U.S SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[x] Annual report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 (Fee required)
For the fiscal year ended April 30, 1999
[ ] Transition report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934 (No fee required)
For the transition period from to
Commission file number 0-8299
CAMELOT CORPORATION
(Name of Small Business Issuer in Its Charter)
Colorado 84-0691531
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
PMB 249, 6757 Arapaho Road, Suite 711, Dallas, Texas 75248
(Address of Principal Executive Office) (Zip Code)
2661 Midway Road, Suite 224-226, Carrollton, Texas 75006
(Former Address of Principal Executive Office) (Zip Code)
(972) 458-1767
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
None None
Securities registered under Section 12(g) of the Exchange Act:
None
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. [x] Yes [ ] 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 a
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [x]Yes
[ ] No
Issuer's revenues for its most recent fiscal year is $ - .
As of July 16, 1999, the aggregate market value of the voting stock held by
non-affiliates was $146,724.
The number of shares outstanding of the Registrant's common stock $0.01
par value was 6,293,740 at July 16, 1999.
Documents Incorporated by Reference.
NONE
PART 1
Item 1. Business
Camelot Corporation ("Registrant or the Company") is a holding company
with one inactive subsidiary. All its other subsidiaries have been
dissolved by its state of incorporation. During the fiscal year ended
April 30, 1999 the Company had no operations. All previous business
operations have been discontinued. The Company's primary assets are
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 and has
since been dissolved by the state of Florida. 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 have since provided unpaid
services on a part-time basis to the Company.
Discontinued Activities - Acquisition and Divestment History
The Company's activities were conducted through subsidiaries, all of which
are now discontinued or have been sold. 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 1998) 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.
The Company made other acquisitions as follows:
<TABLE>
<S> <C> <C> <C>
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 $168,500
Distribution
</TABLE>
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 12.
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 5,000,000 British Pounds of
loan stock which was subsequently converted into Meteor shares. In
November 1996 Registrant sold the international DigiPhone rights to Meteor
for 1,000,000 British Pounds of loan stock which subsequently was
converted into Meteor shares. In May 1998, 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 British Pounds 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 British Pounds unsecured convertible loan
stock owed by Meteor to Camelot, and the issuance by Camelot of
3,238,400 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 70,000 British Pounds.
Employees
As of July 14, 1998, the Company ceased having any employees. Its directors
and officers have since provided unpaid services on a part-time basis as
needed to the Company.
Item 2. Properties
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 rents an accommodation
address in Dallas, Texas on a month to month basis for a nominal fee.
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.
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.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock trades on the OTC Bulletin Board. The following
table sets forth the quarterly high and low prices of the common stock for
the period from May 1, 1997 through April 30, 1999 (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
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
1999
First July 31, 1998 0.14 0.14
Second October 31, 1998 0.31 0.20
Third January 31, 1999 0.50 0.10
Fourth April 30, 1999 0.20 0.20
As of July 16, 1999, the Company had approximately 1,175 shareholders of
record of Company's common stock. No dividends have been declared on the
stock in the last two fiscal years and the Board of Directors does not
presently intend to pay dividends in the near future.
Item 6. Management Discussion and Analysis
1999
The Company's revenue for the period was $0 compared with $275,435 in
1998. Net loss for the period was $994,305 compared with a loss for the
previous year of $6,074,163. These results are due to the lack of
operations as the subsidiaries ceased doing business.
The consolidated balance sheets for the period show stockholders'
equity of $586,315 compared with $1,707,668 for the financial year ended
April 30, 1998. Total assets were $633,883 compared with $1,968,294 for
the comparable period. The decrease in stockholders' equity and total
assets was due to the loss attributable to closing of the operating
subsidiaries.
The Company failed to make its dividend payment on the Preferred Shares,
Series E and paid off the dividend due and redeemed the Preferred
Shares by transferring 125,000 restricted common shares in Wincroft, Inc.
at market value.
A majority of the subsidiaries have been dissolved by their state of
incorporation due to a lack of funding. The following subsidiaries were
dissolved by their respective states:
Third Planet Publishing, Inc.
Kids University, Inc.
Maxmedia Distributing, Inc.
Atlantic Media, Inc.
Camelot Creative Designs, Inc.
Business Investigations, Inc.
SAC Distributing, Inc.
Mr. CD-ROM Stores, Inc.
Camelot Distributing, Inc.
Camelot Internet Access Services, Inc.
Camelot Energy, Inc.
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.
On February 15, 1999, the Registrant settled outstanding litigation with
Audio Visual Group dba AIMS Media ("AIMS") in order to eliminate the
expense of further litigation and without admitting any liability by the
transference of 200,000 restricted common shares of Wincroft, Inc., owned
by the Registrant to AIMS. The Company issued 275,192 shares and
transferred 3,000 shares of Wincroft to its attorney's in settlement of
legal fees in relation to this litigation.
On February 24, 1999 in order to provide cash and future stream of cash
flow the Company sold to Texas Country Gold Development, Inc., a company
affiliated with its President, 700,000 shares of Wincroft for $87,500
payable $1,000 in cash and $86,500 in a note yielding 6%.
