SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended April 30, 1998 Commission File No.
0-8299
CAMELOT CORPORATION
(Exact Name of Company as specified in its charter)
Colorado 84-0691531
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Camelot Place, 2415 Midway Road, Suite 115, Carrollton, Texas
75006
(Address of principal executive office) (Zip Code)
Company's telephone number, including area code: (972) 733-3005
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
$0.01 par Value Common Stock NONE
Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Based on the price of $0.156, at July 23,1998, the aggregate market
value of the voting stock held by nonaffiliates of the Company was
$651,319.
The number of shares outstanding of the Company's common stock, $0.01
par value, was 4,609,309 at July 23, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
<PAGE>
PART 1
Item 1. Business
Camelot Corporation ("Registrant" or "the Company") is a holding
company. All its subsidiaries are now inactive. All previous
business operations have been discontinued. The Company's primary
assets are common and preferred shares in OTC Bulletin Board
companies.
The Company was incorporated in Colorado on September 5, 1975,
and completed a $500,000 public offering of its common stock in March
1976. The Company has made several acquisitions and divestments of
businesses (see Discontinued Activities - Acquisition and Divestment
History). The Company was delisted from NASDAQ's Small Cap Market on
February 26, 1998. Subsequently it was unable to raise additional
capital required to continue the trading activities of its operating
subsidiaries. Its principle subsidiary, Third Planet Publishing, Inc.
sold all rights, title and interests to its software and hardware
products on March 31, 1998. Its remaining operating subsidiary
mrcdrom.com, inc. liquidated its inventory and ceased trading in July,
1998. In July, 1998 all employees of Camelot and its subsidiaries
were terminated. Its directors and officers provide unpaid services
on a part-time basis to the Company.
Discontinued Activities - Acquisition and Divestment History
The Company's recent activities were conducted through
subsidiaries, all of which are now discontinued. Third Planet
Publishing, Inc., (`Third Planet") (established in January 1995) was a
research and development company developing hardware and software
solutions for audio and video conferencing over the Internet.
mrcdrom.com, inc. ("mrcdrom.com"), (established in March 1997) was an
Internet catalog retailer of software. Camelot Internet Access
Services, Inc. ("CIAS"), (established in June 1996) was a provider of
Internet access services. Alexander Mark Investments (USA), Inc.
("AMI") (80% acquired in May 1997) was a U.S. public holding company
whose only investment was a shareholding in Meteor Technology plc
("Meteor") a U.K. public company.
Third Planet was a research and development company focusing on the
development of VideoTalk, a video conferencing system for the
Internet. Approximately $7,000,000 was expended by Third Planet in
developing VideoTalk and its ancilliary software product DigiPhone
since inception. VideoTalk was successfully demonstrated at COMDEX in
the later part of 1997. However, a lack of funds for marketing the
product was experienced in 1998. Following the Company's delisting
from NASDAQ Small Cap Market in February, 1998 Third Planet sold on
March 31, 1998 all rights, title and interest in VideoTalk and its
ancilliary products to Wincroft, Inc. a US public company traded on
the OTC Bulletin Board. The consideration was $7,002,056 payable by
the issuance of 5,000,000 Preferred Shares, Series A and 1,028,000
Common Shares in Wincroft together with a $2,000,000 note.
Subsequently, on June 29, 1998 the $2,000,000 note was converted into
2,000,000 Preferred Shares, Series B in Wincroft.
<PAGE>
Other acquisitions were as follows:
Date Name Business Cost
March 1991 Vesta Land Title Company Titles
$120,000
July 1991 Business Investigations Investigations 312,231
July 1992 McKee-Blanchard Appraisals
32,203
September 1992 First Appraisal Group Appraisals
15,000
June 1994 Maxmedia Distributing Software Distribution 168,500
These companies ceased doing business in July 1994, July 1994,
November 1993, November 1993, and May 1995, respectively.
On September 16, 1988, the Company acquired Stock Transfer
Company of America, Inc. ("STCA"), a transfer agent, for 6,666 newly
issued common shares of the Company (post reverse split). In
connection with this transaction, Daniel Wettreich was appointed a
Director, Chairman and Chief Executive Officer and Jeanette Fitzgerald
was appointed a Director. On April 11, 1994, following a decision by
the Directors of the Company to discontinue financial services
activities, STCA was sold to a company affiliated with Mr. Wettreich
for book value, $13,276. (See Item 13. Certain Relationships and
Related Transactions).
On March 2, 1990, the Company's subsidiary, Beecher Energy, Ltd.
("Beecher") was listed on the Vancouver Stock Exchange in an initial
public offering. The Company sold its 69% shareholdings in Beecher on
July 6, 1994 for C$400,000, (US $288,293).
In January 1991, the Company acquired for cash an 80% majority
interest in Forme Capital, Inc. ("Forme") a publicly traded real
estate company from the wife of Mr. Wettreich. In September 1993, the
Company sold to Forme two office properties and then sold all its
investment in Forme for cash (approximately $40,000) to Mrs.
Wettreich. These transactions were approved by the shareholders of the
Company at the Annual Meeting held on February 15, 1994.
In July, 1993, Registrant acquired approximately 40% of the
issued share capital of Goldstar Video Corporation ("GVC"), a video
marketing company for a net price of $92,432. Registrant also made a
$150,000 secured loan to GVC. Further, Goldstar Entertainment, Inc.
("GEI") a subsidiary of Registrant acquired certain licenses and other
assets from GVC for $375,000. Thereafter Registrant's subsidiary
Camelot Entertainment, Inc. commenced business as a video marketing
company. On October 20, 1993, GVC filed for protection from creditors
under Chapter 11 of the Bankruptcy Code which was converted to Chapter
7 on February 4, 1994. Registrant was not a controlling shareholder
of GVC. The Company's subsidiary Camelot Entertainment, Inc. filed
under Chapter 7 of the US Bankruptcy laws in January 1995.
In November 1995, Registrant appointed Firecrest Group plc a
public company, as exclusive distributor for DigiPhone in the United
Kingdom and Ireland in consideration for $1,950,575 payable by shares
equal to approximately 10% of Firecrest. ("Digiphone Rights") In
March 1996 all relations with Firecrest were terminated and Registrant
sold all its shares in Firecrest in market transactions.
Subsequently, Firecrest sold its DigiPhone Rights to Meteor. In July
1996, Registrant sold the European rights to distribute DigiPhone to
DigiPhone Europe Ltd which became a subsidiary of Meteor. The
consideration was (british pounds)5,000,000 of loan stock which was
subsequently
converted into Meteor shares. In November 1996 Registrant sold the
international DigiPhone rights to Meteor for (british pounds) 1,000,000
pounds of loan stock
which subsequently was converted into Meteor shares. In May 1997,
DigiPhone International, Ltd. a Meteor subsidiary, became the
exclusive marketing company for all Third Planet products on a
worldwide basis.
