SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The fiscal year ended November 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file no. 1-8846
CALTON, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2433361
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization
125 HALF MILE ROAD 07701-6749
RED BANK, NEW JERSEY (Zip Code)
(Addresses of principal executive offices)
Registrant's telephone number,
including area code: (732) 212-1280
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Class on which registered
-------------- ---------------------
Common Stock American Stock Exchange
$.01 par value per share
Rights American Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate 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 registrant'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. X
---
The aggregate market value (based upon the last sales price reported by the
American Stock Exchange) of voting shares held by non-affiliates of the
registrant as of February 24, 2000 was $82,226,000.
As of February 24, 2000, 21,617,000 shares of Common Stock were outstanding.
The Company's Proxy Statement for the annual meeting of shareholders is
incorporated by reference into Part III hereof.
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Disclosure Concerning Forward-Looking Statements
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All statements, other than statements of historical fact, included in this Form
10-K, including in Part II, Item 7: "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the statements under
"Business" are, or may be deemed to be, "Forward-Looking Statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," and variations of such words and
similar phrases are intended to identify such forward-looking statements. Such
forward-looking statements involve assumptions, known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements contained in this Form 10-K. Such potential risks and
uncertainties, include without limitation, matters related to national and local
economic conditions, the effect of governmental regulation on the Company, the
competitive environment in which the Company operates, potential adverse affects
of acquisitions, the ability of the Company to identify suitable acquisition
candidates, changes in interest rates, and other risk factors detailed herein
and in other of the Company's Securities and Exchange Commission filings. The
forward-looking statements are made of the date of this Form 10-K and the
Company assumes no obligation to update the forward-looking statements or to
update the reasons actual results could differ from those projected in such
forward-looking statements.
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PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
GENERAL
Calton, Inc. (the "Company" or "Calton") sold its principal
operating subsidiary, Calton Homes, Inc. ("Calton Homes"), on
December 31, 1998. See "Sale of Calton Homes." Since the completion
of the sale, the Company has been primarily engaged in providing
consulting services to the purchaser of Calton Homes and analyzing
potential business and acquisition opportunities. In addition, in
July 1999, the Company acquired substantially all of the assets of
iAW, Inc., an Internet business solutions provider in its early
stages of development. In January 2000, the Company acquired a
controlling interest in PrivilegeONE Networks, Inc.
("PrivilegeONE"), a newly formed company engaged in the development
of a co-branded loyalty credit card program.
Calton was incorporated in 1981 for the purpose of acquiring
all of the issued and outstanding capital stock of Kaufman and
Broad of New Jersey, Inc., a New Jersey corporation, from Kaufman
and Broad, Inc., a Maryland corporation. After the acquisition, the
name Kaufman and Broad of New Jersey, Inc. was changed to Calton
Homes. Calton maintains it corporate offices at 125 Half Mile Road,
Suite 206, Red Bank, New Jersey 07701 and its telephone number is
(732) 212-1280. As used herein, the term "Company" refers to
Calton, Inc. and its subsidiaries, unless the context indicates
otherwise.
SALE OF CALTON HOMES
On December 31, 1998 (the "Closing Date"), Calton completed
the sale of Calton Homes, its wholly owned homebuilding subsidiary,
to Centex Real Estate Corporation ("CREC" or the "purchaser"), the
homebuilding subsidiary of Centex Corporation (NYSE:CTX), one of
the nation's largest homebuilders (the "Sale Transaction"). The
purchase price for the stock of Calton Homes, which was paid in
cash at closing, was $48.1 million, subject to a $5.2 million
holdback, and certain post closing adjustments. The Company
recorded a pre-tax gain of approximately $7.6 million and a net
gain of approximately $4.4 million after recording a non-cash
provision in lieu of taxes of $3.2 million as a result of the Sale
Transaction in the first quarter of fiscal 1999. Calton has entered
into an agreement to provide consulting services to CREC which will
entitle the Company to payments of $1.3 million per year over the
three year period ending December 31, 2001.
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STRATEGIC PLAN
At the time of the Sale Transaction, the Company announced
that the Sale Transaction was part of a strategic plan designed to
enhance shareholder value. Pursuant to its strategic plan, the
Company commenced a stock repurchase program and announced its
intention to (i) shift the Company's primary business focus from
homebuilding to providing various services to participants both
within and outside the homebuilding industry, including consulting
services, equity and debt financing and financial advisory services
and (ii) seek to invest in, acquire or combine with one or more
operating businesses within or outside the homebuilding industry.
Pursuant to its stock repurchase program, the Company has,
since October 31, 1998, acquired approximately 6,900,000 shares of
Common Stock at an average price of $1.26 per share. The timing and
number of additional shares purchased pursuant to the stock
repurchase program will depend on a variety of factors, including
the market price of the Common Stock. Management has currently
suspended the acquisition of additional shares of Common Stock
pursuant to the stock repurchase program because recent market
prices of the Common Stock have exceeded book value.
In 1999, the Company acquired the assets of iAW, Inc. and in
January 2000, acquired a 50.4% interest in PrivilegeONE pursuant to
its strategic plan. The Company continues to analyze potential
acquisitions and other business opportunities. Pending further
implementation of the Company's strategic plan, the Company's cash
will be temporarily invested as management of the Company deems
prudent, which may include, but will not be limited to, mutual
funds, money market accounts, stocks, bonds or United States
government or municipal securities; provided, however, that the
Company will attempt to invest the net proceeds and conduct its
activities in a manner which will not result in the Company being
deemed to be an investment company under the Investment Company Act
of 1940, as amended, or a personal holding company for federal
income tax purposes. See "Certain Risks."
If by June 30, 2000, the Company has not redeployed a
substantial portion of the proceeds of the Sale Transaction, or
developed a plan to redeploy a substantial portion of such proceeds
within in a reasonable time frame, the Company, subject to
shareholder approval, will be liquidated and dissolved. Management
currently expects to deploy or have a plan to deploy a substantial
portion of the proceeds by June 30, 2000.
CERTAIN RISKS
Risks Associated with Potential Business Combinations.
The Company is seeking to enhance shareholder value by
investing in, acquiring or combining with one or more operating
businesses either within or outside of the homebuilding industry.
Management of the Company will endeavor to evaluate the risks
inherent in any particular target business; however, there can be
no assurance that the Company will properly ascertain all such
risks. In many cases, shareholder approval will not be required to
effect such a business combination. The fair market value of the
target business will be determined by the Board of Directors of the
Company. Therefore, the Board of Directors has significant
discretion in determining whether a target business is suitable for
a proposed business combination. The success of the Company will
depend on the Company's ability to attract and retain qualified
personnel as well as the abilities of key management of the
acquired companies. As a result, no assurance can be given that the
Company will be successful in implementing its strategic plan or
that the Company will be able to generate profits from such
activities.
Continued Listing on AMEX.
The Company's Common Stock is currently listed for trading on
the American Stock Exchange ("AMEX"). Under AMEX's suspension and
delisting policies, AMEX will normally consider suspending
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dealings in, or removing from listing securities of a company, if
the company has sold or otherwise disposed of its principal
operating assets, has ceased to be an operating company or has
discontinued a substantial portion of its operations or business
for any reason. AMEX has indicated that the Common Stock may become
subject to delisting if the Company is not engaged in active
business operations within a reasonable period of time after the
closing of the Sale Transaction. Although the Company is engaged in
active business as a result of its consulting agreement with CREC
and its acquisitions of iAW and PrivilegeONE, no assurance can be
given that AMEX will not commence proceedings to delist the Common
Stock. If the Common Stock is delisted, it would trade on the OTC
Bulletin Board or in the "pink sheets" maintained by the National
Quotation Bureau, Inc., which are generally considered to be less
efficient markets.
Investment Company Act Considerations.
The Investment Company Act of 1940, as amended ("1940 Act"),
requires the registration of, and imposes various substantive
restrictions on, certain companies that engage primarily, or
propose to engage primarily in the business of investing,
reinvesting, or trading in securities, or that fail certain
statistical tests regarding the composition of assets and source of
income, and are not primarily engaged in a business other than
investing, holding, owning or trading securities. The Company
intends to conduct its activities in a manner which will not
subject the Company to regulation under the 1940 Act; however,
there can be no assurance that the Company will not be deemed to be
an investment company under the 1940 Act. If the Company were
required to register as an investment company under the 1940 Act,
it would become subject to substantial regulation with respect to
its capital structure, management, operations, transactions with
affiliates, the nature of its investments and other matters. In
addition, the 1940 Act imposes certain requirements on companies
deemed to be within is regulatory scope, including compliance with
burdensome registry, recordkeeping, voting, proxy, disclosure and
other rules and regulations. In the event of the characterization
of the Company as an investment company, the failure of the Company
to satisfy regulatory requirements, whether on a timely basis or at
all, could have a material adverse effect on the Company.
Certain Tax Matters.
Section 541 of the Internal Revenue Code of 1986, as amended
(the "IRC"), subjects a corporation which is a "personal holding
company," as defined in the IRC, to a 39.6% penalty tax on
undistributed personal holding company income in addition to the
corporation's normal income tax. The Company could become subject
to the penalty tax if (i) 60% or more of its adjusted ordinary
gross income is personal holding company income and (ii) 50% or
more of its outstanding Common Stock is owned, directly or
indirectly, by five or fewer individuals. Personal holding company
income is comprised primarily of passive investment income plus,
under certain circumstances, personal service income.
Indemnity Obligations
The stock purchase agreement pursuant to which the Company
sold Calton Homes requires the Company to indemnify the purchaser
for, among other things, breaches of the agreement and certain
liabilities that arise out of events occurring prior to the closing
of the sale including the cost of warranty work on homes delivered
if such costs exceed $600,000. On the Closing Date of the Sale
Transaction, the Company deposited an aggregate of approximately
$5.2 million in escrow, $3 million of which provides security for
the Company's indemnity obligations (the "General Indemnification
Funds") and approximately $2.2 million of which were deposited to
fund costs associated with certain specified litigation (the
"Specific Indemnification Funds"), involving Calton Homes. During
1999, the Company refunded to the purchaser $700,000, paid out of
the General Indemnification Funds as a part of a settlement
agreement and related post closing adjustments; also the Company
collected $592,000 from the Specific Indemnification Funds as a
result of a certain litigation settlements and legal fee
reimbursements. In January, 2000 the Company collected
approximately $1.0 million from the General Indemnification Funds.