Year 2000 Readiness Disclosure
The Company is aware of the issues associated with the programming code
in existing computer systems as the year 2000 approaches. The issue is
whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. The Company believes that the
Year 2000 issue will not pose significant operational problems for the
Company's computer systems and will not have a material adverse effect on
the Company's financial condition or results of operations.
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.
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 2,000,000 British Pounds of
loan stock owed to the Company by Meteor and #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 70,000 British
Pounds 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 500,000 British Pounds
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.
On 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.
Liquidity and Capital Resources
1999
Net cash used by operating activities for the 1999 was $148,299
compared with $3,757,870 in 1998. Net cash supplied by investing
activities was $1,000 compared with net cash used of $730,884 in 1998.
Net cash used by financing activities was $4,800 compared with
$1,611,520 provided in 1998. Cash of $666 compares with $152,765 at
April 30, 1998.
The Company does not have any plans for capital expenditures. The
Company has negligible cash resources and will experience liquidity
problems over the next twelve months due to its lack of revenue unless it
is able to raise funds from outside sources. 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.
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.
Item 7. Financial Statement and Supplementary Data
Index to Consolidated Financial Statements Page
Report of Independent Auditors F-1
Consolidated Financial Statements
Balance Sheet - April 30, 1999 F-2
Statements of Operations and Other Comprehensive Income
for the years ended April 30, 1999 and 1998 F-3
Statements of Stockholders' Equity for the
years ended April 30, 1999 and 1998 F-4
Statements of Cash Flows for the years ended
April 30, 1999 and 1998 F-5 and
F-6
Notes to Consolidated Financial Statements F-7 through
F-18
<PAGE>
Larry O'Donnell, CPA, P.C.
Telephone (303) 745-4545 2280 South Xanadu Way
Suite 370
Aurora, Colorado 80014
REPORT OF INDEPENDENT AUDITOR
Board of Directors and Stockholders
Camelot Corporation and Subsidiaries
I have audited the accompanying consolidated balance sheet of Camelot
Corporation and Subsidiaries as of April 30, 1999 and the
related consolidated statements of operations, stockholders' equity, and
cash flows for the two years then ended. These financial
statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial
statements based on my audit
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Camelot Corporation and Subsidiaries as of April 30, 1999, and the
consolidated results of their operations and their consolidated cash
flows for the years ended April 30, 1999 and 1998, 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 15 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Larry O'Donnell, CPA, PC
July 28, 1999
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
April 30, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 666
Accounts receivable 15,800
Total current assets 16,466
OTHER ASSETS
Note receivable - related party 86,500
Note receivable - officer,
net of allowance of $1,914,216 -
Preferred stock-related party 530,917
Total other assets 617,417
$ 633,883
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 47,570
Total current liabilities 47,570
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 50,000,000
shares authorized, 6,293,740 shares
issued and outstanding 62,937
Preferred stock, $.01 par value,
100,000,000 shares
authorized, 1,345,305 shares issued
and outstanding 13,453
Additional paid-in capital 35,597,919
Accumulated deficit (32,251,300)
Less treasury stock at cost,
29,245 shares (2,836,696)
Total stockholders' equity 586,313
$ 633,883
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended April 30,
<TABLE>
<S> <C> <C>
1999 1998
REVENUES $ 0 $ 275,435
COSTS AND EXPENSES
Cost of sales - 143,656
General and administrative 59,498 3,084,321
Provision for inventory
obsolescence - 363,837
Depreciation and amortization - 279,295
Total costs and expenses 59,498 3,871,109
LOSS FROM OPERATIONS (59,498) (3,595,674)
OTHER INCOME (EXPENSE)
Interest and miscellaneous - 100,491
Dividend income - related party - 46,657
Gain/Loss on disposition of assets (796,664)
Loss on investment in affiliate (83,388) (811,433)
Note receivable allowance - (1,025,216)
Realized gain (loss) on sale of
marketable securities (841,419) 7,676
Total other income (expense) (934,807) (2,478,489)
NET LOSS (994,305) (6,074,163)
DIVIDENDS ON PREFERRED STOCK (4,800) (19,200)
TOTAL COMPREHENSIVE INCOME ATTRIBUTAL
TO COMMON STOCKHOLDERS $(999,305) $ (6,093,363)
INCOME (LOSS) PER SHARE:
Net Loss $ (0.19) $ (3.88)
Net Loss attributable to
common stockholders $ (0.19) $ (3.89)
Weighted average number of
common stock and common stock
equivalent shares 5,308,453 1,565,543
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Period from May 1, 1997 through April 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Common Common Preferred Preferred Additional
