UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): August 20, 2008
CAMELOT
ENTERTAINMENT GROUP INC.
(EXACT
NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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Delaware
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000-3078
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52-2195605
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(State
or other jurisdiction of incorporation or organization)
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(Commission
File Number)
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(IRS
Employee Identification No.)
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130
Vantis Suite 140 Aliso Viejo CA
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92656
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
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(949)
334 2950
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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1
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ITEM
1.01
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ENTRY
INTO A MATERIAL DEFINITIVE
AGREEMENT(S)
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On August
20, 2008, the Company’s Board of Directors ratified a series of agreements
entered into between the Company and several note holders with whom the Company
previously had entered into various financing agreements. On July 31, 2008, the
Company agreed to amend the original notes entered into on December 27, 2006,
with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW
Offshore, Ltd. and AJW Partners, LLC. Under the amended agreements, the interest
rate will be 10% effective January 1, 2008 and the Applicable Percentage will be
50%. On July 31, 2008, we entered into an additional Securities Purchase
Agreement (the "Securities Purchase Agreement") with New Millennium Capital
Partners II, LLC (the "Investor"). Under the terms of the Securities Purchase
Agreement, the Investor purchased an aggregate of (i) $160,000 in callable
convertible secured notes (the "Notes") and (ii) warrants to purchase
20,000,0000 shares of our common stock (the "Warrants"). The capital provided by
the Notes will be delivered to the Company as follows; $50,000 upon closing,
$50,000
upon filing of the Company’s 14C and $60,000 upon effectiveness of the planned
reverse split of the Company’s common stock.
The Notes
carry an interest rate of 10% and a maturity date of July 31, 2011. The notes
are convertible into our common shares at the Variable Conversion Price (as
defined hereafter). The Variable Conversion Price shall be equal to the
Applicable Percentage multiplied by the average of the lowest three (3) trading
prices for our shares of common stock during the twenty (20) trading day period
prior to conversion. The Applicable Percentage is 50%.
At our
option, we may prepay the Notes in the event that no event of default exists,
there are a sufficient number of shares available for conversion of the Notes
and the Common Stock is trading below the Initial Market Price as adjusted. In
addition, in the event that the average daily price of the common stock, as
reported by the reporting service, for each day of the month ending on a
determination date is below the Initial Market Price as adjusted, we may prepay
a portion of the outstanding principal amount of the Notes equal to 104% of the
principal amount hereof divided by thirty-six (36) plus one month’s interest.
Exercise of this option will stay all conversions for the following month. The
full principal amount of the Notes is due upon default under the terms of Notes.
In addition, the Company has granted the investors a security interest in
substantially all of its assets and intellectual property, excluding Camelot
Studio Group and Camelot Film Group, as well as demand registration
rights.
We
simultaneously issued to the Investors seven year warrants to purchase
20,000,000 shares of our common stock at an exercise price of $.01 post
reverse.
The
Investors have contractually agreed to restrict their ability to convert the
Notes and exercise the Warrants and receive shares of the Company's common stock
such that the number of shares of the Company's common stock held by them and
their affiliates after such conversion or exercise does not exceed 4.99% of the
then issued and outstanding shares of the Company's common stock.
If
requested by the note holder, we are committed to registering the shares of
common stock underlying the Notes. We have agreed to use our best efforts to
file the registration statement within thirty (30) days from the closing date of
our agreement with the Investors otherwise we may be subject to penalty
provisions. There are penalty provisions if the Company does not use its best
efforts and respond to comments from the SEC regarding its Registration
Statement in a timely manner, or after the Registration Statement has been
declared effective by the SEC, sales of all of the Registrable Securities cannot
be made pursuant to the Registration Statement due to the fault of the
Company.
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ITEM
2.03
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CREATION
OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE
SHEET ARRANGEMENT OF A REGISTRANT
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The sale
of Notes described in Item 1.01 is still underway and is expected to be
completed on or about August 29, 2008. The Company received $50,000 in gross
proceeds from the Notes on August 12, 2008. At the closing, the company became
obligated to the Investors for $50,000 in face amount of the Notes. The Company
received an additional $50,000 in gross proceeds from the Notes on August 19,
2008. At the subsequent closing, the company became obligated to the Investors
for $50,000 in face amount of the Notes. The balance of the Notes, $60,000, will
be delivered to the Company upon the effectiveness of the planned reverse split,
which is currently scheduled to occur on or about August 29, 2008. The Notes are
a debt obligation arising other than in the ordinary course of business which
constitute a direct financial obligation of us.
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ITEM
3.02
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UNREGISTERED
SALES OF EQUITY SECURITIES
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The Notes
and Warrants referenced in Item 1.01 were offered and sold to the Investors in a
private placement transaction in reliance upon exemptions from registration
pursuant to Section 4(2) of the Securities Act of 1933 and/or Rule 506 of
Regulation D promulgated thereto. Each of the Investors is an accredited
investor as defined in Rule 501 of Regulation D under the Securities Act of
1933.
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2
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ITEM
9.01
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FINANCIAL
STATEMENT AND EXHIBITS
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(a)
Financial Statements of Business
Acquired.
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None
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(b)
Pro Forma Financial Information.
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None
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(c)
Exhibits.
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Exhibit
Number
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Description
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4.1
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Securities
Purchase Agreement dated July 31, 2008 by and among the Company and the
Investor
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4.2
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Form
of Callable Convertible Secured Note dated July 31, 2008 by and among
the Company and the Investor
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4.3
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Form
of Stock Purchase Warrant by and among the Company and the
Investor
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4.4
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Registration
Rights Agreement by and among the Company and the
Investor
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4.5
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Security
Agreement by and among the Company and the Investor
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4.6
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Intellectual
Property Security Agreement by and among the Company and the
Investor
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4.7
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Subsidiary
Guarantee Agreement by and among the Company and the
Investor
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4.8
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Amendment of Notes |
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4.9
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Form of Callable Convertible Secured Note dated August 15, 2008 by and among the Company and the Investor |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned hereunto
duly authorized.
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CAMELOT
ENTERTAINMENT GROUP, INC.
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Dated:
August 20, 2008
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By:
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/s/
Robert P. Atwell
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Robert
P. Atwell
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Chairman
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