As of February 1, 2000 there was approximately $1.5 million in the
General Indemnification Funds and $1.5 million in the Specific
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Indemnification Funds. In January, 2000 the purchaser asserted an
indemnification claim against the General Indemnification Funds in
the amount of $253,000. However the Company believes it has
meritorious defenses against this claim. It is uncertain as to
whether this claim will enter into arbitration proceedings. Under
certain circumstances, the Company may be required to deposit
additional funds into escrow. In addition, the Company's indemnity
obligations are not limited to the amount deposited in escrow. No
assurance can be given that the purchaser of Calton Homes will not
make additional claims for indemnity or that a significant portion
of the escrowed funds will not be utilized to resolve litigation.
See "Legal Proceedings."
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The information required by this item is presented in Note 3
of the 1999 Financial Statements located on page F-9 of this
report.
(C) DESCRIPTION OF BUSINESS
GENERAL
With the sale of Calton Homes, the Company discontinued its
homebuilding operations. Since the completion of the Sale
Transaction, the Company has been primarily engaged in providing
consulting services to the purchaser of Calton Homes and analyzing
potential acquisitions and other business opportunities. In July
1999, the Company acquired substantially all of the assets of iAW,
Inc., an Internet business solutions provider. In January 2000, the
Company acquired a 50.4% interest in PrivilegeONE.
ECALTON.COM
In July 1999, the Company acquired iAW, Inc. an Internet
business solutions provider. The Company conducts the acquired
business though a wholly owned subsidiary that has changed its name
to eCalton.com, Inc. ("eCalton"). The purchase price for the
acquisition, which was structured as an asset purchase, was
$250,000. eCalton provides Internet strategy consulting and
comprehensive Internet-based solutions. By combining extensive
business and Internet knowledge with creativity, eCalton provides
its customers with the resources and tools to optimize, monitor,
and measure the effectiveness of each component of their
e-business. eCalton provides Internet-based solutions to small,
medium, and large companies.
Sales and Marketing.
eCalton's national marketing office is headquartered in Vero
Beach, Florida. The company markets its products and services
through telemarketing, face to face interviews with client
executives, and through the eCalton web site.
In order to completely understand the needs of its clients,
eCalton uses a three-step process that allows eCalton to evaluate
the client's Internet practices, and transform the client's
Internet business presence into one that provides a competitive
business advantage, referred to as an Internet Best Practices
Audit:
Step one is a visit to the client facility for a series of
interviews with senior executives responsible for setting corporate
strategy. This interview allows eCalton to gain a basic
understanding of the clients overall e-business strategy,
competitive situation, immediate and long-term goals.
5
Step two is to conduct a complete assessment of the client's
current Internet presence and to formulate an e-business strategic
plan to satisfy all of the client's needs. eCalton evaluates the
effectiveness of the web site, and compares and contrasts the site
to industry best practices, including measuring the "visibility" of
the Website with the most effective Internet search tools
available.
The third step is for eCalton to present the results to its
client and direct the implementation of the solution. The Internet
Best Practices Audit includes a written report with assessments and
recommendations.
In most cases, once the solution has been implemented, eCalton
continues to partner with its clients to ensure that the solution
continues to meet the clients' changing e-business requirements and
to allow for potential future revenue opportunities for eCalton.
In addition to marketing its services to its client, eCalton's
marketing efforts are also dedicated to creating brand name
awareness and enhancing its reputation as a complete Internet-based
solutions provider.
Competition.
The market for Internet professional services is relatively
new, intensely competitive, rapidly evolving and subject to rapid
technological change. While relatively new, the market is already
highly competitive and characterized by an increasing number of
entrants that have introduced or developed products and services
similar to those offered by eCalton. The Company expects
competition not only to persist, but to increase. Increased
competition may result in price reductions, reduced margins and
loss of market share. eCalton's competitors and potential
competitors have longer operating histories, larger installed
customer bases, greater name recognition, longer relationships with
their clients, and significantly greater financial, technical,
marketing and public relations resources than eCalton. As a result,
eCalton's competitors may be better positioned to react in the
ever-changing market place. eCalton expects competition to persist
and intensify in the future.
PRIVILEGEONE
General.
In January 2000, the Company acquired a 50.4% collective
direct and indirect (through ownership in a parent company)
interest in PrivilegeONE Networks, Inc. PrivilegeONE was formed in
1999 to develop customer loyalty programs through the use of a
co-branded credit card related to the automotive industry.
In order to execute the PrivilegeONE business plan,
PrivilegeONE management is currently pursuing arrangements with
financial institutions to issue and process credit cards marketed
by PrivilegeONE. Until such an arrangement is secured, PrivilegeONE
will be unable to execute its business plan.
The purchase price for the Company's interest in PrivilegeONE
was comprised of $105,000 of cash and a five-year warrant to
acquire 1,200,000 shares of the Company's Common Stock at an
exercise price of $2.50 per share. The warrant becomes exercisable
only if PrivilegeONE surpasses certain specified earnings targets.
In addition to its equity interest, the Company has agreed to loan
up to $1,500,000 to PrivilegeONE pursuant to a note which bears
interest at the rate of 10% per annum and becomes due in January
2004. The Company has the right to designate a majority of the
Board of Directors of PrivilegeONE until the later of the time that
the note is repaid or January 2004. The Company has entered into
shareholder agreements with the other shareholders of PrivilegeONE
and its parent company which obliges each of the shareholders to
offer his or its shares in PrivilegeONE or its parent to the other
shareholders in the event that the shareholder wishes to transfer
his or its shares. The shareholder agreements also grant the
Company the preemptive right to acquire a proportionate share of
any additional
6
securities issued by PrivilegeONE or its parent and provide that
certain corporate actions may not be taken without the
Company's approval.
Sales and Marketing.
PrivilegeONE intends to market its program directly through a
national sales force. PrivilegeONE is seeking to develop a number
of customer acquisition and loyalty strategies centered around the
acceptance and use of its cards, including reward and other
programs designed to promote card use. PrivilegeONE also intends to
develop an Internet site through which it will seek to develop
strong relationships with and provide services to customers.
Competition.
The credit card industry is characterized by intense
competition. PrivilegeONE will compete with numerous co-branded
credit card programs, including reward based programs. Many of
these programs are sponsored by entities with greater resources and
name recognition than PrivilegeONE. As a result PrivilegeONE's
competitors may be better positioned to react in a changing market
place.
CONSULTING SERVICES
The Consulting Agreement requires the Company to provide
certain consulting services to CREC, including information, advice
and recommendations with respect to the homebuilding market in New
Jersey and Pennsylvania. The Company has agreed that it will not
provide similar services to others in New Jersey or Pennsylvania
during the term of the Consulting Agreement and for a four year
period after the expiration of the three year term of the
Consulting Agreement.
The Consulting Agreement requires Anthony J. Caldarone, the
Company's Chairman, President and Chief Executive Officer to
participate in the performance of the consulting services to CREC
and for so long as he remains employed by or associated with the
Company.
In consideration for the services provided by the Company
under the Consulting Agreement, CREC is required to pay the Company
a consulting fee of $1.3 million per year, payable in equal
quarterly installments during the three year term of the agreement.
Other than the Consulting Agreement, the Company has not entered
into any arrangements to provide consulting, investment or advisory
services to any third parties.
EMPLOYEES
As of February 25, 2000, the Company employed eight full time
personnel, and one part time employee; the Company's subsidiary,
eCalton.com, Inc., employed 24 full time personnel and two part
time employees; PrivilegeONE employed 9 full time personnel.
The Company believes that its employee relations are
satisfactory.
ITEM 2. COMPANY FACILITIES
The Company currently leases approximately 2,100 square feet
of office space located in Red Bank, New Jersey, for approximately
$4,700.00 per month. The term of this lease is on a month-to-month
basis. The Company also leases approximately 1,790 square feet of
temporary office space on a month-to-month basis in Vero Beach,
Florida, for approximate $2,200.00 per month, until its permanent
space is available at the end of May 2000. The permanent space at
the same location will consist of approximately 3,815 square feet,
at a monthly rate of approximately $5,722.00, for a term of 5
years.
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The Company's subsidiary, eCalton, currently leases
approximately 4,000 square feet of office space, for approximately
$4,700 per month. The term of this lease is on a month-to-month
basis. PrivilegeONE currently leases 2,000 square feet of office
space in Rhode Island at a cost of $900.00 per month on a month to
month basis.
Management believes that these arrangements currently provide
adequate space for all of the Company's business operations.
ITEM 3. LEGAL PROCEEDINGS
The stock purchase agreement pursuant to which the Company
sold Calton Homes on December 31, 1998 requires the Company to
indemnify the purchaser for, among other things, breaches of the
agreement and certain liabilities that arise out of events
occurring prior to the closing of the sale. On December 31, 1998,
as a condition to the sale of Calton Homes, the Company entered
into a holdback escrow agreement with the purchaser pursuant to
which approximately $5.2 million of the closing proceeds were
deposited into escrow. Of this amount, $3 million (the "General
Indemnification Funds") were deposited to provide security for the
Company's indemnity obligations and approximately $2.2 million (the
"Specific Indemnification Funds") were deposited to fund costs
associated with certain specified litigation involving Calton
Homes. During 1999, the Company refunded $700,000 to the purchaser,
out of the General Indemnification Funds as a part of a settlement
agreement and related post closing adjustments. The Company
collected $592,000 from the Specific Indemnification Funds in 1999
as a result of a certain litigation settlements and legal fee
reimbursements. In January 2000, approximately $1.0 million was
released to the Company from the General Indemnification Funds
pursuant to the terms of its agreement with the purchaser. As of
February 1, 2000 there was approximately $1.5 million in the
General Indemnification Funds and $1.5 million in the Specific
Indemnification Funds. In January 2000, the purchaser asserted a
$253,000 claim for indemnification related to certain alleged
misrepresentations and liabilities allegedly arising out of the
events occurring prior to the sale of Calton Homes. The Company and
the purchaser are attempting to resolve this claim and it is
uncertain as to whether this claim will enter into arbitration
proceedings. However, the Company believes it has meritorious
defenses against this claim. The remaining General Indemnification
Funds will be disbursed to the Company, subject to claims for
indemnification, on December 31, 2000. The Specific Indemnification
Funds will be disbursed, to the extent not otherwise utilized in
the resolution of litigation, on a case by case basis as the
litigation is resolved. If all of the specified litigation is not
resolved by December 31, 2000, a portion of the General
Indemnification Funds will not be disbursed to the Company until
the resolution of the litigation. The Company may, under certain
circumstances, be required to deposit additional funds in the
holdback if all of the specified litigation is not resolved by
December 31, 2000. In addition, the Company's indemnity obligations
are not limited to the amounts deposited in escrow. In the event
that the Company elects to liquidate and dissolve prior to December
31, 2003, it will be required to organize a liquidating trust to
secure its obligations to the purchaser. The liquidating trust will
be funded with the Specific Indemnification Funds plus, $3 million
if created between December 31, 1999 and December 31, 2000 and $2
million if created after December 31, 2000. If the liquidation
occurs prior to December 31, 2000, the Company may be required to
deposit additional amounts in the Liquidating Trust if the
specified litigation is not resolved by such date. Any General
Indemnification Funds remaining in the holdback escrow fund will be
applied as a credit against amounts required to be deposited in the
liquidating trust.