In May 1997, Registrant acquired approximately 80% of AMI whose
principle asset was approximately 57% of Meteor. The consideration
(post reverse split) payable to the seller, Adina, Inc. ("Adina") was
892,015 Preferred Shares, Series J of Registrant and 453,080 Preferred
Shares, Series J in deferred consideration. Following the transaction
Adina had 49% of the voting rights attributable to the issued and
outstanding common and preferred shares of Registrant. Mr. Wettreich
is a director of Adina and did not participate in any directors' votes
in relation to this transaction.
Registrant, through its acquisition of 80% of AMI in May 1997
obtained control of Meteor, a U.K. listed public company which was
subsequently renamed Constable Group plc. Meteor's two operational
subsidiaries, were DigiPhone International Ltd. and Meteor Payphones
Ltd. DigiPhone International was the worldwide distributor for all
products developed by Third Planet and was sold to Registrant in
January, 1998 for cancellation of 500,000 loan stock owed to Camelot
by Meteor. All rights owned by DigiPhone International were
transferred to Third Planet Publishing prior to the sale of VideoTalk
to Wincroft. Registrant sold all its shareholding in AMI for $38,063
on March 20, 1998. Meteor Payphones and its sister payphone companies
were placed into liquidation on 30th March 1998. Constable Group plc
(formerly Meteor Technology plc) was placed into liquidation on 31st
July 1998.
mrcdrom.com began operations in April, 1997 as an Internet
shopping company selling software titles over the World Wide Web. It
also announced the filing of a registration statement to raise up to
$12,000,000 through an initial public offering ("IPO") over the
Internet, however such registration was withdrawn and no funds were
raised. mrcdrom.com had losses throughout its trading history and due
to the inability of Registrant to fund such continuing losses ceased
doing business in July, 1998, liquidated all its inventory, and
terminated all its employees. The Company is now inactive.
Camelot Internet Access Services, Inc. was an Internet services
provider formed in January 1996 using the UUNet backbone, this
subsidiary's principle activities were the provision of support
services for Registrant and the provision of Internet access to users
of DigiPhone who would otherwise be unable to access the Internet.
The Company became inactive during 1997.
In February 1997, Registrant acquired from Meteor the U.S.A. and
Canadian rights to PCAMS software, a payphone contract and management
system originally developed for Meteor's payphone subsidiary. The
consideration was cancellation of 2,000,000 unsecured convertible loan
stock owed by Meteor to Camelot, and the issuance by Camelot of
80,960 restricted common shares of Camelot. Management intended to
utilize PCAMS software both by offering such software to independent
providers and by seeking acquisitions of payphone businesses.
Registrant's limited resources precluded active marketing of this
product and in March 1998 the product was sold back to Meteor for
(british pounds)70,000.
<PAGE>
Employees
As of July 14, 1998, the Company has no employees.
Item 2. Properties
Real Estate
Company previously leased, approximately 25,700 square feet of
warehouse and office space in Carrollton, Texas on a lease expiring on
December 31, 2000. As of July 24, 1998 this lease was terminated by
the payment of $39,781 by the Company to the landlord and the Company
has no further liability under the terms of the lease. The Company
now will use space at this site on an informal basis as a portion of
the premises were let by Forme Capital, Inc. a company of which Mr.
Wettreich is also the president and director.
Item 3. Legal Proceedings
No material legal proceedings to which the Company is a party is
subject or pending and no such proceedings are known by the Company to
be contemplated with the exception of the fact that the Company has
been sued as detailed below. The Company believes there is no
validity to this suit, and has denied plaintiff's allegations.
The Company has been sued by a creditor of a previous subsidiary.
The Plaintiffs alleges that the Company is the alter ego of the
previous subsidiary and is therefore liable for its debts. The
Company believes the allegations are groundless and intends to
vigorously defend itself in litigation.
There are no proceedings to which any director, officer or
affiliate of the Company, or any owner of record (or beneficiary) of
more than 5% of any class of voting securities of the Company is a
party adverse to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the security holders during the
final quarter of the fiscal year or subsequent to the end of the
fiscal year.
Item 5. Market for Company's Common Equity and Related Stockholder
Matters
The Company's common stock trades on the "Pink Sheet" of the
National Quotation Bureau. The following table sets forth the
quarterly high and low prices of the common stock for the period from
May 1, 1996 through April 30, 1998 (post reverse split). They reflect
inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
High Low
1997
First July 31, 1996 102.50 37.50
Second October 31, 1996 60.00 43.75
Third January 31, 1997 35.00 23.75
Fourth April 30, 1997 15.00 3.75
1998
First July 31, 1997 3.06 3.06
Second October 31, 1997 5.44 4.78
Third January 31, 1998 3.62 2.69
Fourth April 30, 1998 0.31 0.12
As of July 14, 1998, the Company had 1,100 shareholders of
record of Company's common stock.
Item 6. Selected Financial Data
A comparison of various financial data pertaining to the
Company's operations over the past five fiscal years is as follows:
1998 1997 1996 1995 1994
Net sales $275,435 $1,887,617 $ 3,002,049 $1,184,469 $ -
Income
(loss) (6,074,163) (12,996,369) (4,314,788) (2,335,977) (1,567,312)
from
continuing
operations
Income
(loss) - - (250,925) (1,182,927) (402,981)
from
discont-
inued
operations
Income
(loss) per (3.88) (20.45) (12.54) (9.17) (8.30)
share from
continuing
operations
Total 1,968,294 6,772,076 16,701,863 2,098,974 3,309,132
assets
Long-term - - - - -
debt
Company's software subsidiaries commenced operations during
fiscal 1995 (See Item 1. Business).
On January 30, 1995, Company's subsidiary Camelot Entertainment
filed under Chapter 7 of the US Bankruptcy Code.
On April 11, 1994, Company disposed of its subsidiary STCA, and
on July 8, 1994 discontinued Vesta Land Title Company and Business
Investigations its remaining financial service subsidiaries (See Item
1. Business).
On July 6, 1994, Company disposed of its 69% interest in Beecher
Energy, Ltd., a company trading on the Vancouver Stock Exchange
representing its energy interests (See Item 1. Business).
Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations
Certain information within this Item 7 and throughout this Form
10-K contain forward looking statements. These statements are subject
to certain risks and uncertainties that could cause actual results to
differ materially from those set forth including but not limited to
Camelot's dependence upon outside suppliers, upon the continued
ability to create and/or acquire products that customers will accept;
the impact of competition and the changing competitors; the changing
nature of regulations and the manner in which they are interpreted;
and pricing pressures in addition to normal economic and world factors
beyond the control of the Company; the Company's ability to create
competitive products; changes in technology and the ability to obtain
patents and trademarks.
1998
During the year the Company's principle operating subsidiaries were
Third Planet Publishing, Inc. and mrcdrom.com, inc. Both these
companies have discontinued operations. The Registrant now has no
ongoing business operations and is inactive, other than as an investor
in public company stocks.
The Company's revenue for the year was $ 275,435 compared with
$1,887,617 for 1997. Net loss for the financial year was $
(6,074,163) compared with $12,996,369 for 1997. These results are due
to continued research and development for Third Planet Publishing,
Inc. and continuing losses from mrcdrom.com, inc. as well as the
closure and write down of all operating assets at the end of the
period. Registrants remaining investment in Meteor Technology has
been written off.