Stock Stock Stock Stock Paid In
Shares Amount Shares Amount Capital
Balance at May 1,
1997 881,763 18,818 2,438,056 124,38 34,021
Conversion of
Series L
Preferred
Stock to
Common Stock 662,437 6,624 (1,876,920) (18,769) 15,270
Sale of preferred - 2,400 - - 380,750
stock for cash
Sale of common 240,000 - 50 - 480,000
stock for cash
Series J
Preferred stock - - 892,214 8,922 85,295
issued for
acquisitions
Accrued interest
on stock - - - - -
subscription
receivable
Purchase of - - - - -
treasury stock
Sale of - - - - 800,000
convertible
debentures
Preferred stock
dividends to: - - - - (19,200)
Related parties
Other parties - - - - - 5,507
reverse uncleared
payments
Net loss - - - - -
Balance at April 30,
1998 1,784,200 17,842 1,453,400 14,534 35,768,983
Exchange of
Series L - - (108,095) (1,081) (123,919)
Preferred
Stock for
shares of
Wincroft
Adjustment to 4,234,348 42,343 (42,343)
correct shares
Issuance of
Common Stock for 275,192 2,752
services
Cancellation of
Common
Stock
subscription for
treasury stock
Change in
unrealized loss
on available for
sale securities
Preferred Stock
dividends to (4,800)
related party
Net Loss
Balance at April 6,293,740 $62,937 1,345,305 $13,453 $35,597,919
30, 1999
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (continued)
For the Period from May 1, 1997 through April 30, 1999
<TABLE>
<S> <C> <C> <C> <C>
Accumulated Treasury Stock Total
Deficit Stock Subscription Stockholders'
Equity
(Deficit)
Balance at May 1,
1997 (25,182,832) (2,714,575) (78,644) 6,078,509
Conversion of
Series L - - - 3,126
Preferred
Stock to
Common Stock
Sale of preferred - - - 480,000
stock for cash
Sale of common - - - 383,150
stock for cash
Series J
Preferred stock - - - 94,217
issued for
acquisitions
Accrued interest
on stock - - (2,415) (2,415)
subscription
receivable
Purchase of - (41,063) - (41,063)
treasury stock
Sale of - - - 800,000
convertible
debentures
Preferred stock
dividends to: - - - (19,200)
Related parties
Other parties - - - - -
reverse uncleared
payments
Net loss 6,074,163
Balance at April
30, 1998 (31,256,995) (2,755,638) (81,059) 1,707,667
Exchange of
Series L (125,000)
Preferred
Stock for
shares of
Wincroft
Adjustment to
correct shares
Issuance of
Common Stock for 2,752
services
Cancellation of
Common
Stock (81,059) 81,059
subscription for
treasury stock
Change in
unrealized loss (362,919)
on available for
sale securities
Preferred Stock
dividends to (4,800)
related party
Net Loss (994,305) (994,305)
Balance at April
30, 1999 $(32,251,300) $(2,836,697) - $586,314
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended April 30,
<TABLE>
<S> <C> <C>
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (994,305) $(6,074,163)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Non cash transactions for services 4,415 -
Accrued interest addition to
related party note receivable (2,415)
Depreciation and amortization 279,295
Loss on disposal of securities 931,807
Write up of securities to market value (7,676)
Provision for inventory obsolescence 50,000 363,837
Note receivable allowance 1,025,216
Proceeds from trading securities (738,480)
Change in assets and liabilities
Accounts receivable 32,356 114,436
Prepaid expenses 40,486 127,283
Inventories 87,664
Other assets 23,114
Accounts payable and accrued
expenses (213,058) (432,941)
Net cash used in operating activities (148,299) (3,757,870)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment (84,583)
Investment in affiliate 13,829
Proceeds from available for sale
securities 1,000 391,042
Purchases available for sales securities (375,098)
License, trademarks and product development (619,047)
Issuance of note receivable - related party (57,027)
Net cash provided by (used in)
investing activities 1,000 (730,884)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 383,150
Sale of preferred stock 1,283,125
Dividends paid (4,800) (13,692)
Purchase of treasury stock (41,063)
Net cash provided by (used in)
financing activities (4,800) 1,611,520
NET INCREASE (DECREASE) IN CASH (152,099) (2,877,234)
Cash at beginning of year 152,765 3,029,999
Cash at ending of year $ 666 $ 152,765
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Years Ended April 30,
<TABLE>
<S> <C> <C>
1999 1998
Supplemental information:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES
In fiscal 1999, The Company sold shares of Wincroft, Inc. to a
related party for $1,000 cash and a note receivable of $86,500.
In fiscal 1999, the Company exchanged 1,081 shares of preferred stock
for shares of Wincroft, Inc.
In fiscal 1998, the Company's Preferred Stock was converted to the
Company's restricted common stock as follows:
24 Series L for 1,407,285 shares of restricted common
453,080 Series I for 9,049,629 shares of common
In fiscal 1998 as discussed in Note 7, the Company sold its VideoTalk
business for a note receivable and preferred and common stock with
assets valued at $1,065,582.
In fiscal 1998, the Company acquired stock of Alexander Mark
Investments (USA), Inc. (which later changed its name to Wincroft,
Inc.) for issuance of preferred stock valued at $94,217. In March,
1998 the Company exchanged its shares in Alexander Mark Investments
(USA), Inc. for 8% Preferred Shares of Forsam Venture Funding ,
Inc..