Although the Company believes it has adequately reserved for
the resolution of all of the litigation associated with the
indemnity obligations, there is no assurance that the ultimate
resolution of the pending litigation will not result in additional
charges to discontinued operations or the Company will collect all
of the remaining holdback escrow.
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Calton's by-laws contain provisions which provide
indemnification rights to officers, directors and employees under
certain circumstances with respect to liabilities and damages
incurred in connection with any proceedings brought against such
persons by reason of their being officers, directors or employees
of Calton.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, no matter was submitted to
a vote of security holders through the solicitation of proxies or
otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of February 24, 2000
are listed below and brief summaries of their business experience
and certain other information with respect to them is set forth in
the following table and in the information which follows the table:
Name Age Position
---- --- --------
Anthony J. Caldarone 62 Chairman, President and Chief Executive Officer
Maria F. Caldarone 36 Vice President of Corporate Development
David J. Coppola 40 Vice President and Treasurer
Kelly S. McMakin 38 Senior Vice President of Accounting
Mr. Caldarone was reappointed as Chairman, President and Chief
Executive Officer of Calton in November 1995, having previously
serviced in such capacities from the inception of the Company in
1981 through May 1993. From June 1993 through October 1995, Mr.
Caldarone served as a Director of the Company.
Maria Caldarone served as the Director of Business Development
from January 1999 until she was appointed as a Vice President of
the company in February 2000. From 1995 through January 1999 Ms.
Caldarone was a non-practicing attorney. Prior to 1995 Ms.
Caldarone was employed by Trafalgar Homes, from December 1993 to
November 1994 where she served as Director of Land Acquisition. Ms.
Caldarone is a licensed attorney in the state of Florida. Ms.
Caldarone is the daughter of Mr. Caldarone.
Mr. Coppola was appointed Treasurer of the Company in January
1999. He served as the Company's Controller from 1992 until 1999
and was appointed as a Vice President of the Company in 1993. Mr.
Coppola is a Certified Public Accountant.
Mr. McMakin was appointed Senior Vice President of the company
in January 2000. From 1993 through January 2000, Mr. McMakin served
as Controller and Treasurer of Florafax International, Inc., a
publicly traded floral wire service and credit card processor
headquartered in Vero Beach, Florida. Mr. McMakin is a Certified
Public Accountant.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Calton, Inc. common stock is traded on the American Stock
Exchange ("AMEX") under the symbol CN. The following reflects the
high and low sales prices of the common stock during fiscal 1999
and 1998.
FISCAL 1999 High Low
------- -------
1st Quarter.............. $ 1-1/2 $ 1
2nd Quarter............... 1-3/8 1
3rd Quarter.............. 1-9/16 1-5/16
4th Quarter.............. 1-7/8 1-3/16
FISCAL 1998 High Low
-------- -------
1st Quarter.............. $ 5/8 $ 7/16
2nd Quarter............... 7/8 5/8
3rd Quarter.............. 3/4 9/16
4th Quarter.............. 1-1/8 3/4
At February 15, 2000, there were approximately 577 record
holders of the Company's common stock. On that date, the last sale
price for the common stock as reported by AMEX was $4.94. The
Company did not pay any dividends on its Common Stock during fiscal
1999.
In July 1999, the Company issued options to acquire 600,000
shares of Common Stock at an exercise price of $1.63 per share to
Kenneth D. Hill, Matthew Smith and Robert Hill pursuant to
employment agreements between such individuals and eCalton that
were executed in connection with the acquisition of the assets of
iAW, Inc. Each of such options has a 10 year term and is
exercisable in three equal annual installments commencing on the
anniversary date of the date of grant. The grant of the options was
made in reliance upon the exemption provided by Section 4(2) of the
Securities Act of 1933 as a transaction not involving any public
offering.
In January 2000, the Company issued a warrant to acquire
1,200,000 shares of the Company's Common Stock at an exercise price
of $2.50 per share to Taytrowe Van Fecthmann World Companies, Inc.,
the parent company of PrivilegeONE, in connection with the
acquisition of the Company's interest in PrivilegeONE. The warrant,
which has a term of five years, is not exercisable unless
PrivilegeONE surpasses certain specified earnings targets. The
warrant was issued in reliance upon the exemption provided by
Section 4(2) of the Securities Act of 1933 as a transaction not
involving any public offering.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth historical selected financial
information of the Company as of the dates and for the periods
indicated. The data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial
Statements and Notes thereto include elsewhere in this report.
(in thousands, except per share amounts) Years Ended November 30,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
SELECTED OPERATING DATA
Revenues................................................ $ 3,196 $ - $ - $ 1,292 $ 9,090
Net income (loss) from continuing operations............ 661 (1,960) (1,901) (1,736) (1,660)
Net income (loss) from discontinued operations(1)....... (240) 6,315 1,646 2,189 (1,478)
Net income from sale of operating businesses............ 4,418 - 369 - -
Extraordinary gain, net of income taxes................. - - 1,263 - -
Net income (loss)....................................... 4,839 4,355 1,377 453 (3,138)
Basic earnings (loss) per share:
Net income (loss) from continuing operations............ .03 (.07) (.07) (.06) (.06)
Net income (loss) from discontinued operations(1)....... (.01) .23 .06 .08 (.06)
Net income from sale of operating businesses............ .19 - .01 - -
Extraordinary gain, net of income taxes................. - - .05 - -
Net income (loss)....................................... .21 .16 .05 .02 (.12)
Diluted earnings (loss) per share:
Net income (loss) from continuing operations............ .03 (.07) (.07) (.06) (.06)
Net income (loss) from discontinued operations(1)....... (.01) .23 .06 .08 (.06)
Net income from sale of operating businesses............ .18 - .01 - -
Extraordinary gain, net of income taxes................. - - .05 - -
Net income (loss)....................................... .20 .16 .05 .02 (.12)
At November 30,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
SELECTED BALANCE SHEET DATA
Total assets............................................ $ 40,441 $ 40,082 $ 35,142 $ 70,895 $ 77,183
Total debt(2)........................................... - - - 39,500 45,000
Shareholders' equity.................................... 38,654 38,221 32,850 28,086 27,013
(1) As a result of the sale of Calton Homes, Inc. that occurred on December
31, 1998, the financial statements presentation treats the Company's
homebuilding business and results as discontinued operations in
accordance with APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a
Business." The Company recognized a gain of $4,418,000 which is net of
a provision in lieu of taxes of $3,173,000 on the sale.
(2) Debt is included as part of discontinued operations subsequent to June
1997 since Calton Homes, Inc. became the primary obligor and borrower
of a revolving credit agreement entered into at that time.
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF SALE OF CALTON HOMES, INC.
OPERATIONS
On December 31, 1998, the Company completed the sale of Calton
Homes, Inc., its primary operating homebuilding subsidiary to
Centex Real Estate Corporation ("Centex" or the "purchaser"). The
shareholders of Calton, Inc. approved the sale of the stock of
Calton Homes on December 30, 1998. The purchase price for the stock
of Calton Homes was $48.1 million, which resulted in a pretax gain
of approximately $7.6 million and was subject to a $5.2 million
holdback (see Commitments and Contingencies). Cash proceeds from
the sale through November 30, 1999 were approximately $43.4
million, net of the remaining holdback of $4.0 million and
including other closing adjustments. No tax liability is expected
to result from the sale. However, a provision in lieu of taxes was
recorded for financial reporting purposes in the amount of $3.2
million related to the sale. Calton has entered into an agreement
to provide consulting services to Centex that requires payments to
the Company of $1.3 million per year over a three-year period.
The sale of Calton Homes was completed as part of the
Company's overall strategy to enhance shareholder value. Since the
completion of the sale, the Company has been primarily engaged in
providing consulting services to the purchaser of Calton Homes and
analyzing potential business and acquisition opportunities. In July
1999, the Company acquired substantially all of the assets of iAW,
Inc., an Internet business solutions provider in its early stages
of development that assists companies in defining an effective
Internet business strategy and implementing the components of that
strategy. The Company conducts this business through its wholly
owned subsidiary, eCalton. In January 2000, the Company acquired a
collective direct and indirect (through ownership in a parent
company) 50.4% interest in PrivilegeONE, a newly formed company
engaged in the development of a co-branded loyalty credit card
program. The Company continues to actively analyze other
opportunities to deploy the funds generated by the sale of Calton
Homes.
As part of the Company's strategic plan to enhance shareholder
value, the Company implemented a significant stock repurchase
program, pursuant to which it announced its intention to repurchase
up to 10 million shares of common stock in open market repurchases
and privately-negotiated transactions. Approximately 6.9 million
shares of Common Stock have been repurchased by the Company since
October 31, 1998 at an average price of $1.26 per share.
The following discussion included in the Results of Operations
are based on the continuing operations of Calton, Inc. The
financial statements present the Company's homebuilding business as
discontinued operations in accordance with APB Opinion No. 30,
"Reporting the Effects of Disposal of a Segment of a Business."
RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 1999
AND 1998
Income from continuing operations before taxes was $1.1
million for the year ended November 30, 1999 compared to a loss of
$2.0 million for the year ended November 30, 1998. Revenues of $3.2
million during fiscal 1999 were primarily derived from the
consulting agreement with the purchaser of Calton Homes and
interest earned on cash derived from the sale. Also included in
revenues for 1999 was $157,000 for eCalton. There were no
comparable revenues for fiscal 1998.
Selling, general and administrative expenses included in
continuing operations were $2.0 million during both fiscal 1999 and
1998. General and administrative expenses have decreased
approximately $500,000 at the corporate level. The decrease is
attributable to a significant reduction in corporate fixed costs
related to the sale of Calton Homes, including personnel
reductions, leasing costs and other overhead items. However, the
reductions were offset with the expenditures of eCalton as part of
the strategy to ramp up its operations during 1999 and 2000.
12
As a result of the circumstances described above, the Company
recognized Income from continuing operations, net of taxes of
$661,000 for fiscal 1999 as compared to a loss of $2.0 for fiscal
1998. Included in the 1999 results is a pretax loss of $427,000
from eCalton, $256,000 net of taxes.