The consolidated balance sheets for the period shows Stockholders'
Equity of $1,707,668 compared with $6,078,509 in 1997. Total assets
were $ 1,968,294 compared with $6,772,076 in 1997. The decrease in
Stockholders' Equity and total assets was due to losses from
operations and as a result of the closure of those operations.
The consolidated statements of cash flows reflects, in addition to the
items noted above an increased note receivable allowance, increased
provision for inventory obsolescence, and an increase in the accounts
payable and accrued expenses. The statements also reflect the
increased expenditure for license, trademarks, and product
development. Further, the statements reflect additional funds raised
from the sale of common and preferred stock though at a decreased
level from the previous years. The items noted above along with the
expenses from the research and development efforts resulted in the
Company having a net decrease in cash of $ (2,877,234).
The Company leased 10,000 square feet of offices from Forme
Capital, Inc. ("Forme") a company affiliated with the president of the
Company. The lease was for a term of 5 years commencing September
1993 at $8 per square foot. Total rent paid during fiscal 1996 and
1995 was $80,000, respectively. The lease agreement and transactions
related thereto were approved by a vote of Company's shareholders. In
September, 1997 the lease was terminated by mutual consent and the
Company paid approximately $17,000 per month on a month to month basis
thereafter. In February, 1998 the Company vacated the premises and
consolidated its offices at 2415 Midway Road. In July 1998 the Company
surrendered the Midway lease to the landlord for $39,781.
On March 4, 1997, the Company acquired the US and Canadian rights to
PCAMS software a payphone contract and management system software from
Meteor Technology, plc payable by the cancellation of (british pounds)
2,000,000 ofloan stock owed to the Company by Meteor and (british pounds)
500,000 by the issuance by the Company to Meteor of 80,960 restricted
common shares. Mr.Wettreich and Ms. Fitzgerald who were directors of both
companies at the time, did not participate in any directors votes in
relation to this transaction. On May 11, 1998 the PCAMS software was sold
back to Meteor for (british pounds)70,000 as the Company did not have the
funds to market the software.
On March 27, 1997, the Company created a new wholly owed
subsidiary, mrcdrom.com, inc., to establish a software Internet
catalogue. On April 3, 1997, mrcdrom.com filed a registration
statement with the Securities and Exchange Commission (the "SEC").
The filing offered for sale 1,500,000 common shares of mrcdrom.com at
$4.00 per share with a minimum offering of $250,000. No offers or
sales were made and the registration statement was withdrawn. Due to
the inability of the Company to fund the losses of mrcdrom.com, it
ceased doing business in July 1998, and is now inactive.
On May 20, 1997, the Company's subsidiary Third Planet amended
the terms of its existing distribution agreement with DigiPhone
International a subsidiary of Meteor Technology plc, to market
exclusively all TPP products on a worldwide basis. Mr. Wettreich and
Ms. Fitzgerald who were directors of these companies at the time, did
not participate in any directors votes in relation to this
transaction.
In May, 1997, the Company accepted a Preferred Share, Series J
stock subscription by Adina, Inc., a public company of which Mr.
Wettreich is a director and officer. Mr. Wettreich did not
participate in any directors vote in respect to this transaction. The
consideration for the issuance of the Preferred Shares was the
transfer of eighty (80%) percent of AMI a public company whose major
asset is fifty-seven (57%) percent of the outstanding ordinary shares
of Meteor. The Preferred Shares, Series J have one vote per share
voting with the common shares, have a liquidation preference over the
common shares but are subordinate to the outstanding Preferred Shares,
are not convertible and pay no dividend. They also are subject to a
forward or reverse split in any instances for which the common shares
are subject to a forward or reverse split on the exact same basis.
On May 30, 1997, the Company subscribed for (british pounds)500,000 1997-2007
10% unsecured redeemable loan stock of Meteor by paying cash. Mr.
Wettreich and Ms. Fitzgerald who were directors of both companies at
the time, did not participate in any directors votes in relation to
this transaction.
On March 20, 1998 Registrant sold to Forsam Venture Funding, Inc.,
3,837,706 shares in AMI for its then net asset value per share of
$24,233 payable by the issuance by Forsam of 8% Preferred shares. Mr.
Wettreich is a director of Forsam and did not participate in any
director vote relating to this transaction. At the same time
Registrant sold to Abuja Consultancy, Ltd. 2,192,265 shares in AMI for
$13,830 cash. These transactions represented Registrants total
shareholding in AMI.
On March 20, 1998 Registrant sold to Abuja Consultancy, Ltd. 1,149,464
shares in Meteor Technology plc representing its total shareholding
in that company for a price calculated at the then pro rata net asset
value of Meteor amounting to $16,187 cash.
In March 23, 1998, Registrant acquired from AMI 43,000 Preferred
Shares, Series B of Forsam Venture Funding for $43,000 cash.
On March 31, 1998, the Registrant's wholly owned subsidiary,
Third Planet Publishing, Inc. entered into a conditional contract with
Wincroft, Inc. to sell all right, title and interest in the VideoTalk
product for $7,002,056 payable by the issuance of common stock,
preferred stock and a promissory note in the amount of $2,000,000.
On June 29, 1998, Registrant agreed with Wincroft, Inc., at the
request of Wincroft, to satisfy the outstanding Promissory Note
payable to Camelot by Wincroft in the amount of $2,000,000 of Wincroft
Non-Voting Preferred Stock, Series B. These Preferred Shares pay a
dividend of 10% when and as declared by the board of directors and
will pay an additional yield equivalent to 10% of any revenues derived
by Wincroft on sale of VideoTalk. The Preferred Shares also call for
redemption by Wincroft in the event VideoTalk is sold. Wincroft
requested this action in order to assist in its fund raising
capabilities. Wincroft is seeking funds to pay for working capital
and marketing expenditures.
1997
Although the Company's historical financial results for the year ended
April 30, 1997 were not good, Management believes that this is very
typical for a company primarily involved in research and development.
Management believes that Registrant's principal subsidiary Third
Planet is now at the culmination of a 30 month software and hardware
development program for Internet video conferencing and telephony
which will yield positive results for the Company in the future.
The Company's revenue for the year was $1,887,617 compared with
$3,002,049 in 1996. Net loss for the period was $12,996,369 compared
with $4,565,713 the previous year. These results are due to a
combination of limited revenues from DigiPhone, the closure of the
retail software stores and continuing research and development costs
which were largely expensed. Further, other expenses of $4,675,189
relating to losses on disposition of assets, investment in affiliate,
marketable securities and a note receivable allowance impacted the
results.
Revenues consisted of sales of licensing rights, paid primarily with
the issuance of free trading stock by the entity acquiring the
licensing rights; minimal sales of the Digiphone product, and sales
during the time the stores were operating. The expenses consisted of
the store operating expenses, the marketing and distribution expenses
for the Digiphone and primarily the research and development costs for
the VideoTalk, Digiphone 2.0 and Proficia. These high research and
development costs allowed the Company to be on the cutting edge of the
known technology in the videoconferencing field thereby putting in
position to offer a product, VideoTalk that will be well received.