See accompanying notes to consolidated financial statements
F-6
<PAGE>
CAMELOT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity and Principles of Consolidation
The consolidated financial statements include the Company and its
majority owned subsidiaries (collectively the "Company"). The
Company is now inactive and all its operating subsidiaries have
discontinued operations. The Company was primarily engaged in
research and development of Internet software and hardware
and the retailing of computer software over the Internet.
Discontinued operations of subsidiaries were involved in selling
software products through retail stores located in the Dallas
metroplex, the provision of Internet services, video marketing
and distribution, financial services, real estate rentals, and
oil and gas development. Significant intercompany accounts and
transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents. The company and its subsidiaries maintain cash
balances at several financial institutions and a brokerage firm
in Carrollton, Texas. Cash equivalents are composed primarily of
investments in a money market account. The Company believes it
is not exposed to any significant credit risk on cash and
cash equivalents.
Inventories
Inventories of computer software held for resale, are stated at
the lower of cost or market using the weighted average cost
method. An allowance for inventory obsolescence is maintained
to provide for an estimate of inventory items that have
declined in value.
Property and Equipment
Property and equipment are carried at cost, less
accumulated depreciation. Major additions and betterments are
capitalized while replacements and maintenance and repairs that
do not improve or extend the life of the respective assets are
expensed. Leasehold improvements are amortized over the lesser
of the term of the related lease or the estimated useful lives of
the assets. When property is retired or otherwise disposed of,
the related costs and accumulated depreciation are removed from
the accounts and any gain or loss is reflected in operations.
F-7
<PAGE>
Depreciation and amortization of property and equipment is provided
on the straight-line method over the following
estimated useful lives:
Office furniture and fixtures 7 years
Computer and office equipment 5 years
Computer software 5 years
Leasehold Improvements Length of lease
ranging to 5 years
Software Development
Certain software development costs are capitalized upon the
establishment of technological feasibility for each product or
process and capitalization ceases when the product is available
for general release to customers or is put into service. The
establishment of technological feasibility and the ongoing
assessment of recoverability of capitalized software development
costs require considerable judgment by management with respect to
certain external factors, including, but not limited to,
anticipated future revenues, estimated economic life and
changes in software and hardware technology. Research and
development costs related to software development that has not
reached technological feasibility are expensed as incurred.
Software development costs are amortized utilizing the straight-
line method over the estimated economic lives of the related
products not to exceed two years. Amortization of capitalized
software costs for April 30, 1998 was $86,703 and. Capitalized
software development costs were $302,510 at April 30, 1998 and
1997, respectively. Total research and development costs
charged to general and administrative expenses were
approximately $261,000 and for the years ended April 30, 1998.
Trademark and Licenses
Trademarks and licenses are stated at cost, net of
accumulated amortization, which is provided using the straight-
line method over 5 to 10 years.
Loss Per Share
Loss per common share is computed on the basis of the weighted
average number of common shares outstanding during the
respective periods. Outstanding stock warrants, options and
preferred shares are excluded from the computations as their
effect would be anti-dilutive. During 1998, common shares were
issued upon conversion of preferred shares. Had this conversion of
preferred stock occurred on May 1, 1998 net loss per common shares
would have been $3.69 for 1998.
F-8
<PAGE>
During 1999, common shares were issued upon conversion of
preferred shares. Had this conversion of preferred stock occurred
on May 1, 1998, net loss per common share would have been $16.71
for 1999.
Software Revenue Recognition
Revenue from sales of software is generally recognized upon
delivery of the software provided that no significant
obligations remain and collection of the resulting receivable is
deemed probable.
Advertising Costs
Advertising costs, included in general and administrative
expenses, are charged to operations when the advertising first
takes place and were $27,924 for 1998.
Income Taxes
Deferred income taxes are determined using the liability method
under which deferred tax assets and liabilities are
determined based upon differences between financial and tax
basis of assets and liabilities.
Fair Value of Financial Instruments
Fair value of financial instruments are estimated to approximate
the related book value, unless otherwise indicated, based on
market information available to the Company.
Impairment of Long-Lived Assets
Impairment losses are recorded on long-lived assets and
certain identifiable intangible assets held and used in operations
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be
recoverable.
Use of Estimates
In preparing financial statements in conformity with
generally accepted accounting principles, management is required
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ
from those estimates.
F-9
<PAGE>
2. ACCOUNTS RECEIVABLE AND CREDIT RISK
The Company's trade receivables at April 30, 1999 and 1998 are
primarily due from an ex-employee unsecured loan and from major
computer software distributors. The Company believes it is
not exposed to significant credit risk.
3. INVENTORIES
Included in the accompanying April 30, 1998 balance sheet is
inventory of computer software at a carrying value of
$50,000 which was management's estimate of its net realizable
value. At April 30, 1999, the entire amount of unsold inventory
was written off. Major classes of inventories consist of the
following at April 30,:.