Loss from discontinued operations was $613,000, $240,000 net
of a $373,000 tax benefit for the year ended November 30, 1999. The
loss includes approximately $1.0 million related to legal costs and
the resolution of certain litigation matters in excess of amounts
previously reserved by management related to the Company's former
homebuilding business. As a condition to the sale of Calton Homes,
the Company is required to indemnify the purchaser for certain
specified litigation pending against Calton Homes. There is no
assurance that the ultimate resolution of the pending litigation
will not result in additional charges. Partially offsetting the
loss is pre-tax income of $429,000 from one month of operations of
Calton Homes and a commercial land sale. In addition, included in
the tax provision for discontinued operations is a tax benefit
related to the reduction of a state tax reserve in the amount of
$550,000 due to the resolution of certain state tax issues.
Income from discontinued operations for the year ended
November 30, 1998 was $6.3 million, net of a tax provision of $2.4
million. The results primarily include the operations of Calton
Homes.
Taxes for the year ended November 30, 1999 reflect a provision
for income taxes of $3.2 million resulting in an effective rate of
thirty-nine and one- half percent (39.5%). The increase in the
effective tax rate from thirty-four percent (34%) for the year
ended November 30, 1998 was primarily due to the future tax
benefits recognized in 1998 which were significantly higher than
those recognized in 1999, coupled with a significantly larger
amount of 1999 expenses for which the Company will not receive any
tax benefit. In 1998 a provision for income taxes of $2.2 million
was recorded. The net operating loss carryforwards and certain
other deferred tax assets are subject to utilization limitations as
a result of the changes in the control of the Company that occurred
in 1993 and 1995. The Company's ability to use the net operating
loss ("NOL") to offset future income is $1.1 million per year for
14 years. This amount has been reduced from 1998 by $500,000 per
year as a result of the sale of Calton Homes (see note 5).
The effective rate from continuing operations for the years
ended November 30, 1999 and 1998 is based upon a provision of
$453,000 and a benefit of $125,000, respectively. The effective
rate for 1998 is influenced by the tax expense associated with
intercompany charges from continuing operations to discontinued
operations.
As of November 30, 1999 the Company recorded a $518,000
unrealized loss on marketable equity securities in comprehensive
income.
RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997
For the year ended November 30, 1998 the Company reported a
net loss of $2.0 million from continuing operations as compared to
$1.9 million for the year ended November 30, 1997. As previously
stated, the Company's primary business was homebuilding and with
the sale of Calton Homes, Inc., those financial results are treated
as discontinued operations. Without revenues in both 1998 and 1997,
the loss was primarily attributable to general and administrative
costs of $2.0 million and $2.4 million for the years ended November
30, 1998 and 1997, respectively. General and administrative costs
were substantially comprised of salaries, benefits, insurance ,
rent, and professional services.
Other income for 1997 is comprised of $571,000 of interest
income received related to a tax refund which was recorded as an
increase to paid in capital since the refund related to events
occurring prior to the Company's 1993 restructuring and $525,000
representing the final payments received on a note previously
reserved.
The effective tax rate for continuing operations for the years
ended November 30, 1998 and 1997 is based upon a benefit of
$125,000 and a provision of $560,000, respectively. The effective
rate for both years is influenced by the tax expense associated
with intercompany charges from continuing operations to
discontinued operations. The effective rate from continuing
operations for 1997 was influenced by the tax expense associated
with other income.
Taxes for the year ended November 30, 1998 reflect a provision
for income taxes of $2.2 million resulting in an effective rate of
thirty-four percent (34%). The reduction in the effective tax rate
from sixty-five
13
percent (65%) for the year ended November 30, 1997 was primarily
due to realization of future tax benefits of approximately
$603,000, which increased the total tax benefit to $705,000, of
which $649,000 relates to the sale of Calton Homes. In 1997 a
provision for income taxes of $209,000 was recorded.
Income from discontinued operations was $6.3 million for the
year ended November 30, 1998 as compared to $1.6 million for the
prior year. The Company's former homebuilding operations benefited
from improved economic conditions in New Jersey. Revenues and gross
profit for fiscal 1998 were $105.3 million and $19.4 million as
compared to $126.6 million and $16.2 million, respectively for
fiscal 1997.
The Company's objectives during 1998 and 1997 were to reduce
debt and related interest costs, and to increase shareholders'
equity. The Company's weighted average debt outstanding under its
revolving credit facility amounted to $25.0 million for the year
ended November 30, 1998 compared to $40.2 million for the year
ended November 30, 1997. The decrease is attributable to the
improved operating and financial performance of Calton Homes, and
the sale of the Florida division's assets of approximately $16.7
million in November 1997, a substantial portion of which was
utilized to reduce the amount outstanding under the Company's
credit facility.
In June 1997, the Company entered into a new, secured
revolving credit facility with BankBoston, N.A. Proceeds from the
new facility were used to retire the prior revolving credit
facility of $42.0 million which was paid off for $39.4 million.
Based on the accounting principals in effect at the time of the
extinguishment of debt, the Company recorded an extraordinary gain
of approximately $1.3 million, after deducting an $842,000
provision in lieu of income taxes. Included in the gain was the
write off of deferred costs and out-of-pocket costs of
approximately $550,000.
LIQUIDITY On December 31, 1998 the sale of Calton Homes liquidated a
AND substantial part of the Company and resulted in the payoff, by the
CAPITAL purchaser, of the Company's revolving credit facility with
RESOURCES BankBoston which had an outstanding balance of $19.5 million. The
sale generated approximately $43.4 million of cash including the
receipt of an additional $1.8 million related to the post closing
adjustments that were finalized in September 1999. In addition, a
$5.2 million holdback was established at closing as part of the
sale as a condition to indemnify the purchaser against existing
litigation and other warranties. As part of a post-closing
settlement agreement, $700,000 was refunded to the purchaser in the
fourth quarter of 1999, which was paid out of the General
Indemnification Funds. The Company collected $592,000 out of the
Specific Indemnification Funds during 1999 as a result of certain
litigation settlements, and legal fee reimbursements (see Note 6).
At November 30, 1999 there was $2.4 million in the General
Indemnification Funds and $1.6 million in the Specific
Indemnification Funds. During the first quarter of 2000, $1.0
million was collected out of the General Indemnification Funds
and indemnity claims totaling approximately $253,000 have been
made by the purchaser. The Company and the purchaser are
attempting to resolve these claims and it is uncertain as to
whether these claims will proceed to arbitration in accordance
with the terms of the indemnification agreement. However, the
Company believes it has meritorious defenses against this claim.
The remaining General Indemnification Funds will be disbursed to
the Company, subject to claims for indemnification, on December
31, 2000. The Specific Indemnification Funds will be disbursed,
to the extent not otherwise utilized in the resolution of
litigation, on a case by case basis as the litigation is
resolved. If all of the specified litigation is not resolved by
December 31, 2000, a portion of the General Indemnification Funds
will not be disbursed to the Company until the resolution of the
litigation. The Company may, under certain circumstances, be
required to deposit additional funds in the holdback if all of
the specified litigation is not resolved by December 31, 2000.
Future decreases to the escrows held for indemnifications, if any
will be recorded as an adjustment to the Income from sale of
Calton Homes.
As of November 30, 1999 the Company had $33.8 million of
highly liquid money market funds with its underlying investments
comprised of investment-grade, short-term corporate issues and
commercial paper yielding approximately 5.0%. Also at November 30,
1999 the Company had invested approximately $1.9 million in
marketable equity securities with an unrealized loss of $518,000.
In July 1999, the Company acquired substantially all of the
assets of iAW, Inc., an Internet business solutions provider. The
purchase price for the acquisition was $250,000. The Company
conducts the acquired business through its wholly owned subsidiary,
eCalton.
14
In January 2000, the Company acquired a collective direct and
indirect (through ownership in a parent company) 50.4% equity
interest in PrivilegeONE Networks, a newly formed company engaged
in the development of a co-branded loyalty credit card program. The
purchase price for the Company's interest was comprised of $105,000
of cash and a warrant to acquire 1,200,000 shares of Common Stock
at an exercise price of $2.50 per share. The warrant becomes
exercisable only if PrivilegeONE surpasses certain specified
earning targets. In addition to its equity interest, the Company
has agreed to loan up to $1,500,000 to PrivilegeONE pursuant to a
note which bears interest at the rate of 10% per annum and becomes
due in January 2004.
The Company believes that current cash on hand, additional
funds generated by the sale of Calton Homes as a result of the
collection of the holdback receivable, income tax payment
reductions derived from NOL utilization, and funds provided under
the three-year consulting agreement with the purchaser of Calton
Homes which provides for payments of $1.3 million per year, will
provide sufficient capital to support the Company's operations. As
of November 30, 1999 the Company had repurchased an aggregate of
6.9 million shares for $8.7 million, an average price of $1.26 per
share. Management has suspended the acquisition of additional
shares subsequent to year end since the market value of the
Company's common stock has been trading in excess of book value.
Although the Company is currently analyzing potential business
opportunities consistent with its strategic plan; it has not
determined the specific application for the remaining proceeds of
the sale of Calton Homes. If over the period that commenced on
December 30, 1998 and continues for 18 months thereafter, the
Company has not redeployed a substantial portion of the sale
proceeds of Calton Homes, or developed a plan to redeploy a
substantial portion of the proceeds within a reasonable timeframe,
the Company, subject to shareholder approval, will be liquidated
and proceeds distributed to its shareholders. However, the Company
continues to actively analyze other opportunities to redeploy the
funds.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from operating activities generated approximately
$1.0 million during 1999 that includes $1.7 million of interest
earned on highly liquid money market funds, and approximately $1.0
million from the consulting agreement with the purchaser of Calton
Homes. Partially offsetting the increases are cash utilized for
general and administrative costs and the funding of eCalton's
operations as it proceeds in the initial stages of business.
Cash flow from discontinued operations during fiscal 1999
primarily consisted of the payment of legal settlements and
litigation costs related to the indemnification obligations arising
from the sale of Calton Homes in the amount of $1.5 million.
Offsetting the uses of cash are the collection of a mortgage
payable in the amount of $442,000 and the sale of a commercial land
parcel of $240,000, among other items.
CASH FLOWS FROM INVESTING ACTIVITIES
The Company generated approximately $43.4 million of cash in
fiscal 1999 from the sale of Calton Homes including the receipt of
an additional $1.8 million as part of the post-closing settlement.
As a part of the post-closing agreement, the Company refunded to
the purchaser $700,000 in September 1999, paid out of the General
Indemnification Funds that were deposited in escrow and classified
as Holdback receivable. In addition, the Company collected $592,000
of the holdback established to secure the Company's indemnity
obligations to the purchaser.
