languages in addition to English.
During the period under review, the Company launched its newest
subsidiary, Camelot Internet Access Services (`Camelot Internet').
Through an agreement with UUNET, Camelot Internet provides local
access in over 200 cities in the United States and connection to a
global Internet of more than 38,000 networks in 72 countries. Camelot
Internet has established the same pricing structure as a special offer
currently made by AT&T's Internet access service. Camelot Internet is
also being bundled with DigiPhone Deluxe.
Also during the period under review, the Company signed an
agreement with Lucent Technologies to incorporate packet voice
technology from Bell Labs, the research and development arm of Lucent
Technologies, into the next version of DigiPhone. The Company is the
first to announce that they will be basing their voice over the
Internet product on the Bell Labs Fidelity Plus(TM) Speech Coder. The
agreement will enable the Company to use the voice coder in future
releases of DigiPhone.
The Company commenced shipment of DigiPhone Deluxe which is the
first Internet voice communication system that includes a conference
calling capability. The Company also released DigiPhone for Mac which
is the newest member of the DigiPhone family and extends the complete
Internet phone system to users of Apple's Macintosh computers.
DigiPhone for Mac incorporates the e-Phone telephony software for
Macintosh which was acquired by Camelot in October 1995. Free thirty
day versions of DigiPhone and DigiPhone for Mac software may be
downloaded from the Internet at http://www.digiphone.com.
In May, the Company announced that it has applied for a patent
for VideoTalk(TM), a video and audio communication system for the
Internet. VideoTalk is a complete hardware and software system which
when connected to a multimedia PC enables full duplex video and audio
conferencing over the Internet. The Company believes that this is the
next generation in communication on the Internet. Just as DigiPhone
enables free audio communication using the Internet, VideoTalk will
enable free video and audio conferencing using the Internet. The
development program for VideoTalk and a new version of DigiPhone which
will include the Multi-Protocol Framework allowing voice communication
with other Internet telephony software, continues on track.
In May, the Company announced it had received a letter from the
Federal Trade Commission (`FTC') seeking to confirm that DigiPhone
software can communicate over the Internet in a full duplex manner.
On August 23rd, the Company announced that the FTC had closed its
investigation of Camelot and the marketing of DigiPhone. The FTC has
determined that no further action is warranted. Separately, the
Company announced in May that it had received a letter from the Fort
Worth district office of the Securities and Exchange Commission
seeking information regarding financings by the Company which involved
sales of its securities. The Company considers this matter to be
routine and is responding fully to the information request.
<PAGE>
Management continues to concentrate the majority of its
management and financial resources on the development and successful
marketing of Internet related software products produced by its
subsidiary, Third Planet Publishing, and continues to anticipate that
its principal revenue and profitability will emanate from DigiPhone
derivative software products and from DigiPhone license fees.
Liquidity and Capital Resources
Net cash used by operating activities for the three months ended
July 31, 1996 was $1,706,134 compared with $877,887 in 1995. Net cash
used by investing activities was $527,665 compared with $390,384 in
1995. Net cash provided by financing activities was ($73,202)
compared with $1,312,085 in 1995. Cash and securities of $14,423,317
compares with $12,157,884 at April 30, 1996.
The Company's plan for capital expenditures relate principally to
the purchase of property and equipment to further its software
development program and to capital costs incurred in the opening of
any additional retail units. The Company estimates that each
additional retail unit will require approximately $50,000 of capital
expenditure. Only a limited number of such corporate units will be
opened during the next twelve months. Management believes that sales
from its DigiPhone software products and revenues generated from
DigiPhone licensing fees will generate its principal revenues and cash
flow for the Company during the next twelve months. Management does
not anticipate any liquidity problems over the next twelve months and
believes that the anticipated level of revenue generated by the
Company together with the present level of cash resources available to
the Company will be sufficient for its needs. Management believes
that should the Company require additional cash resources, it can
raise additional resources from the sale of Common and Preferred Stock
and/or by incurring borrowing. Management is aware that the Company
has no long term corporate debt. There are no known trends, demands,
commitments, or events that would result in or that is reasonably
likely to result in the Company's liquidity increasing or decreasing
in a material way other than the potential use of cash resources for
investment in the Company's subsidiaries in the normal course of
business.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Exhibits and Reports on Form 8-K.
(a)Exhibits:
3(1) Articles of Incorporation: Incorporated by reference to
Registration Statement filed
on Form 10, June 23, 1976.
3(2) Bylaws: Incorporated by reference as
immediately above.
(10) 1991 Incentive Stock Option Plan: Incorporated by reference
to proxy statement for 1991.
(b)Reports on Form 8-K: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereto duly authorized.
CAMELOT CORPORATION
(Registrant)
By: /s/ Daniel Wettreich
DANIEL WETTREICH,
President
Treasurer and Principal
Financial Officer
Date: September 9, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1996
<CASH> 7563598
<SECURITIES> 6859719
<RECEIVABLES> 632029
<ALLOWANCES> 2353
<INVENTORY> 1265483
<CURRENT-ASSETS> 16453259
<PP&E> 1244876
<DEPRECIATION> 461239
<TOTAL-ASSETS> 19512411
<CURRENT-LIABILITIES> 1113147
<BONDS> 0
0
12331
<COMMON> 248272
<OTHER-SE> 30373104
<TOTAL-LIABILITY-AND-EQUITY> 19512411
<SALES> 8355826
<TOTAL-REVENUES> 8355826
<CGS> 299400
<TOTAL-COSTS> 299400
<OTHER-EXPENSES> 2241307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2744006
<INCOME-TAX> 2744006
<INCOME-CONTINUING> 2744839
<DISCONTINUED> (833)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2670804
<EPS-PRIMARY> .118
<EPS-DILUTED> .118
</TABLE>