<TABLE>
<S> <C> <C>
1999 1998
Software - $908,581
Less: Allowance for slow moving
and obsolescence 858,581
NET $ 50,000
</TABLE>
4. MARKETABLE SECURITIES
The Company adopted, effective for the year ended April 30,
1995, Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity
Securities". Under this statement, investments in available-
for-sale securities are measured at fair value with net
unrealized gains and losses reported in equity.
Investments that are bought are held principally for the purpose
of selling them in the near future are classified as trading
securities. Trading securities are measured at fair value with
net realized gains and losses reported in the statement of
operations. The fair value of marketable securities is
determined based on quoted market prices for those securities.
Sales proceeds and gross related gains and losses on securities
are as follows:
<TABLE>
<S> <C> <C>
1999 1998
Cost basis $383,366
Proceeds 391,042
Realized gains 27,135
Realized losses 19,459
</TABLE>
F-10
<PAGE>
The Company uses the specific identification method to determine
the cost of securities sold.
5. NOTE RECEIVABLE-RELATED PARTY
During fiscal 1999, the Company sold shares of Wincroft, Inc. to a
Company affiliated with the President and Chief Executive Officer.
The note is unsecured, due on demand and bears interest at 6%.
6. NOTE RECEIVABLE - OFFICER
During fiscal 1997, the Company loaned the President and
Chief Executive Officer of the Company $1,800,000. The loan is
evidenced by a nonrecourse note, which bears interest at 6%,
with all principal and accrued interest due November 14,
2006. The note is collateralized by approximately 33,500
shares of common stock of the Company which had a market value
of $1,800,000 on September 25, 1996 and is not subject to
additional calls for security regardless of any changes in the
value of the stock. At April 30, 1998, these shares had a market
value of approximately $3,115. The allowance of $1,914,216,
which includes the interest on the note is to provide for
impairment of the collateral.
7. INVESTMENT IN AFFILIATE
In May, 1997, the Company acquired 80% of the outstanding stock
of Alexander Mark Investments, USA, Inc. (which later changed
its name to Wincroft, Inc.). In March, 1998, the Company
exchanged its shares in Alexander Mark Investments, USA, Inc.
for 8% preferred shares of Forsam Venture Funding, Inc.
An officer of the Company is a director of Forsam. The
carrying amount of the investment is $80,388. The investment
was written off during fiscal 1999.
On March 31, 1998, the Company's wholly owned subsidiary, Third
Planet Publishing, Inc. sold all right, title and interest in
VideoTalk product for $7,002,056 which was paid by issuance of
common and preferred stock valued at $5,002,056 and a
promissory note for $2,000,000. On June 29, 1998, the Company
agreed to satisfy the promissory note for preferred stock and the
Company is treating the transaction as if it accrued at year end.
This investment was accounted for using the equity method because
the Company owned 20% of Wincroft, Inc. The investment had been
valued at the net book value of the assets transferred, which is
$1,065,582. During fiscal 1999, the Company sold its shares at
a loss of $841,419.
F-11
<PAGE>
8. ACCRUED EXPENSES
The following is a summary of accrued expenses at April 30,:
<TABLE>
<S> <C> <C>
1999 1998
Taxes $ $ 29,811
General and administrative 36,077
Fees 15,265
$ $ 81,155
</TABLE>
9. INCOME TAXES
The Company had no current State or Federal income tax expense
for each of the years ended April 30, 1999 and 1998.
Deferred tax assets and liabilities are determined based on
the difference between currently enacted tax rates. Deferred
tax expense or benefit is the result of the changes in deferred
tax assets and liabilities.
Deferred income taxes arise principally from the temporary
differences between financial statement and income tax
recognition of allowance for doubtful accounts, note
receivable allowance, investment valuation adjustments,
inventory reserve and from net operating losses.
The components of deferred taxes at April 30, in the
accompanying balance sheets are summarized below:
<TABLE>
<S> <C> <C>
1999 1998
Inventories 291,000
Other 4,000
Note receivable allowance 651,000 651,000
Investment valuation adjustment 123,000 1,191,000
Capital loss carryforward 323,000 115,000
Net operating loss carryforward 9,520,000 8,800,000
Less valuation allowance (10,617,000) (11,052,000)
Deferred tax asset-net $ - $ -
</TABLE>
At April 30, 1999, the Company has approximately $26,000,000 of
unused Federal net operating loss carryforwards, which expire in
the years 2003 through 2013.
F-12
<PAGE>
Approximately $640,000 of the net operating loss carryforwards for
tax purposes are limited due to statutory changes in the tax law
in connection with the change in more than 50% ownership of the
Company in 1988. Because of statutory requirements in the law,
that portion of the net operating loss carryforward applicable to
the period prior to the ownership change is limited to use of
approximately $35,800 per year until it expires. As the net
operating losses expire, at a minimum, approximately $425,000 of
the tax net operating loss carryforward will not be available for
the Company's future use.
10. STOCKHOLDERS' EQUITY
Common Stock
The brother of the President of the Company purchased 100,000
shares of the Company's restricted common stock for $278,150 in
various transactions during fiscal 1998.
Unrelated third parties purchased 140,000 shares of the
Company's restricted common stock for $105,000 in various
transactions during fiscal 1998.