In July 1999, the Company acquired the assets of iAW, Inc., an
Internet business solutions provider. The purchase price for the
acquisition was $250,000.
The Company purchased marketable equity securities for an
aggregate amount of $4.0 million in fiscal 1999, of which $1.9
million was outstanding as of November 30, 1999. These securities
were subsequently sold during the first quarter of 2000 resulting
in the receipt of $1.3 million.
15
The Company loaned $250,000 to an entity in exchange for a
convertible note with a warrant attached. The note has been
subsequently converted to 142,851 common shares of CorVu
Corporation (symbol-"CRVU") under the terms of the loan when the
borrower became a publicly held company through a reverse merger.
As consideration for making the loan, the Company obtained a
warrant that permits the purchase of 253,125 shares at a per share
price of $.01 per share. The fair value of the warrant is $16,000
based upon the allocation of the relative fair values of the
convertible note and warrant at the time of issuance. The market
price for CorVu common stock was $6.25 per share as of February 9,
2000; however, both the stock and the stock under the warrants are
unregistered securities and therefore are not freely tradable. In
addition, the Company loaned $103,000 to PrivilegeONE pursuant to
the acquisition that occurred in January 2000 (see Note 9,
Subsequent Events).
CASH FLOWS FROM FINANCING ACTIVITIES
For the year ended November 30, 1999 the Company repurchased
6.9 million shares of its Common Stock on the open market and in
privately negotiated transactions for an aggregate price of $8.6
million, an average of $1.26 per share. These repurchases were
consistent with the Company's repurchase program to repurchase up
to 10.0 million shares of its Common Stock. The stock repurchase
program has been temporarily suspended as a result of increases in
the trading price during the first quarter of 2000 as compared to
the book value per share. In June 1999, the holder of a warrant
(the "Warrant") to purchase 1,000,000 shares of Calton Common Stock
exercised its right under the Warrant using the cashless exercise
method. As a result, the holder was issued 681,000 shares which the
Company repurchased for $750,000 that is included in the aggregate
numbers above. As a result, the Warrant was cancelled.
YEAR 2000
The Company implemented a plan to address the Company's
exposure to the Year 2000 issues and has not experienced any
material adverse consequences as a result of the impact of Year
2000 issues on its computer based systems and applications, or the
computer based systems of its vendors. The Year 2000 issue is the
result of computer programs written using two digits rather than
four to define the applicable year. Computer systems that have time
sensitive software may recognize the date "00" as the year 1900
rather than 2000. This could result in a major system failure or
miscalculations. Pursuant to its plan, the Company has completed
the process of upgrading its personal computers and the conversion
of its information technology system to a new system that is Year
2000 compliant. The Company does not believe that it faces any
significant risk relating to non-information technology systems.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company currently has no outstanding indebtedness other
than accounts payable. As a result, the Company's exposure to
market rate risk relating to interest rate is not material. The
Company's funds are primarily invested in highly liquid money
market funds with its underlying investments comprised of
investment-grade, short-term corporate issues and commercial paper
currently yielding approximately 5.0%. The Company does not believe
that it is currently exposed to market risk relating to foreign
currency exchange risk or commodity price risk. However, a
substantial part of the Company's cash equivalents are not FDIC
insured or bank guaranteed. As of November 30, 1999 the Company had
approximately $1,857,000 in marketable equity securities. As a
result, the Company had exposure to market risks associated with
declines in trading prices of these securities. As of November 30,
1999, the Company recorded a $518,000 unrealized loss on the
securities in comprehensive income. These securities were
subsequently sold at a $508,000 loss in the first quarter of fiscal
2000 that will impact earnings for the quarter ending February 29,
2000.
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data are set forth
herein commencing on page F-1 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by item 10 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year covered by
this report.
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
Page
----
(a) 1. and 2. Financial statements and financial statement schedules F-1
Reference is made to the Index of Financial Statements and
Financial Statements Schedules hereinafter contained
3. Exhibits E-1
Reference is made to the Index of Exhibits hereinafter
contained
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
November 30, 1999.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the underwriter, thereunto duly authorized.
CALTON, INC.
--------------------------------
(Registrant)
Dated: February 29, 2000 By: /s/ David J. Coppola
--------------------------------
David J. Coppola, Vice President
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the underwriter, thereunto duly authorized.
Signature Title Date
--------- ----- ----
/s/ Anthony J. Caldarone Chairman, Chief Executive February 29, 2000
- --------------------------- Officer and President
Anthony J. Caldarone (Principal Executive Officer)
/s/ David J. Coppola Vice President February 29, 2000
- --------------------------- (Principal Financial &
David J. Coppola Accounting Officer)
/s/ Anthony J. Caldarone Director February 29, 2000
- ---------------------------
Anthony J. Caldarone
/s/ J. Ernest Brophy Director February 29, 2000
- ---------------------------
J. Ernest Brophy
/s/ Mark N. Fessel Director February 29, 2000
- ---------------------------
Mark N. Fessel
/s/ Kenneth D. Hill Director February 29, 2000
- ---------------------------
Kenneth D. Hill
/s/ Robert E. Naughton Director February 29, 2000
- ---------------------------
Robert E. Naughton
/s/ Frank Cavell Smith, Jr. Director February 29, 2000
- ---------------------------
Frank Cavell Smith, Jr.
19
CALTON, INC. AND SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Page
----
Report of Independent Accountants F-2
Consolidated Balance Sheets as of November 30, 1999 and 1998 F-3
Consolidated Statements of Operations for the Years Ended November 30, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the Years Ended November 30, 1999, 1998 and 1997 F-5
Consolidated Statements of Shareholders' Equity for the Years Ended November 30, 1999, 1998 and F-6
1997
Notes to Consolidated Financial Statements F-7
Consent of Independent Accountants F-18
Schedules
II-Valuation and Qualifying Accounts F-19
- -------------------------------
** Schedules other than the schedule listed above have been omitted because of
the absence of the condition under which they are required or because the
required information is presented in the financial statements or the note
thereto.
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of Calton, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page F-1 present fairly, in all material
respects, the financial position of Calton, Inc. and its subsidiaries at
November 30, 1999 and November 30, 1998, and the results of their operations and
their cash flows for each of the three years in the period ended November 30,
1999 in conformity with accounting principles generally accepted in the United
States. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 14(a)(2) on page F-1 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers, LLP
Florham Park, New Jersey
January 12, 2000, except for the information presenting in Note 9, which is as
of February 18, 2000
F-2
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1999 AND 1998
1999 1998
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents...................................................... $ 33,786,000 $ 85,000
Securities available for sale.................................................. 1,339,000 -
Holdback receivable............................................................ 1,205,000 -
Receivables.................................................................... 337,000 61,000
Prepaid expenses and other assets ............................................. 202,000 939,000
------------ ------------
Total current assets....................................................... 36,869,000 1,085,000
Holdback receivable............................................................ 2,842,000 -
Notes receivable.............................................................. 338,000 -
Goodwill, net.................................................................. 233,000 -
Fixed assets, net.............................................................. 143,000 31,000
Warrant........................................................................ 16,000 -
Net assets of discontinued operations.......................................... - 38,851,000
------------ ------------
Total assets .............................................................. $ 40,441,000 $ 39,967,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities.......................... $ 1,350,000 $ 1,746,000
Net liabilities of discontinued operations ....................................... 437,000 -
------------ ------------
Total liabilities ......................................................... 1,787,000 1,746,000
------------ ------------
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 53,700,000 shares authorized; issued and
outstanding 21,473,000 in 1999 and 26,635,000 in 1998 ...................... 283,000 267,000
Paid in capital ................................................................ 32,636,000 27,957,000
Retained earnings............................................................... 14,951,000 10,112,000
Less cost of shares held in treasury............................................ (8,698,000) (115,000)
Accumulated other comprehensive loss:
Unrealized loss in securities available for sale........................... (518,000) -
------------ ------------
Total shareholders' equity ................................................ 38,654,000 38,221,000
------------ ------------
Total liabilities and shareholders' equity ................................ $ 40,441,000 $ 39,967,000
============ ============
See accompanying notes to consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended November 30,
-----------------------------------------
1999 1998 1997
------------ ------------ ------------
Revenues ............................................................ $ 3,196,000 $ - $ -
------------ ------------ ------------
Costs and expenses
Cost of revenues............................................ 116,000 - -
Selling, general and administrative......................... 1,966,000 2,029,000 2,396,000
------------ ------------ ------------
2,082,000 2,029,000 2,396,000
------------ ------------ ------------
Income (loss) from operations........................................ 1,114,000 (2,029,000) (2,396,000)
Other charges (credits)
Interest expense, net........................................ - 56,000 41,000
Other income................................................. - - (1,096,000)
------------ ------------ ------------
Income (loss) from continuing operations before income taxes,
discontinued operations and extraordinary gain............. 1,114,000 (2,085,000) (1,341,000)
Provision (benefit) for income taxes................................. 453,000 (125,000) 560,000
------------ ------------ ------------
Income (loss) from continuing operations............................. 661,000 (1,960,000) (1,901,000)
Income (loss) from discontinued operations, net of a provision
(benefit) for incomes taxes of ($373,000), $2,363,000
and ($597,000) respectively.................................. (240,000) 6,315,000 1,646,000
Income from sale of Calton Homes, Inc. in 1999 and Florida
sale transaction in 1997, net of a provision in lieu of
income taxes of $3,173,000 and $246,000, respectively........ 4,418,000 - 369,000
Extraordinary gain from extinguishment of debt, net of an
$842,000 provision in lieu of income taxes................... - - 1,263,000
------------ ------------ ------------
Net income........................................................... $ 4,839,000 $ 4,355,000 $ 1,377,000
============ ============ ============
Earnings per share
Basic:
Income (loss) from continuing operations..................... $ .03 $ (.07) $ (.07)
Income (loss) from discontinued operations, net.............. (.01) .23 .06
Income from sale of operating businesses, net................ .19 - .01
Extraordinary gain, net...................................... - - .05
------------ ------------ ------------
Net income................................................... $ .21 $ .16 $ .05
============ ============ ============
Diluted:
Income (loss) from continuing operations..................... $ .03 $ (.07) $ (.07)
Income (loss) from discontinued operations, net.............. (.01) .23 .06
Income from sale of operating businesses, net................ .18 - .01
Extraordinary gain, net...................................... - - .05
------------ ------------ ------------
Net income................................................... $ .20 $ .16 $ .05
============ ============ ============
Weighted average number of shares outstanding
Basic........................................................ 22,769,000 26,685,000 26,567,000
============ ============ ============
Diluted...................................................... 23,992,000 26,685,000 26,567,000
============ ============ ============
See accompanying notes to consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended November 30,
--------------------------------------------
1999 1998 1997
------------ ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................ $ 4,839,000 $ 4,355,000 $ 1,377,000
Adjustments to reconcile net income to net cash
used by operating activities
Income from the sale of Calton Homes, Inc............ (4,418,000) - -
Income (loss) from discontinued operations........... 240,000 (6,315,000) (2,015,000)
Extraordinary gain from extinguishment of debt, net.. - - (1,263,000)
Provision for income taxes........................... 422,000 - -
Depreciation and amortization........................ 17,000 164,000 173,000
Amortization of debt financing fees.................. - - 103,000
Change in net assets/liabilities of discontinued
operations...................................... (657,000) 3,232,000 32,694,000
Increase in receivables.............................. (276,000) - -
Tax refund........................................... - - 1,871,000
Decrease (increase) in prepaid expenses
and other assets................................ 737,000 (895,000) 697,000
Increase (decrease) in accounts payable, accrued
expenses and other liabilities.................. 77,000 (431,000) (1,042,000)
Issuance of stock under 401(k) Plan and other........ - 91,000 41,000
------------ ------------ -------------
981,000 201,000 32,636,000
------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of Calton Homes, Inc.................... 43,440,000 - -
Purchase of securities available for sale...................... (3,984,000) - -
Sale of securities available for sale.......................... 2,127,000 - -
Increase in notes receivable................................... (338,000) - -
Acquisition of business........................................ (250,000) - -
Increase in property and equipment............................. (58,000) (18,000) (16,000)
Purchase of warrant............................................ (16,000) - -
------------ ------------- --------------
40,921,000 (18,000) (16,000)
------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock repurchase............................................... (8,583,000) (115,000) -
Stock options exercised........................................ 382,000 - -
Retirement of revolving credit agreement....................... - - (39,350,000)
Proceeds under revolving credit agreement...................... - - 2,500,000
------------ ------------ -------------
(8,201,000) (115,000) (36,850,000)
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents.............. 33,701,000 68,000 (4,230,000)
Cash and cash equivalents at beginning of year.................... 85,000 17,000 4,247,000
------------ ------------ -------------
Cash and cash equivalents at end of year.......................... $ 33,786,000 $ 85,000 $ 17,000
============ ============ =============
Noncash transactions:
Holdback receivable............................................ $ 4,047,000 $ - $ -
Acquisition of assets.......................................... $ 54,000 $ - $ -
See accompanying notes to consolidated financial statements.