Further due to the closing of the stores during the year any
depreciation and amortization attributable to the assets in the stores
were immediately expensed thereby increasing the depreciation and
amortization line item. Additionally, the Other Expense includes a
loss on the disposition of assets relating to the closing of the
stores, a loss on investment in affiliate which resulted from a
decrease in the market value of the investment in the subsidiary,
Meteor Technology, Ltd., and a note receivable allowance which
reflects a decrease in the value of the collateral of the loan to an
officer.
The consolidated balance sheets for the period show stockholders'
equity of $6,078,509 compared with $15,680,168 for the previous year.
Total assets were $6,772,076 compared with $16,701,863 in 1996. The
decrease in stockholders' equity and total assets was due to losses.
The Consolidated Statements of Cash Flows reflects, in addition to the
items noted above, cash received from the sale of marketable
securities, a loan to an officer and the sale of preferred stock to
help finance the research and development efforts. The items noted
above resulted in the Company having a net decrease in its cash.
During the year, substantial financial (approximately $2,375,000,
$1,319,000, and $163,000 for the three years ended April 30, 1997,
1996 and 1995 respectively) and managerial resources were expended in
the continuing research and development of Internet video conferencing
and Internet telephony, and Management believes that significant
progress was made in this regard. Through its affiliated company,
DigiPhone International, Registrant will make available for licensing
Third Planet's three new products in approximately September 1997,
which products are to be offered to the major PC manufacturers.
During the financial year, the Company's activities resulted in the
following.
Completion and shipping through retail distribution channels of
DigiPhone Deluxe
A development program for multi-protocol framework for DigiPhone 2.0
The filing of a worldwide patent for VideoTalk
A thirty-day version of DigiPhone for downloading over the Internet
The launch of Camelot Internet Access Services
An agreement with Lucent Technologies to license Lucent's voice codec
for future versions of DigiPhone
Completed DigiPhone for Mac
Completed arrangements for worldwide distribution of Third Planet
products with DigiPhone International, an affiliate of the Company
Listed Registrant's securities on the Frankfurt Stock Exchange
Acquired PCAMS Software
Filed an initial registration statement for mrcdrom.com, inc.
Acquired a controlling interest in AMI
Demonstrated its new technology at COMDEX/Spring in Atlanta
The Company's subsidiary Mr. CD-ROM Stores, Inc. closed its six
retail locations during the period and transferred the majority of its
assets to a fellow subsidiary mrcdrom.com (See Item 1. Business).
The Company took a charge against revenues for $745,521 as a
result of the closing of these stores. The Company has actively
worked with the landlords of the sites of the stores to reduce its
exposure pursuant to the leases. Further the Company has limited its
losses due to its transfer of assets to mrcdrom.com.
Management believes its future profitability and revenues will result
from licensing its VideoTalk, DigiPhone 2.0, and Proficia technology
to PC manufacturers and (subject to a successful conclusion of the
initial public offering of mrcdrom.com), from the sale of software and
ancillary products over the Internet. Management also intends to
expand its interests in the payphone industry both through its
affiliate Meteor Payphones and through developing and/or acquiring
payphone interests in the United States and Canada.
1996
The Company made substantial progress during the year ending
April 30, 1996. The Company's revenue for the year was $3,002,049
compared with $1,184,469 in 1995, an increase of 153%. Net loss for
the period was $4,565,713 compared with a loss for the previous year
of $3,518,904. These results are due to a combination of revenue from
DigiPhone, license fees received from European distribution rights for
DigiPhone, revenue from the five newly opened Mr. CD-ROM Stores, and
increased general and administrative costs related to the development
and marketing of DigiPhone.
The consolidated balance sheets for the period show stockholders'
equity of $15,680,168 compared with ($87,049) for the financial year
ended April 30, 1995. Total assets were $16,701,863 compared with
$2,098,874 in April 1995. The substantial increase in stockholders'
equity and total assets was due to the completion of private
placements.
During the April 1996 period, the Company's subsidiary Third
Planet completed shipments of its preliminary orders for the Windows
3.1 version of DigiPhone. This software achieved widespread retail
distribution, and by the end of the third quarter the first production
run had sold out. Subsequent retail reorders were limited in
anticipation of the Windows 95 version of DigiPhone which commenced
shipment in May 1996 along with DigiPhone Deluxe. DigiPhone Deluxe
has enhanced telephone features including conference calling
capability, voice mail, speed dialing, voice sound effects, conversion
recording and playback, and macro command capabilities. It comes with
a full suite of Internet tools including an e-mail program, a
newsreader, an FTP program, and a telnet program. In addition, a free
Windows 95 upgrade for the existing DigiPhone software is available.
Both DigiPhone and DigiPhone Deluxe have two licenses in each retail
box. Effectively, this provides two Windows 95 compatible licenses
for DigiPhone or DigiPhone Deluxe for the price of one, and enables
consumers to immediately start Internet telephone conversations with a
family member or a friend without any extra cost.
During the April 1996 period, the Company announced the
acquisition of e-Phone, formerly known as NetPhone, the only Macintosh
compatible computer software that enables voice communication over the
Internet. The purchase price was $593,000 payable $350,000 in Camelot
restricted common shares valued at $207.50 per share and the balance
in cash. In addition, New Paradigm will also receive for a five year
period $1 per unit and 10% of OEM revenue derived from the software.
The technology of e-Phone was incorporated by Third Planet into a
Macintosh compatible version of DigiPhone called "DigiPhone For Mac".
The cost of acquisition was written off in the 1997 financial period.
The appointment of Firecrest Group PLC as exclusive distributor
for DigiPhone in the United Kingdom and Ireland, occurred during the
period under review. The consideration for the granting of the UK and
Ireland exclusive rights was $1,950,575 payable by issuance by
Firecrest of 1,856,453 ordinary shares equal to approximately 10% of
the increased share capital of Firecrest. Firecrest is a media and
marketing company in the United Kingdom.
The rights for Scandinavia were conditionally purchased in
January 1996 by Telepartner Holdings A/S, a Copenhagen, Denmark based
company, which is the leading telephone database services company in
Scandinavia. The consideration for the exclusive distribution rights
was $1,000,000 payable by the issuance to Camelot of shares in
Telepartner equal to 2.7% of the share capital of Telepartner. Due to
the non-receipt of consideration, the Company terminated the agreement
in May 1996.
In July, 1996, after the financial year end, the Company
concluded an agreement with DigiPhone Europe, Ltd., whereby it
appointed DigiPhone Europe, Ltd. as exclusive distributor for
DigiPhone and DigiPhone Deluxe in Europe, excluding the United Kingdom
and Ireland. The consideration for the rights was (british pounds)5,000,000
6% loan stock (approximately $7,500,000). DigiPhone Europe, Ltd. is a London,
England based European software marketing company which merged with
Telecom Credit Europe, PLC ("TCE"), a public company listed on the
Alternative Investment Market of the London Stock Exchange. Following
the merger, Camelot owns approximately 16% of TCE. The majority
stockholder of TCE, Danny Wettreich, is also Chairman and Chief
Executive Officer of Camelot. Mr. Wettreich did not participate in
any Directors' vote in relation to this transaction.