Preferred Stock
The Company has 100,000,000 authorized shares of $.01 par value
preferred stock with rights and preferences as designated by the
board of directors at the time of issuance. The Company has the
following series of preferred stock issued and outstanding at April
30, 1999:
<TABLE>
<S> <C> <C>
Number of Shares
Series of Authorized Issued and
Preferred Stock Outstanding
A 2,000 -
B 75,000 -
C 50,000 -
D 66,134 -
E 108,056 -
F 15,000 -
BB 1,000,000 -
G 5,333,333 -
H 17,000,000 -
I 10,000,000 -
J 60,000,000 1,345,295
K 412,000 -
L 500,000 10
TOTAL 94,061,523 1,345,305
</TABLE>
F-13
<PAGE>
During fiscal 1998, 26 shares of Series L were converted to
1,407,285 shares of common stock.
During fiscal 1998, 453,080 shares of Series I were converted
to 9,049,629 shares of the Company's common stock.
Series E preferred shares owned by a trust affiliated with the
President of the Company are entitled to receive a cumulative
dividend equivalent to $1,600 per month. Dividends in the
amount of $4,800 and $19,200 were declared and paid each during
the years ended April 30, 1999 and 1998.
Series H preferred shares ("Series H") are entitled to receive
a dividend of 9% payable quarterly. The Series H are
convertible to common shares at twenty percent off the closing
price of the common shares.
Series L preferred shares ("Series L") are entitled to receive a
cumulative dividend of 7%, payable in common shares of the
Company. The Series L are convertible to common shares at twenty
percent off the closing price of the common shares. All shares
will automatically be converted into common shares two years
after issuance.
Any split or combination of common shares requires a simultaneous
split or combination of each series of preferred shares and
visa versa. Upon liquidation or dissolution of the Company,
holders of each series of preferred shares are entitled to
receive, to the extent of their par value, pro rata with other
preferred shareholders and before holders of common shares, all
assets legally available for distribution to stockholders.
Each series of preferred shares issued as of fiscal year-end
is nonvoting.
11. STOCK OPTIONS
The Company adopted the 1991 Employee Stock Option Plan (the Plan)
in April 1992, reserving 3,750 shares of the Company's common
stock for issuance upon the exercise of options granted under
the Plan. On April 30, 1993, the board amended and the
shareholders approved to increase the number of common shares
to 16,250 available for issuance under this plan. The options
may be purchased as Incentive Stock Options at 100% of fair
market value of the common stock or as supplemental stock options
at not less than 85% of the fair market value of the common
stock at the date of grant.
F-14
<PAGE>
The terms of the options under the Plan may not exceed 10 years.
No options may be granted under the Plan after April, 2002.
The Company has determined to use the 1991 Employee Stock
Option Plan for non-employee directors and has amended the Plan
to specifically cover directors. Other than a name change to
the 1991 Outside Director Stock Option Plan and as set out above,
the Plan will otherwise stay the same.
In October 1996 the Company adopted the 1996 Stock Option Plan.
At that time the Company canceled all outstanding options from
the 1991 plan and granted the equal number of options from the
1996 plan. The plan reserves 200,000 shares of the Company's
common stock upon exercise of the options granted under the
plan. The exercise price for the options is equal to the
Fair Market Value of a share of Common Stock on the Grant Date.
The per share exercise price of any option granted to a person
who at the time of grant owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company
must be at least 110% of the fair market value of a share of the
Company's common stock on the date of grant, and the term of such
option cannot exceed five years.
The term of the options under the 1996 plan may not exceed 10
years. No options may be granted under the Plan after October
2006. During 1997, the exercise price of the options granted
under the 1991 and 1996 plans was changed to $5.00 per share.
Under the 1996 plan, 175,000 options were granted to the President
of the Company, however he was not eligible for options under the
1991 plan. An additional 3,500 options were granted to officers
during fiscal 1997.
Outstanding stock options outside the Plan were 86,250 at April
30, 1999 and 1998,
The following schedule summarizes the changes in the Plans:
<TABLE>
<S> <C> <C>
1999 1998
Options outstanding at 282,375 275,388
beginning at year
Granted 183,563
Exercised -
Canceled (176,576)
Options outstanding at end of year 282,375 282,375
Options execrable at end of year 282,375 282,375
Average price of options:
Granted during year $ 2.063
Exercised during year -
Canceled during year 12.160
Outstanding at end of year 2.063
</TABLE>
F-15
<PAGE>
Company recognized and measures compensation costs related to
stock option plans utilizing the intrinsic value based method.
Accordingly, no compensation cost has been recorded. Had
compensation expense been determined on the fair value of awards
granted, net loss and loss per share would have been as follows:
<TABLE>
<S> <C> <C>
1998
As Reported Pro forma
Net loss $(6,074,163) $(6,538,653)
Loss per share $ (3.88) $ (4.18)
</TABLE>
The fair value of each option is estimated using the Black-
Scholes option-pricing model with the following assumptions used
for grants in 1998: risk free interest rate 4.5%; expected life
10 years; expected volatility 30%; dividend yield 0%. The fair
values generated by the Black-Scholes model may not be
indicative of the future benefit, if any, that may be received
by the option holder.