F-5
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(amounts in thousands)
Total Accumulated
Shareholders' Other Compre-
Equity Common Paid In Retained Treasury Compre- hensive
Capital Stock Capital Earnings Stock hensive Loss Earnings
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Balance,
November 30, 1996............ $ 28,086 $ 265 $ 23,441 $ 4,380 $ - $ - $ -
Net income.................... 1,377 - - 1,377 - - -
Issuance of stock under
401(k) Plan.............. 31 1 30 - - - -
Provision in lieu of
income taxes............ 1,265 - 1,265 - - - -
Tax refund.................... 1,871 - 1,871 - - - -
Issuance of stock
warrants................. 210 - 210 - - - -
Shares issued under
stock option plan
and other................ 10 - 10 - - - -
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Balance,
November 30, 1997............. 32,850 266 26,827 5,757 - - -
Net income.................... 4,355 - - 4,355 - - -
Issuance of stock under
401(k) Plan ............. 71 1 70 - - - -
Provision in lieu of
income taxes............. 1,040 - 1,040 - - - -
Shares issued under
stock options plan
and other................ 20 - 20 - - - -
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Subtotal................. 38,336 267 27,957 10,112 - - -
Less: Purchase of
treasury stock........... (115) - - - (115) - -
-------------- ----------- ----------- ----------- ---------- ------------- -----------
Balance,
November 30, 1998............. 38,221 267 27,957 10,112 (115) - -
Net income.................... 4,839 - - 4,839 - - 4,839
Issuance of stock under
stock option plans...... 382 9 373 - - - -
Issuance of stock under
warrant exercise........ - 7 (7) - - - -
Modification of stock - -
option terms............. 525 - 525 - - - -
Provision in lieu of
income taxes............. 3,788 - 3,788 - - - -
Less: purchase of
treasury stock........... (8,583) - - - (8,583) - -
Comprehensive Loss:
unrealized loss in
securities available
for sale................. (518) - - - - (518) (518)
-----------
Comprehensive
earnings................. - - - - - - $ 4,321
-------------- ----------- ----------- ----------- ---------- ------------ ===========
Balance,
November 30, 1999............. $ 38,654 $ 283 $ 32,636 $ 14,951 $ (8,698) $ (518)
============== =========== =========== =========== ========== ============
See accompanying notes to consolidated financial statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF PRINCIPLES OF CONSOLIDATION
SIGNIFICANT
ACCOUNTING The consolidated financial statements include the accounts
POLICIES of Calton, Inc. and all of its wholly-owned and majority owned
subsidiaries (the "Company"). On December 31, 1998, the Company
completed the sale of Calton Homes to Centex Real Estate
Corporation ("Centex" or the "purchaser"), and on November 30,
1997, the Company sold the Orlando, Florida homebuilding assets
(see Note 7).
As a result of the sale of Calton Homes and the Florida
homebuilding assets, the financial statements treat the Company's
former homebuilding business and results as discontinued
operations in accordance with APB Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business."
Certain reclassifications have been made to prior years'
financial statements in order to conform with the 1999
presentation. All significant intercompany accounts and
transactions have been eliminated.
ACQUISITION AND NEW BUSINESS SEGMENT
In July 1999 the Company acquired the assets of iAW, Inc.,
an Internet business solutions provider. The acquired business is
operated through a wholly owned subsidiary named eCalton.com,
Inc. ("eCalton"). As a result of this acquisition, the Company
has recorded Goodwill in the amount of $237,000 that will be
amortized over a ten-year period.
REVENUE RECOGNITION
Revenues of eCalton are derived from fixed fee arrangements
and are recognized under the percentage of completion method of
accounting based on the ratio of costs incurred compared to
estimated costs. Provision for estimated losses on uncompleted
contracts are made in circumstances in which such losses are
probable.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid
investments, with original maturities of three months or less,
that are readily convertible into cash.
FIXED ASSETS
Fixed assets primarily comprise of computer equipment and
office furniture. Computer equipment is being depreciated over a
useful life of three to four years and office furniture is being
depreciated over five years. Accumulated depreciation as of
November 30, 1999 is $12,000.
INCOME TAXES
Income taxes are determined in accordance with Statement of
Financial Accounting Standards No. 109 (see Note 5).
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses consist primarily of prepaid insurance that
will be amortized over the contract period.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
PER SHARE COMPUTATIONS
Statements of Financial Accounting Standards No. 128,
"Earnings per Share" requires the presentation of basic and
diluted per share amounts, effective for financial statements
issued for periods ending after December 15, 1997. The weighted
average number of common stock outstanding for 1999, 1998 and
1997 used for the basic calculation is 22,769,000, 26,685,000 and
26,567,000 respectively. The diluted weighted average number of
shares of common stock for the same periods is 23,992,000,
26,685,000 and 26,567,000 respectively.
As of November 30, 1999, there were 21,473,000 shares
outstanding and a total of 3,661,000 stock options granted and
outstanding under the Company's incentive stock option plans.
There were 1,800,000 stock options that were not included in the
calculation of diluted earnings per share in 1999 as these
options were antidilutive. In addition, a warrant to purchase
1,000,000 shares of common stock was outstanding until June 1999
(see Note 4). The effect of stock options and the warrant were
not included in the calculation of diluted earning per share in
1998
F-7
and 1997 as these options and warrants were antidilutive due to
the loss from continuing operations during these periods.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"),
establishes a fair value based method of accounting for
stock-based compensation plans, including stock options. FAS 123
allows the Company to continue accounting for stock options plans
under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), but requires it to provide
pro forma net income and earnings per share information "as if"
the new fair value approach had been adopted. Because the Company
continued to account for its stock option plans under APB 25,
there was no impact on the Company's consolidated financial
statements resulting from implementation of FAS 123 (see Note 4).
2. NOTES
RECEIVABLE NOTES RECEIVABLE CONSIST OF THE FOLLOWING:
November 30,
------------------------
1999 1998
--------- -----------
CorVu note receivable (a)................ $ 234,000 $ -
PrivilegeONE note receivable (b)......... 104,000 -
--------- -----------
$ 338,000 $ -
========= -----------
(a) In November 1999, the Company made a $250,000 unsecured
bridge loan to CorVu Corporation ("CorVu") pursuant to a note
which provided that all principal and accrued interest would
become due upon the earlier of (i) 120 days or (ii) the closing
of a reverse merger transaction with Minnesota American, Inc.
Upon the occurrence of the reverse merger in January 2000, the
bridge loan was converted to 143,000 common shares in the
surviving corporation.
As consideration for making the bridge loan, the Company was
issued a five year warrant to purchase 253,000 shares of common
stock in CorVu at a per share price of $.01 per share. The fair
value of the notes and warrant were determined and allocated to
each instrument based on their relative fair value.
At the time of the reverse merger, Minnesota American
changed its name to CorVu and is traded under the symbol
("CRVU".) The trading price for CorVu common stock was $6.25 per
share as of February 9, 2000; however, both the common shares and
the shares under the warrant are unregistered securities and
therefore are not freely tradable (see Note 9).
(b) November 1999, the Company loaned an aggregate of
$104,000 to PrivilegeONE to fund its initial operations pursuant
to a note providing for interest at a rate of ten percent per
annum and a maturity date of February 19, 2000. During the first
quarter of fiscal 2000, the Company acquired a 50.4% direct and
indirect ownership interest in PrivilegeONE. Concurrently, the
note was converted to a new note bearing interest at 10% per
annum, with a maturity date of January, 2004 (see Note 9).
F-8
3. SEGMENT Through the acquisition of substantially all the assets of
REPORTING iAW, Inc., an Internet business solutions provider, in July 1999,
the Company has entered into a new business and related industry.
The acquired business is operated through a wholly owned
subsidiary, eCalton. Revenues of eCalton will be recognized under
the percentage of completion method of accounting. The Company
does not have any foreign operations. The following schedule
illustrates eCalton relative to the consolidated Company for the
year ended November 30, 1999 (dollars in thousands):
CORPORATE
INTERNET AND
BUSINESS CONSULTING TOTAL
SOLUTIONS SERVICES COMPANY
----------- ----------- ----------
Total revenues (a) ......................... $ 157 $ 3,039 $ 3,196
Total cost of revenue (b) .................. 116 - 116
Total selling, general and administrative
expenses ............................. 468 1,498 1,966
Income (loss) from operations .............. (427) 1,541 1,114
Provision (benefit) for income taxes........ (171) 624 453
Income (loss) from continuing
operations............................ (256) 917 661
Total assets ............................... $ 464 $ 39,977 $ 40,441
(a) Total revenues for Internet Business Solutions
represents five months of revenues since acquisition
on July 1, 1999.