During the period the Company opened five Mr. CD-ROM Stores in
the Carrollton, Texas area. The retail stores range in size from
1,000 square feet to 3,000 square feet, and specialize in CD-ROM
software with up to 2,000 titles in stock. These Mr. CD-ROM corporate
stores were intended to be the first of a previously announced target
of 100 corporate and franchise stores to be opened by Christmas 1996.
However, results from the stores led Management to the conclusion that
the retail concept was not viable, and the stores were closed in 1997.
On January 26, 1996, the Company announced that it has concluded
an agreement with UUNet. Technologies, Inc. whereby it will use
UUNet's Internet backbone for the Company's newly formed subsidiary,
Camelot Internet Access Services, Inc. ("Camelot Internet"). The use
of UUNet's exclusive alternate Internet backbone facilities enables
Camelot Internet to instantly establish itself as a nationwide quality
Internet service provider. Camelot Internet was officially launched
in June 1996 at which time its nationwide services commenced. Camelot
Internet is offered as part of Camelot's DigiPhone Deluxe software
package.
At the world's first Internet Telephony conference, held in
London, England on April 18-19 and called "Dialing The Net", Danny
Wettreich, Chairman and Chief Executive Officer of Camelot, disclosed
a development program for the DigiPhone Multi-Protocol Frameworks.
These frameworks will enable DigiPhone to communicate with any other
standards-based Internet Telephony software.
A 30 day free trial of DigiPhone Version 1.03 software is
available through the Company's web site on the Internet. To access
this free offer, users download the software from the Company's web
page, http://www.digiphone.com. The only system requirement for
potential users are a multimedia PC, Internet access and web browser
software. At the end of the 30 day trial, users can purchase a full
version of DigiPhone or DigiPhone Deluxe software by calling a toll-
free number. Users will also be provided with a list of retailers
that carry DigiPhone Deluxe software. To gain additional exposure for
DigiPhone software, Camelot will, in the future, offer this 30 day
trial version bundled with various third party hardware products and
through Internet access provider services.
Subsequent to the period under review, the Company announced that
it has applied for a patent for VideoTalkT, a video and audio
communications 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.
It will provide significant advantages to users as VideoTalk does not
require a soundcard or a video capture card. VideoTalk will come with
a new version of DigiPhone 2.0 which will include the recently
announced Multi-Protocol Framework allowing voice communication with
other Internet telephony software. VideoTalk's features are designed
to incorporate new leading edge audio and video compression technology
to enable connections over devices such as 28.8 kbps modems.
VideoTalk is designed with an expansion peripheral interface that
enables attachments to be added to the VideoTalk unit. Third Planet
will provide API specifications so that other developers can take
advantage of the features and processing power of VideoTalk in their
applications.
The Company also announced the Proficia, an Internet telephony
handset which is specifically designed to enable superior voice
communications over the Internet. The handset attaches to the side of
a computer monitor and functions in a similar way to a telephone
handset, thus eliminating the necessity for a headset or microphone
and speakers when Internet voice communication software is used.
Management expects its principal revenue and profitability will
emanate from DigiPhone derivative software products and from license
fees, and intends to concentrate the majority of its management and
financial resources on the development and successful marketing of
Internet related products produced by its subsidiary Third Planet.
Liquidity and Capital Resources
1998
Net cash used by operating activities for 1998 was $3,757,870 compared
with $5,555,018 in 1997. Net cash used by investing activities was
$730,884 compared with $4,587,734 in 1997. This was primarily due to
the net loss of $6,074,163 in 1997 compared with $12,996,369 the
previous year. Net cash provided by financing activities was
$1,611,520 compared with $3,302,152 in 1997.
Registrant's continual requirement for financial resources relates to
its obligations for statutory, legal and accounting requirements.
Registrant has no available cash resources to fund its ongoing
activities and will experience severe cash flow difficulties if no
external funding source is obtained.
1997
Net cash used by operating activities for 1997 was $5,555,018 compared
with $6,740,073 in 1996. Net cash used by investing activities in
1997 was $4,587,734 compared with net cash used by investing
activities of $1,889,146 in 1996. This was primarily due to the net
loss of $12,996,369 in 1997 compared with $4,565,713 the previous
year. Net cash provided by financing activities was $3,302,152
compared with $18,350,289 the previous year. Sales of common and
preferred stock were $3,410,500 compared with $22,330,214 in 1996.
Registrant's requirement for additional financial resources primarily
results from the continuing research and development costs of its
subsidiary Third Planet. Registrant believes that its current
development program will shortly be concluded, but believes that
continued research and development will be required to maintain a
technological lead which management believes that Third Planet
currently has. Accordingly, management is aware of the need for
additional cash resources to be obtained for the continuance of
research and development and anticipates that such financial resources
will primarily come from the private placement of Registrants' common
and preferred stock. Management believes that license fees received
from Third Planet's products will generate revenues and cash flow
towards the end of the current financial period. The activities of
Registrant's subsidiary, mrcdrom.com are dependent on its initial
public offering (See Item 1. Business). Registrant has no plans for
significant capital expenditures during the next twelve months.
Management believes that cash provided by financing activities and
licensing fees as well as revenue from sale of software over the
Internet together with the present level of cash resources available
to the Registrant will be sufficient for its needs over the next
twelve months. Management believes that should the Company require
additional cash resources it can incur borrowing as Registrant 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 equity 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 or additional fund raising.
1996
Net cash used by operating activities for 1996 was $6,740,073
compared with $2,207,683 in 1995. Net cash used by investing
activities was $1,889,146 compared with net cash received of $28,482
in 1995. This was primarily due to product development and software
costs of $608,800 compared with $40,000 in 1995, to the purchase of
minority interests of $264,044 ($0 in 1995), to the issuance of a note
receivable in the amount of $312,400 ($0 in 1995) and to purchases of
property and equipment of $1,087,658 ($195,589 in 1995).
Net cash provided by financing activities was $18,350,289
compared with $2,290,941 the previous year. Sales of common stock and
preferred stock were $22,330,214 compared with $1,623,847 in 1995.
These transactions substantially improved the liquidity of the Company
and helped raise stockholders' equity by $15,767,262 in 1996.
The Company's plans for capital expenditures relate principally
to capital costs likely to be incurred in opening of additional retail
units. Management does not anticipate any liquidity problems 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 cash 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. Management believes that it
is well positioned to make arrangements for additional debt should the
need arise. 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 and the normal course of business.
Management continued to demonstrate its ability to attract
private investment during the nine months ended January 31, 1996. The
Company raised $22,330,214 in private placements of restricted common
and convertible preferred stock. The preferred stock yields range
from 9% to 12% and can be converted into common shares of the Company
in limited amounts during agreed time frames subsequent to issuance
and in unlimited amounts thereafter. The conversion rate is equal to
an agreed upon discount on the prevailing market price of the Company
shares at the time of the conversion.