12. RELATED PARTY TRANSACTIONS
On February 24, 1999 in order to provide cash and future stream of
cash flow the Company sold to Texas Country Gold Development,
Inc., a company affiliated with its President, 700,000 shares of
Wincroft for $87,500 payable $1,000 in cash and in a note yielding
6%.
The Company received management fees of $54,000, for the years
1998, from a securities transfer agent company affiliated with
the President of the Company.
During fiscal 1996, an officer of the Company was given the
opportunity to execute a 6% interest bearing note in principal
amount of $75,156 to exercise stock options. The note
receivable, was collaterized by the pledge of 1,500 shares of
common stock of the Company and was due on January 18, 1998. The
Company accepted company stock in settlement of the loan.
The Company owns 21,495 shares of Forme Capital's Series A, 10%
Noncumulative Preferred Stock, 50,000 shares of Series B, 10%
Non-cumulative Preferred Stock and 466,571 shares of Series
C, 10% Non-cumulative Preferred Stock. The preferred shares
have no voting rights, pay dividends at the discretion of
Forme's board of directors, and have priority for payment upon
dissolution of Forme over Forme's common stock. The Company
received dividends of $46,657 from Forme Capital during fiscal
year 1998.
F-16
<PAGE>
13. COMMITMENTS AND CONTINGENCIES
Leases
The Company rented office space for its corporate headquarters
from Forme under a September 1993 agreement expiring in
September 1998. In March, 1998, the Company and Forme agreed
to terminate the lease. Rent expense incurred with Forme for
fiscal 1998 was $135,000.
In addition, the Company rented office and warehouse space in
the Carrollton, Texas area. This lease was terminated in July,
1998.
Total rent expense, all of which were minimum rentals, for
fiscal 1999, and 1998 was approximately $40,000 and $300,000,
respectively.
Litigation
During the ordinary course of business, the Company is involved
in legal proceedings and regulatory inquiries which management
does not expect to have a material effect on the financial
position of the Company.
Liquidity and Capital Resources
The consolidated statement of operations presented in the
financial statements reflects net losses for the years ended April
30, 1999 and 1998. However, the Company has been able to
improve it's financial position through preferred and common
stock offerings and has been able to raise $1,666,275 in 1998
and through private placements. As indicated at Note 16, the
Company has discontinued its operating subsidiaries and sold its
Videotalk product line in exchange for shares in Wincroft, Inc.
14. DISCONTINUED OPERATIONS
During the year ended April 30, 1998, management determined that
its operating subsidiaries should not continue in business.
Third Planet Publishing, Inc. sold all rights title and
interests to its software and hardware on March 31, 1998. The
other subsidiaries ceased operating by July 1998.
F-17
<PAGE>
The following information for the discontinued operations is for
the year ended April 30, 1998.
<TABLE>
<S> <C>
(Loss) on disposition of assets $ (189,825)
Revenues 162,500
Cost of sales and inventory write down 507,443
General and administrative expenses 1,559,769
Net income(loss) (2,094,537)
Earnings per share $ (1.34)
</TABLE>
F-18
<PAGE>
Item 8. Disagreements on Accounting and Financial Disclosure
Lane Gorman Trubitt, L.L.P. was 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 9. Directors and Executive Officers of the Registrant
The following persons serve as directors and/or officers of the
Company as of July 28, 1999:
<TABLE>
<S> <C> <C> <C> <C>
Name Age Position Period Served Term Expires
Daniel Wettreich 47 Chairman, September 16, 1988 Next Annual
President, Meeting
Director
Allan S. Wolfe 67 Director May 24, 1993 Next Annual
Meeting
</TABLE>
Daniel Wettreich
Daniel Wettreich is Chairman, President and Director of the
Company(1) since September 1988. Additionally, he currently holds
directors positions in the following public companies: Forme
Capital, Inc., a holding company, and Adina, Inc., and Malex, Inc.
which are dormant companies seeking merger opportunities. From July
1996 to July 1998, he was a 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. Mr. Wettreich has a Bachelor
of Arts in Business Administration from the University of
Westminster, London, England.
Allan S. Wolfe
Allan S. Wolfe has been a Director of the Company since May, 1993.
He is a director of Palm Desert Art, Inc., formerly Database
Technologies, Inc., a public company now involved with art galleries,
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.
<PAGE>
(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 10. 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, 1999. No bonuses
were granted to any officer, nor was any compensation deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C>
<C> <C> <C>
<C> <C>
Annual Compensation Long-Term Compensation
Awards Payouts
Restr-
Name and Other icted Opt- LTIP All
Principal Year Salary Bonus Annual Stock ions/ Pay Other
Position Compens Award SARs outs Compens
ation (s) ation
Daniel 1997 $250,000 - - - 175,000 - $(1)
Wettreich 1998 $250,000 - - - 100,000 - $(1)
Chairman and 1999 $ 52,083 - - - (275,000) - $(1)
CEO (1)
</TABLE>
(1) In July 1995, Mr. Wettreich became an employee 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. In April 1999 he surrendered his options to the
Company 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.