(b) Total cost of revenues represents production costs
(including allocated salaries, computer hardware,
computer software and video conferencing costs).
4. SHAREHOLDERS' The Company's Certificate of Incorporation provides for
EQUITY 53,700,000 authorized shares of Common Stock (par value $.01 per
share), 2,600,000 shares of Redeemable Convertible Preferred
Stock (par value $.10 per share) and 10,000,000 shares of Class A
Preferred Stock (par value $.10 per share), one million shares of
which have been designated as Class A Series One Preferred Stock.
None of the Preferred Stock is issued or outstanding.
The Company commenced a significant stock repurchase program
pursuant to which it announced its intention to repurchase up to
10,000,000 shares of Common Stock in open market repurchases and
privately-negotiated transactions during fiscal 1999 and 1998. As
of November 30, 1999, there were 6,900,000 shares held in
Treasury in the amount of $8,698,000. The Company has suspended
the acquisition of additional shares subsequent to year end since
the market value of the Company's Common Stock has been in excess
of book value.
In May 1993, the Company adopted the Calton, Inc. 1993
Non-Qualified Stock Option Plan (the "1993 Plan") under which a
total of 1,493,000 shares of Common Stock were reserved for
issuance. Under the terms of the 1993 Plan, options may be
granted at an exercise price designated by the Board of
Directors. In January 1999, the Company's Board of Directors
approved the grant to the Company's Chairman and President of
options to acquire an aggregate of 600,000 shares of Common Stock
under the 1993 Plan. The options granted under the 1993 Plan vest
in equal installments over a three-year period. The exercise
price of options granted range from $.31 to $1.22 per share.
Options granted under the 1993 Plan have a maximum term of ten
years, with a weighted average contractual life of 6.5 years in
1999 and 2.3 years in 1998. In the fourth quarter of 1998,
685,000 options were repurchased from a former employee for
$171,000 or $.25 per option.
F-9
In April 1996, the Company's shareholders approved the
Company's 1996 Equity Incentive Plan (the "1996 Plan") under
which a total of 2,000,000 shares of Common Stock were reserved
for issuance. Under the terms of the 1996 Plan, options may be
granted at an exercise price equal to the fair market value of
the Common Stock on the date of grant (110% of such fair market
value in the case of an incentive stock option granted to a 10%
shareholder). In January 1999, the Board approved the grant to
other employees of options to acquire an aggregate of 35,000
shares of Common Stock under the 1996 Plan. The options granted
under the 1996 Plan vest in equal installments over a five-year
period. The exercise prices of outstanding options range from
$.34 to $1.22 per share with vesting ranging from one to five
years. The exercise period in up to ten years, with a weighted
average contractual life of 4.7 years in 1999 and 4.1 years in
1998.
In connection with the sale of Calton Homes, Inc. the
Company made certain adjustments to the terms of options to
acquire Calton Common Stock previously granted and outstanding as
of December 31, 1998 under the 1993 Plan and the 1996 Plan.
Effective January 1, 1999, all options that were previously
granted and outstanding became exercisable, regardless of whether
the right to exercise the option had previously vested; employees
of Calton Homes, Inc. have until December 31, 2000 to exercise
any options; and options of employees of Calton, Inc. will expire
in accordance with their original terms. The effect of the
amendments to the stock option plans of approximately $525,000 is
considered to be severance costs and was therefore recorded as an
expense and included in the gain on the sale transaction in the
first quarter of 1999.
STOCK OPTION TRANSACTIONS UNDER THE 1996 PLAN AND 1993 PLAN ARE
SUMMARIZED AS FOLLOWS
(SHARES IN THOUSANDS):
1996 1993
Plan Plan
----- -----
Options outstanding, November 30, 1997................................... 1,095 1,360
Granted.................................................................. 327 -
Forfeited or repurchased................................................. (36) (685)
Exercised................................................................ (4) -
----- -----
Options outstanding, November 30, 1998................................... 1,382 675
Granted.................................................................. 85 600
Exercised................................................................ (521) (360)
----- -----
Options outstanding, November 30, 1999................................... 946 915
----- -----
In July 1999, the Company entered into employment agreements
with three officers of eCalton pursuant to which each have been
granted options to acquire 600,000 shares of Calton Common Stock,
or an aggregate of 1.8 million shares. The non-qualified stock
options granted have terms similar to the 1996 Equity Incentive
Plan, vest in three equal annual installments beginning July 19,
2000, and have a term of ten years. The exercise price is $1.63
per share.
The Company accounts for stock option plans under APB 25.
Accordingly, no compensation expense has been recognized for its
stock-based compensation plans except as discussed above and in
Note 7. Had compensation cost for the Company's stock option
plans been determined based upon the fair value at the grant date
for awards under these plans consistent with the methods
prescribed under FAS 123, the Company's net income would have
been reduced by approximately $551,000 and $141,000 for years
ended November 30, 1999 and 1998, respectively. On a pro forma
basis, earnings per share would have been reduced by $.02 and
$.00 per share for 1999 and 1998, respectively. The estimated
weighted average fair value of the options granted in each of the
two fiscal years ended November 30, 1999 and 1998 is $1.21 and
$.31, using the Black-Scholes option-pricing model, with the
following assumptions: dividend yield - none, volatility of .8
and .7, risk-free interest rate of 4.56% and 5.49%, assumed
forfeiture rate as they occur and an expected life of 3 years and
4.7 years at November 30, 1999 and 1998, respectively.
F-10
In June 1999, the holder of a warrant (the "Warrant") to
purchase 1,000,000 shares of Calton Common Stock, exercised the
Warrant using the cashless exercise method. As a result, the
holder was issued 681,461 shares which the Company repurchased
for $750,000 and the Warrant was canceled. The 681,461 shares are
held as Treasury stock.
In January 2000, the Company's Board of Directors approved a
grant to the Company's Chairman and President of options to
acquire 200,000 shares of Common Stock under the 1996 Plan. These
options have an exercise price of $2.78 per share, a term of five
years and vest in five equal annual installments. In addition, in
January 2000, the Board approved the grant to other employees of
options to acquire an aggregate of 215,000 shares under the 1993
Plan and 136,000 shares under the 1996 Plan. Each of these
options has an exercise price of $2.53 per share. Options granted
under the 1993 Plan vest in equal annual installments over a
three year period. The options granted under the 1996 Plan vest
in equal installments over a five year period.
In February 1999, the Company's Board of Directors adopted a
shareholder rights plan (the "Rights Plan") and declared a
dividend of one preferred stock purchase right (a "Right") for
each outstanding share of Common Stock. Under the Rights Plan,
each Right represents the right to purchase from the Company one
one-hundredth (1/100th) of a share of Class A Preferred Stock
Series One (the "Preferred Stock") at a price of $5.50 per one
one-hundredth (1/100th) of a share. Each one one-hundredth
(1/100th) of a share of Preferred Stock has economic and voting
terms equivalent to those of one share of the Company's Common
Stock. The Rights will not become exercisable unless and until,
among other things, a person or group acquires or commences a
tender offer for 15% or more of the Company's outstanding Common
Stock. In the event that a person or group, without Board
approval acquires 15% or more of the outstanding Common Stock,
each Right would entitle its holder (other than the person or
group) to purchase shares of Preferred Stock having a value equal
to twice the exercise price. Also, if the Company is involved in
a merger or sells more than 50% of its assets or earning power,
each Right will entitle its holder (other than the acquiring
person or group) to purchase shares of common stock of the
acquiring company having a market value equal to twice the
exercise price. If any person or group acquires at least 15%, but
less than 50%, of the Company's Common Stock, the Board may, at
its option, exchange one share of Common Stock for each Right
(other than Rights held by such person or group). The Right Plan
may cause substantial dilution to a person or group that, without
prior Board approval, acquires 15% or more of the Company's
Common Stock, unless the Rights are first redeemed by the Board.
The Rights expire on February 1, 2009 and may be redeemed by the
Company at a price of $.01 per Right.
5. INCOME THE COMPONENTS OF THE PROVISION/(BENEFIT) FOR INCOME TAXES ARE AS
FOLLOWS:
(AMOUNTS IN THOUSANDS)
Years Ended November 30,
-------------------------------
1999 1998 1997
-------- -------- ------
Federal
Current........................................... $ 15 $ 1,785 $ 455
Deferred.......................................... (28) (603) (102)
Provision in lieu of income taxes................. 2,928 527 257
State
Current........................................... 28 16 57
Provision/(benefit) in lieu of income taxes....... 310 513 (458)
-------- -------- ------
3,253 2,238 209
Less: Discontinued operations (provision)/benefit...... 373 (2,363) 351
Provision in lieu of taxes on the sale of
Calton Homes........................... (3,173) - -
-------- -------- ------
Continuing operations....................... $ 453 $ (125) $ 560
======== ======== ======
F-11
THE FOLLOWING SCHEDULE RECONCILES THE FEDERAL PROVISION (BENEFIT)
FOR INCOME TAXES COMPUTED AT THE STATUTORY RATE TO THE ACTUAL
PROVISION FOR INCOME TAXES
(AMOUNTS IN THOUSANDS):
Years Ended November 30,
-------------------------------
1999 1998 1997
-------- -------- ------
Computed provision for income taxes at 34%.......... $ 2,758 $ 2,242 $ 110
Expenses for which deferred tax benefit
cannot be currently recognized................. - - 501
Expenses for which deferred tax benefit is
currently recognized........................... (37) (399) -
State and local tax provision....................... 594 529 222
State tax reserves.................................. (550) - (624)
Expenses for which no tax benefit is available...... 488 - -
Other............................................... - (134) -
-------- -------- ------
Total provision for income taxes.................... 3,253 2,238 209
Less: Discontinued operations
(provision)/benefit.................. 373 (2,363) 351
Provision in lieu of taxes on the sale of
Calton Homes........................ (3,173) - -
-------- -------- ------
Continuing operations..................... $ 453 $ (125) $ 560
======== ======== ======
In 1999 and 1997, the resolution of certain state tax issues
resulted in $550,000 and $624,000 of state tax reserves being
reduced as a reduction to the 1999 and 1997 provision for income
taxes. In addition, included in the Company's 1997 extraordinary
gain is a provision in lieu of income taxes of $842,000.