Item 8. Financial Statement and Supplementary Data
Index to Consolidated Financial Statements Page
Report of Independent Auditors - 1997 and 1996 AF-1
Report of Independent Auditors - 1998 F-1
Consolidated Financial Statements
Balance Sheets - April 30, 1998 and 1997 F-2 and
F-3
Statements of Operations for the years
ended April 30, 1998, 1997 and 1996 F-4
Statements of Stockholders' Equity for the
years ended April 30, 1998, 1997 and 1996 F-5 through
F-7
Statements of Cash Flows for the years ended
April 30, 1998, 1997 and 1996 F-8 and
F-9
Notes to Consolidated Financial Statements F-10 through
F-25
Consolidated Schedule F-26
The information itemized above are included in Part IV, Item 14
as Exhibit (a) (1) and begins at F-1 following page 29.
Item 9. Disagreements on Accounting and Financial Disclosure
Lane Gorman Trubitt, L.L.P. has been dismissed as the Company's
independent auditors effective May 22, 1998.
During the past three years, and the interim period ending May 22,
1998, there were no disagreements between the Company and the auditors
regarding any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. Larry O'Donnell,
CPA has been appointed effective May 22, 1998 to act as the auditor
for the Registrant. The change was made to save the Company money.
PART III
Item 10. Directors and Executive Officers of the Company
The following persons serve as directors and/or officers of the
Company as of July 14, 1998:
Name Age Position Period Served Term
Expires
Daniel Wettreich 46 Chairman, September 16, 1988 Next
President, Annual
Director Meeting
Jeanette P. Fitzgerald 37 Secretary September 16, 1988 Next
Director Annual
Meeting
Allan S. Wolfe 65 Director May 24, 1993 Next
Annual
Meeting
Daniel Wettreich
Daniel Wettreich is Chairman, President and Director of the
Company since September 1988. Additionally, he currently holds
directors positions in the following public companies: Forme Capital,
Inc., a real estate company, Adina, Inc., Malex, Inc., and Tussik,
Inc. which are dormant companies seeking merger opportunities. Since
July 1996, he has been Director of Constable Group plc (formerly
Meteor Technology plc), a United Kingdom public company(3). In July
1993, he was appointed Director of Goldstar Video Corporation(2)
following an investment by the Company. From January 1985 to February
1988 he was a founding director of Phoenix Network, Inc., a
telecommunications company listed on the American Stock Exchange. Mr.
Wettreich has a Bachelor of Arts in Business Administration from the
University of Westminster, London, England.
Jeanette P. Fitzgerald
Jeanette Fitzgerald is Vice President and General Counsel,
Corporate Secretary and a Director of the Company since September
1988(1). She is a member of the State Bar of Texas and the Business
Law section. From July 1996 until January 1998, she was a Director of
Meteor Technology plc(3). She is also the Corporate Secretary and
Director of Malex, Inc.,a public company. In July 1993, she was
appointed Director of Goldstar Video Corporation(2) following an
investment by the Company. Previous to these positions, from 1987 to
1988 she worked as a staff attorney and in the compliance department
at H.D. Vest, Inc., a holding company with subsidiaries including a
securities brokerage firm. She graduated from Texas Tech University
School of Law receiving both a Doctorate of Jurisprudence and a
Masters of Business Administration in May 1986, and from the
University of Michigan with a Bachelors of Business Administration in
December 1982.
Allan S. Wolfe
Allan S. Wolfe has been a Director of the Company since May,
1993. He is Chairman and President of Database Technologies, Inc., a
public company providing database software to the insurance industry
from May 1986 to the present. He is also, since 1984, a director and
Chief Executive Officer of Pathfinder Data Group ("PDG"), a database
company. A subsidiary of PDG, Pathfinder Data, Inc., filed for
protection from creditors under Chapter 11 and has since been
converted to Chapter 7.
(1) A subsidiary, Camelot Entertainment, Inc., filed Chapter 7
liquidation in January 1995.
(2) Goldstar Video filed for protection from creditors pursuant to
Chapter 11 in October 1993, and has converted to a liquidation
proceeding.
(3) A subsidiary, Meteor Payphones Ltd and subsidiaries filed for
voluntary liquidation in March 1998. Constable Group plc filed for
voluntary liquidation in July 1998.
Item 11. Executive Compensation
The following table lists all cash compensation exceeding $100,000
paid to Company's executive officers for services rendered in all
capacities during the fiscal year ended April 30, 1998. No bonuses
were granted to any officer, nor was any compensation deferred.
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensa Compensation
tion
Pay-
Award outs
s
Restr
Name and Pri Other icted Options LTIP All
ncipal Year Salary Bonus Annual Stock / Pay- Other
Position Compen Award SARs outs Compen-
sation (s) sation
Daniel 1996 $208,333 - - - 25,000 - $ (1)
Wettreich 1997 $250,000 - - - 175,000 - $ (1)
Chairman 1998 $250,000 - - - 100,000 - $ (1)
and CEO (1)
Jeanette P. 1996 N/A - - - N/A - $
Fitzgerald 1997 N/A - - - 875 - (1)
Vice 1998 N/A - - - 44,875 - $
President, (1)
General $
Counsel and (1)
Secretary
(1)
(1) Daniel Wettreich and Jeanette Fitzgerald, Directors and Officers
of Company, were employees of a company affiliated with Mr. Wettreich,
which company provided the Company with management services until July
1995 and was paid $-0-, and $44,000 for the years ended April 30,
1997, and 1996 respectively. In July 1995, Mr. Wettreich and Ms.
Fitzgerald became employees of Company and Mr. Wettreich entered into
an employment contract with Company. In July 1998 Mr. Wettreich
agreed to terminate his contract with no cost to the Company.
Directors of the Company are reimbursed for reasonable expenses
incurred in attending meetings of the Board of Directors.
Company has no compensatory plans or arrangements whereby any
executive officer would receive payments from the Company or a third
party upon his resignation, retirement or termination of employment,
or from a change in control of Company or a change in the officer's
responsibilities following a change in control other than Mr.
Wettreich whose contract has been terminated by mutual consent.
On July 1, 1995, Company entered into an employment contract with
Mr. Wettreich whereby he was employed as Chairman, Chief Executive
Officer and President of the Company for a period of ten years at an
annual salary of $250,000 and a cash bonus equal to 5% of the
Company's annual profits before taxation. In the event of Mr.
Wettreich's death during the term of the agreement, Company will pay
annual death benefits of $250,000 for a period of four years. Mr.