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
<PAGE>
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 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth as of July 16, 1999 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 (2 persons).
<TABLE>
<S> <C> <C>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Daniel Wettreich 1,402,928 (1) 17.7%
6959 Arapaho Road, Suite 122
Dallas, Texas 75248
Allan Wolfe 10,250 (2) *
390 South River Road
Suite 5
Bedford, NH 03110
All Officers and Directors 1,413,178 (1)(2) 17.7%
as a group (2 persons)
* Under 0.1%
Forsam Venture Funding, Inc. 1,345,295 (1) 17.7%
6959 Arapaho Road, Suite 122
Dallas, Texas 75248
</TABLE>
<PAGE>
(1) 1,345,295 of these are Preferred Stock , Series J, which have
voting rights, and are owned by Forsam Venture Funding, Inc.,
("Forsam") a Delaware corporation of which, Mr. Wettreich is a
director and officer. 57,633 shares are owned by AM
Investments, Ltd. ("AM") a UK corporation of which Mr.
Wettreich is a director. Mr. Wettreich has disclaimed any
beneficial interest in the shares owned by Forsam and AM. (See
Item 13. Certain Relationships and Related Transactions).
(2)Includes an option to purchase 6,625 shares granted to Allan
Wolfe, which option is not exercised.
Item 12. Certain Relationships and Related Transactions
On February 24, 1999 in order to provide cash and future stream of
cash flow the Company sold to Texas Country Gold Development, Inc., a
company affiliated with its President, 700,000 shares of Wincroft for
$87,500 payable $1,000 in cash and in a note yielding 6%.
On May 20, 1997 Adina, Inc. subscribed for (post reverse) 1,345,295
restricted Preferred Shares, Series J of the Company with payment by
the transfer of 6,029,921 restricted common shares of Alexander Mark
Investments (USA), Inc. to the Company. 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.
Stock Transfer Company of America, Inc., ("STCA") a company
affiliated with the President of the Company provided services during
the year ended April 1999, and 1998 as a securities transfer agent.
A total of $1,000, and $18,855 were paid by Company for these
services. In the opinion of the Board of Directors, the terms of
these transactions were 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 April 30, 1998.
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 surrendered the Midway lease to the landlord in July 1998 for
$39,781.
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.
<PAGE>
On January 17, 1996, the Company's disinterested directors approved a
secured loan to the Corporate Secretary in the amount of $75,156 to
exercise options to purchase Company stock. This loan bears interest
at a rate 6% per annum. The Company agreed to accept Company stock
in settlement of the loan.
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.
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
2,000,000 British Pounds of loan stock owed to the Company by Meteor
and 500,000 British Pounds
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 70,000 British Pounds 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 Alexander Mark Investments (USA), Inc. 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
dividends. 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 #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.
<PAGE>
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
Alexander Mark Investments (USA), Inc. for $13,830 cash. These
transactions represented Registrants total shareholding in Alexander
Mark Investments (USA), Inc.
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.
On March 23, 1998, Registrant acquired from Alexander Mark
Investments (USA), Inc. 43,000 Preferred Shares, Series B of Forsam
Venture Funding for $43,000 cash.
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. 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.
<PAGE>
PART IV
Item 13.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, 1999.
Index to Consolidated Financial Statements Page
Report of Independent Auditors - 1999 and 1998 F-1
Consolidated Financial Statements
Balance Sheet - April 30, 1999 F-2
Statements of Operations and Other Comprehensive Income
for the years
ended April 30, 1999 and 1998 F-3
Statements of Stockholders' Equity for the
years ended April 30, 1999 and 1998 F-4
Statements of Cash Flows for the years ended
April 30, 1999 and 1998 F-5 and
F-6
Notes to Consolidated Financial Statements F-7 through
F-18
(a) (2) Consolidated Schedule -
(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 May 8, 1998 reporting Item 1.
Report filed on May 27, 1998 reporting Item 4.
Report filed on July 9, 1998 reporting Item 5.
Report filed on February 15, 1999 reporting Item 8.
<PAGE>
EXHIBIT 22(a)
SUBSIDIARIES
AS OF MAY 14, 1999
mrcdrom.com, inc. 100%
<PAGE>
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 30, 1999
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 30, 1999
By: /s/Allan Wolfe
Director
Date: July 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> APR-30-1999
<CASH> 666
<SECURITIES> 0
<RECEIVABLES> 15800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16466
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 633883
<CURRENT-LIABILITIES> 47570
<BONDS> 0
0
13453
<COMMON> 62937
<OTHER-SE> 509923
<TOTAL-LIABILITY-AND-EQUITY> 633883
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<TOTAL-REVENUES> 0
<CGS> 59498
<TOTAL-COSTS> 59498
<OTHER-EXPENSES> (934807)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (994305)
<INCOME-TAX> (999105)
<INCOME-CONTINUING> (999105)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (999105)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