Wettreich may terminate his employment after the date of a change in
control of the Company. A change in control is defined as any person
other than Mr. Wettreich or his family interests becomes beneficial
owner, directly or indirectly of common stock of the Company
representing 30% or more of the Company's issued and outstanding
common stock or if the Incumbent Board as defined, ceases to
constitute a majority of the board of directors. If Mr. Wettreich
terminates his employment after a change of control in the company, he
shall be paid (i) the base salary and any bonuses payable to him under
the agreement or (ii) an amount equal to the product of the annual
base salary and bonus paid to Mr. Wettreich during the year preceding
the termination date multiplied by five whichever of (i) or (ii) is
more. In the circumstances whereby Mr. Wettreich terminates his
employment for good reason, as defined, he will receive payments in
accordance with the payments received if termination occurs after a
change of control of the Company. In July 1998 Mr. Wettreich was
terminated along with all the other employees of the Company and Mr.
Wettreich agreed to waive any outstanding obligations owed by
Registrant to him under his employment contract.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth as of July 18, 1998 information
known to the management of the Company concerning the beneficial
ownership of Common Stock by (a) each person who is known by the
Company to be the beneficial owner of more than five percent of the
shares of Common Stock outstanding, (b) each director at that time, of
the Company (including principal directors of subsidiaries) owning
Common Stock, and (c) all directors and officers of the Company
(including principal directors of subsidiaries) as a group (3
persons).
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Daniel Wettreich 1,697,871(1)(2) 27.6%
2415 Midway Road, Suite 115
Carrollton, Texas 75006
Jeanette P. Fitzgerald 80,875 (3) 1.7%
2415 Midway Road, Suite 115
Carrollton, Texas 75006
Allan Wolfe 10,250 (4) *
390 South River Road
Suite 5
Bedford, NH 03110
All Officers and Directors 1,788,996(1)(2)(3)(4) 28.6%
as a group (3 persons)
* Under 0.1%
Forsam Venture Funding, Inc. 1,345,295(1) 22.6%
2415 Midway Road, Suite 115
Carrollton, Texas 75006
57,633 of these shares are owned by AM Investments Ltd. a U.K. company
("AM") of which Mr. Wettreich is a director and officer. 80,960 of
these shares are owned by Constable Group plc ("Constable"), a UK
company of which Mr. Wettreich is a director and officer. 1,345,295 of
these are Preferred Stock owned by Forsam Venture Funding, Inc.,
("Forsam") a Delaware corporation of which, Mr. Wettreich is a
director and officer. Mr. Wettreich has disclaimed any beneficial
interest in the shares owned by AM, Constable and Forsam. (See Item
13. Certain Relationships and Related Transactions).
Includes options to purchase 200,000 shares granted to Daniel
Wettreich, which options are not exercised.
Includes options to purchase 53,750 shares granted to Jeanette
Fitzgerald, which options are not exercised.
Includes an option to purchase 6,625 shares granted to Allan Wolfe,
which option is not exercised.
Item 13. Certain Relationships and Related Transactions
On May 20, 1997 Adina, Inc. subscribed (post reverse) 1,345,295
restricted Preferred Shares, Series J Camelot Corporation ("Camelot")
with payment by the transfer of 6,029,921 restricted common shares of
Alexander Mark Investments (USA), Inc. to Camelot. 892,215 of the
Preferred Shares were issued upon execution of the Agreement and
453,080 were subsequently issued as deferred consideration. The
Preferred Shares have one vote per share and vote with the common
shares, are non convertible, non-yielding and are subordinate to
outstanding preferred shares but have a liquidation preference over
common shares. On April 18, 1998 Adina sold the Preferred Shares,
Series J to Forsam Venture Funding, Inc., a company of which Mr.
Wettreich is a director and officer.
The Company paid management fees of $44,000 in 1996 to Wettreich
Financial Consultants, Inc. ("WFC"), a company affiliated with the
President of the Company. These management services consisted of the
provision of the services of the President and Corporate Secretary of
Company. The amount was determined by the time, effort, and skill
required to provide these services. The President and the Corporate
Secretary of Company were employees of WFC and during the fiscal year
ended April 1995, received no compensation from Company.
Stock Transfer Company of America, Inc., ("STCA") a company
affiliated with the President of the Company provided services during
the year ended April 1998 and 1997, as a securities transfer agent. A
total of $18,855 and $35,158 were paid by Company for these services.
In the opinion of the Board of Directors, the terms of these
transactions was as fair to the company as could have been made with
an unaffiliated party. Additionally, STCA received management
services from the company and paid $6,000 per month starting in
November 1997.
Until March 1998 the Company leased 10,000 square feet of offices
from Forme Capital, Inc., a company affiliated with the President of
the Company. Total rent paid during fiscal 1998 and 1997 was $135,383
and $80,000, respectively. The lease agreement and transactions
related thereto were approved by a vote of Company's shareholders. In
September 1997 the lease was terminated by mutual consent and the
Company paid approximately $17,000 on a month to month basis
thereafter. In February, 1998 the Company vacated the premises and
consolidated its offices at 2415 Midway Road. The Company to
surrendered the Midway lease to the landlord in July 1998 for $39,781.
The Company received loans from Forme totaling $406,000 in fiscal
1995. Payments of $236,000 and $190,000 were made in fiscal years
1996 and 1995, respectively. Forme converted the remaining balance of
$450,000 to common stock during fiscal 1996. Total interest paid
during fiscal 1996 was $11,615 and 1995 was $35,961.
During fiscal 1998 and 1997, Company received dividend payments
from Forme Capital, Inc., Preferred Shares Series C in the amount of
$46,657 for 1998 and $46,657 for 1997.
On January 17, 1996, the Company's disinterested directors
approved a secured loan to the Corporate Secretary in the amount of
$75,156. This loan bears interest at a rate 6% per annum.
On August 1, 1996, the Company's disinterested directors
approved a secured loan to the Corporate Secretary in the amount of
$14,000. This loan bears interest at a rate of 6% per annum and was
repaid as of January 31, 1997.
On September 25, 1996 the Company's disinterested directors
approved a secured loan to the President of the Company in the amount
of $1,800,000. This loan bears interest at a rate of 6% per annum.
March 4, 1997, the Company acquired the US and Canadian rights to
PCAMS software a payphone contract and management system software from
Meteor Technology, plc payable by the cancellation of (british pounds)
2,000,000 ofloan stock owed to the Company by Meteor and (british pounds)
500,000 by the issuance by the Company to Meteor of 80,960 restricted
common shares. Mr.Wettreich and Ms. Fitzgerald who were directors of both
companies at the time did not participate in any directors votes in
relation to this transaction. On May 11, 1998 the PCAMS software was sold
back to Meteor for (british pounds)70,000 as the Company did not have
sufficient funds to market the software and was restricted in its ability
to sublicense the software.
On May 20, 1997, the Company's subsidiary Third Planet amended
the terms of its existing distribution agreement with DigiPhone
International a subsidiary of Meteor Technology plc, to market
exclusively all TPP products on a worldwide basis. Mr. Wettreich and
Ms. Fitzgerald who were directors of these companies at the time did
not participate in any directors votes in relation to this
transaction.
In May, 1997, the Company accepted a Preferred Share, Series J
stock subscription by Adina, Inc., a public company of which Mr.
Wettreich is a director and officer. Mr. Wettreich did not
participate in any directors vote in respect to this transaction. The
consideration for the issuance of the Preferred Shares was the
transfer of eighty (80%) percent of AMI a public company whose major
asset is fifty-seven (57%) percent of the outstanding ordinary shares
of Meteor. The Preferred Shares, Series J have one vote per share
voting with the common shares, have a liquidation preference over the
common shares but are subordinate to the outstanding Preferred Shares,
are not convertible and pay no dividend. They also are subject to a
forward or reverse split in any instances for which the common shares
are subject to a forward or reverse split on the exact same basis.
On May 30, 1997, the Company subscribed for (british pounds)500,000 1997-2007
10% unsecured redeemable loan stock of Meteor by paying cash. Mr.
Wettreich and Ms. Fitzgerald who were directors of both companies at
the time, did not participate in any directors votes in relation to
this transaction.
On March 20, 1998 Registrant sold to Forsam Venture Funding,
Inc.3,837,706 shares in AMI for its then net asset value per share of
$24,233 payable by the issuance by Forsam of 8% Preferred shares. Mr.
Wettreich is a director of Forsam and did not participate in any
director vote relating to this transaction. At the same time
Registrant sold to Abuja Consultancy, Ltd. 2,192,265 shares in AMI for
$13,830 cash. These transactions represented Registrants total
shareholding in AMI.
On March 20, 1998 Registrant sold to Abuja Consultancy, Ltd. 1,149,464
shares in Meteor Technology plc representing its total shareholding
in that company for a price calculated at the then pro rata net asset
value of Meteor amounting to $16,187 cash.
In March 23, 1998, Registrant acquired from AMI 43,000 Preferred
Shares, Series B of Forsam Venture Funding for $43,000 cash.
On March 31, 1998, the Registrant's wholly owned subsidiary,
Third Planet Publishing, Inc. entered into a conditional contract with
Wincroft, Inc. to sell all right, title and interest in the VideoTalk
product for $7,002,056 payable by the issuance of common stock,
preferred stock and a promissory note in the amount of $2,000,000.
On June 29, 1998, Registrant agreed with Wincroft, Inc., at the
request of Wincroft, to satisfy the outstanding Promissory Note
payable to Camelot by Wincroft in the amount of $2,000,000 of Wincroft
Non-Voting Preferred Stock, Series B. These Preferred Shares pay a
dividend of 10% when and as declared by the board of directors and
will pay an additional yield equivalent to 10% of any revenues derived
by Wincroft on sale of VideoTalk. The Preferred Shares also call for
redemption by Wincroft in the event VideoTalk is sold. Wincroft
requested this action in order to assist in its fund raising
capabilities. Wincroft is seeking funds to pay for working capital
and marketing expenditures.
The Company has no compensatory plans or arrangements whereby any
executive officer would receive payments from the Company or a third
party upon his resignation, retirement or termination of employment,
or from a change in control of the Company or a change in the
officer's responsibilities following a change in control other than
Mr. Wettreich. Under the 1996 Stock Option Plan or under the
Company's 1991 Outside Directors Stock Option Plan options granted
under these plans contain provisions pursuant to which the unvested
portions of outstanding options become immediately exercisable and
fully vested upon a merger of the Company in which the Company's
stockholders do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the Company
or its successor, if the successor corporation fails to assume the
outstanding options or substitute options for the successor
corporation's stock to replace the outstanding options. The
outstanding options will terminate to the extent they are not
exercised as of consummation of the merger, or assumed or substituted
for by the successor corporation.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) (1) The following financial statements are included herein for
fiscal year ended April 30, 1998.
Index to Consolidated Financial Statements Page
Report of Independent Auditors - 1997 and 1996 AF-1
Report of Independent Auditors - 1998 F-1
Consolidated Financial Statements
Balance Sheets - April 30, 1998 and 1997 F-3 and
F-4
Statements of Operations for the years
ended April 30, 1998, 1997 and 1996 F-5
Statements of Stockholders' Equity for the
years ended April 30, 1998, 1997 and 1996 F-6 through
F-7
Statements of Cash Flows for the years ended
April 30, 1998, 1997 and 1996 F-8 and
F-9
Notes to Consolidated Financial Statements F-10 through
F-25
(a) (2) Consolidated Schedule F-26
(a) (3) Exhibits included herein:
3(a) Articles of Incorporation Incorporated by reference to Form
10
Registration Statement filed on
June 23, 1976.
3(b) Bylaws Incorporated by Reference as
immediately above.
10 (b) 1991 Outside Directors' Stock
Option Plan Incorporated by reference to the
Proxy Statement for April 13,
1992 Annual Meeting of Shareholders and
the Proxy Statement for January 3, 1998 Annual
Meeting of Shareholders.
1996 Employee Stock Option Plan Incorporated by reference to
the Proxy Statement for January
3,1998 Annual Meeting of Shareholders
22(a) Subsidiaries
(7) Reports on Form 8-K:
Report filed on April 20, 1998 reporting Items 2 and 7.
Report filed on May 8, 1998 reporting Item 1.
Report filed on May 27, 1998 reporting Item 4.
Report filed on July 9, 1998 reporting Item 5.
<PAGE>
EXHIBIT 22(a)
SUBSIDIARIES
AS OF JULY 14, 1998
Third Planet Publishing, Inc. 100%
Mr. CD-ROM Stores, Inc. 100%
Camelot Distributing, Inc. 100%
Maxmedia Distributing, Inc. 100%
Camelot Internet Access Services, Inc. 100%
mrcdrom.com, inc. 100%
Atlantic Media, Inc. 100%
Software @ Cost + 10%, Inc. 100%
SAC Distributing, Inc. 100%
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAMELOT CORPORATION
(Company)
By: /s/Daniel Wettreich
President
Date: July 31, 1998
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 Company and in the capacities and on the dates
indicated.
By: /s/Daniel Wettreich
Director; President
(principal executive officer and
principal financial officer)
Date: July 31, 1998
By: /s/Jeanette Fitzgerald
Director; Secretary
Date: July 31, 1998
By: /s/Allan Wolfe
Director
Date: July 31, 1998
30
<PAGE>
[ARTICLE] 5
[CIK] 0000013033
[NAME]
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] APR-30-1998
[PERIOD-END] APR-30-1998
[CASH] 152765
[SECURITIES] 0
[RECEIVABLES] 48156
[ALLOWANCES] 0
[INVENTORY] 50000
[CURRENT-ASSETS] 291407
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 1968294
[CURRENT-LIABILITIES] 260626
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 14534
[COMMON] 17842
[OTHER-SE] 1754351
[TOTAL-LIABILITY-AND-EQUITY] 1968294
[SALES] 275435
[TOTAL-REVENUES] 275435
[CGS] 3871109
[TOTAL-COSTS] 3871109
[OTHER-EXPENSES] 2478489
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 100491
[INCOME-PRETAX] (6074163)
[INCOME-TAX] (6093363)
[INCOME-CONTINUING] (6093363)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (6093363)
[EPS-PRIMARY] (3.88)
[EPS-DILUTED] (3.89)
</TABLE>