TEMPORARY DIFFERENCES AND CARRYFORWARDS WHICH GIVE RISE TO A
SIGNIFICANT PORTION OF DEFERRED TAX ASSETS AND LIABILITIES AT
NOVEMBER 30, 1999, AND 1998 ARE AS FOLLOWS:
(AMOUNTS IN THOUSANDS)
Deferred Tax Assets/(Liabilities)
-----------------------------------------------------
Continuing Operations Combined*
-------------------------- -----------------------
1999 1998 1999 1998
----------- ---------- --------- -----------
Fresh-start inventory
reserves.................. $ - $ 31 $ - $ 322
Income from joint ventures..... - 129 33 129
Inventory and other reserves... - 594 - 1,173
Capitalized inventory costs.... - (263) - (479)
Federal net operating losses... 5,594 5,406 5,594 8,126
State net operating losses..... 2,248 2,227 2,662 4,265
Depreciation................... (6) 83 (6) 78
Deferred state taxes........... 5 328 131 615
Litigation reserve............. - - 187 -
Stock compensation............. - - 179 -
Other.......................... 23 40 109 17
---------- ---------- --------- -----------
7,864 8,575 8,889 14,246
Valuation allowances........... 7,864 (8,519) (8,805) (13,541)
---------- ---------- --------- -----------
Total deferred taxes........... $ - $ 56 $ 84 $ 705
----------- ---------- --------- -----------
*Includes both continuing and discontinued operations
F-12
Deferred income taxes arise from temporary differences between
the tax basis of assets and liabilities and their reported
amounts in the financial statements. For federal and state tax
purposes, a valuation allowance was provided on a significant
portion of the net deferred tax assets due to uncertainty of
realization. On December 31, 1998, Calton, Inc. sold the stock of
Calton Homes to an unrelated party and incurred a capital tax
loss. This loss will have a full valuation allowance due to
uncertainty of realization. The sale of Calton Homes resulted in
the termination of a significant portion of the net deferred tax
asset.
The federal net operating loss carryforward for tax purposes
is approximately $16,400,000 at November 30, 1999 and $23,900,000
at November 30, 1998. The sale of Calton Homes resulted in a
reduction of approximately $8,000,000 in Calton, Inc.'s federal
net operating loss carryforward. The Company's ability to use its
deferred tax assets including federal net operating loss
carryforwards, created prior to November 21, 1995, to offset
future income is limited to approximately $1,127,000 per year
under Section 382 of the Internal Revenue Code as a result of the
change in control of the Company in November 1995. The limitation
has been reduced by approximately $500,000 per year as a result
of the terms of the sale of Calton Homes. These federal
carryforwards will expire between 2007 and 2014. In 1997, the
Company received a tax refund related to prior periods of
$2,442,000. The Company paid income taxes of approximately
$1,640,000, $680,000 and $30,000, respectively, in 1999, 1998 and
1997.
6. COMMITMENTS (a) As part of the sale of Calton Homes on December 31,
AND 1998, the Company entered into a consulting agreement with the
CONTINGENT purchaser that requires the purchaser to make payments of
LIABILITIES $1,300,000 million per year over a three-year period to the
Company.
(b) If by June 30, 2000, the Company has not redeployed a
substantial portion of the proceeds of the Sale Transaction, or
developed a plan to redeploy a substantial portion of such
proceeds within in a reasonable time frame, the Company, subject
to shareholder approval, will be liquidated and dissolved.
Management currently expects to deploy or have a plan to deploy a
substantial portion of the proceeds by June 30, 2000.
(c) The stock purchase agreement pursuant to which the
Company sold Calton Homes on December 31, 1998 requires the
Company to indemnify the purchaser for, among other things,
breaches of the agreement and certain liabilities that arise out
of events occurring prior to the closing of the sale, including
the cost of warranty work on homes delivered if such costs exceed
$600,000. On December 31, 1998, as a condition to the sale of
Calton Homes, the Company entered into a holdback escrow
agreement with the purchaser pursuant to which $5,159,000 of the
closing proceeds were deposited into escrow. Of this amount,
$3,000,000 (the "General Indemnification Funds") was deposited to
provide security for the Company's indemnity obligations and
$2,159,000 (the "Specific Indemnification Funds") was deposited
to fund costs associated with certain specified litigation
involving Calton Homes. As of November 30, 1999 there was
$1,610,000 in the Specific Indemnification Funds, and $2,410,000
in the General Indemnification Funds, of which $962,000 was paid
to the Company in January 2000. In January 2000, the purchaser
asserted a $253,000 claim for indemnification related to certain
alleged misrepresentations and liabilities allegedly arising out
of the events occurring prior to the sale of Calton Homes. The
Company and the purchaser are attempting to resolve these claims
and is uncertain as to whether these claims will proceed to
arbitration pursuant to the indemnity agreement. The remaining
General Indemnification Funds will be disbursed to the Company,
subject to claims for indemnification, on December 31, 2000. The
Specific Indemnification Funds will be disbursed, to the extent
not otherwise utilized in the resolution of litigation, on a case
by case basis as the litigation is resolved. If all of the
specified litigation is not resolved by December 31, 2000, a
portion on the General Indemnification Funds will not be
disbursed to the Company until the resolution of the litigation.
The Company may, under certain circumstances, be required to
deposit additional funds in the holdback if all of the specified
litigation is not resolved by December 31, 2000. In addition, the
Company's indemnity obligations are not limited to the amounts
deposited in escrow. In the event that the Company elects to
liquidate and
F-13
dissolve prior to December 31, 2003, it will be required to
organize a liquidating trust to secure its obligations to the
purchaser. The liquidating trust will be funded with the Specific
Indemnification Funds plus $3,000,000 if created between December
31, 1999 and December 31, 2000 and $2,000,000 if created after
December 31, 2000. If the liquidation occurs prior to December
31, 2000, the Company may be required to deposit additional
amounts in the liquidating trust if the specified litigation is
not resolved by such date. Any General Indemnification Funds
remaining in the holdback escrow fund will be applied as a credit
against amounts required to be deposited in the liquidating
trust.
(d) The Company assigned its operating lease in New Jersey
for office space expiring November 30, 2002 to Calton Homes.
Rental expense for the years ended November 30, 1999, 1998 and
1997 amounted to $45,000, $392,000 and $730,000 respectively.
The Company currently leases approximately 2,100 square feet
of office space located in Red Bank, New Jersey, for
approximately $4,700.00 per month. The term of this lease is on a
month-to-month basis. The Company also leases approximately 1,790
square feet of temporary office space on a month-to-month basis
in Vero Beach, Florida, for approximate $2,200.00 per month,
until its permanent space is available at the end of May 2000.
The permanent space at the same location will consist of
approximately 3,815 square feet, at a monthly rate of
approximately $5,722.00, for a term of 5 years.
The Company's subsidiary, eCalton, currently leases
approximately 4,000 square feet of office space, for
approximately $4,700 per month. The term of this lease is on a
month-to-month basis.
(e) The Company had a qualified contributory retirement plan
(401(k) Plan) which covered all eligible full-time employees with
a minimum of one year of service. The Company terminated the
401(k) Plan effective December 31, 1998. The Company's
contribution to the plan was $71,000 in 1998, and $30,000 in
1997. The Company's matching contribution, in the form of
registered Common Stock of the Company, for 1998 was 50% of
participant contributions, subject to a maximum of 3% of total
compensation and $2,000 per employee.
7. DISCONTINUED On December 31, 1998, the Company completed the sale of
OPERATIONS Calton Homes. The shareholders of Calton, Inc. approved the sale
of the stock of Calton Homes on December 30, 1998. The purchase
price for the stock of Calton Homes was $48,100,000 plus certain
post closing adjustments. The Company recorded a pretax gain of
$7,591,000 on the sale including the post closing adjustments.
Cash proceeds from the sale were approximately $43,440,000, net
of the $4,040,000 remaining holdback and $1,800,000 million cash
received from closing adjustments. No tax liability is expected
to result from the sale since the transaction resulted in a
capital loss for tax purposes. However, a provision in lieu of
taxes was recorded for financial reporting purposes in fiscal
1999 in the amount of $3,173,000 related to the sale transaction.
The gain was subject to the $5,200,000 holdback (see note 6) of
which $700,000 was refunded to the purchaser, out of the General
Indemnification Funds and included as part of the gain and
$592,000 was received by Calton pursuant to the terms of the
indemnification agreement. Future decreases to the escrows held
for indemnifications, if any, will be recorded as an adjustment
to the Income from the sale of Calton Homes. Calton has entered
into an agreement to provide consulting services to Centex that
requires payments to the Company of $1,300,000 per year over a
three-year period.
As a result of the sale of Calton Homes and the sale of the
Florida homebuilding assets that occurred at the end of fiscal
1997, the financial statements for the current and prior periods
have been restated to reflect the Company's homebuilding and real
estate development business as discontinued operations including
the operations of other subsidiaries located in Orlando, Florida;
Chicago, Illinois; Pennsylvania and California, where the Company
had similar operations and commercial land held for sale.
F-14
RESULTS OF OPERATIONS FROM DISCONTINUED OPERATIONS ARE AS FOLLOWS
(AMOUNTS IN THOUSANDS):
Years Ended November 30,
--------------------------------
1999 1998 1997
------- --------- ---------
Revenues................................................. $ 6,763 $ 105,292 $ 126,588
------- --------- ---------
Cost of revenues......................................... 5,858 85,897 110,419
Selling, general and administrative...................... 1,518 10,172 12,532
Impairment of assets..................................... - - 750
------- --------- ---------
7,376 96,069 123,701
------- --------- ---------
Income (loss) from operations............................ (613) 9,223 2,887
Interest expense, net.................................... - 545 1,223
------- --------- ---------
Income (loss) before income taxes........................ (613) 8,678 1,664
Provision (benefit) for income taxes..................... (373) 2,363 (351)
------- --------- ---------
Net income (loss) from discontinued operations........... $ (240) $ 6,315 $ 2,015
======= ========= =========
Selling, general and administrative costs include
approximately $984,000 of litigation costs related to the
resolution of indemnification obligations as a part of the sale
of Calton Homes.
Included in revenues for the year ended November 30, 1997,
is the Orlando, Florida division that generated $56,281,000 of
revenues, that included $16,660,000 of revenues from the 1997
Florida asset sale and resulted in a pretax gain of $615,000.
Interest paid for the years ended November 30, 1999, 1998
and 1997 was $209,000, $3,970,000 and $5,508,000, respectively.
NET ASSETS OF DISCONTINUED OPERATIONS ARE AS FOLLOWS
(AMOUNTS IN THOUSANDS):
November 30,
---------------------
1999 1998
-------- ----------
Assets
Cash.................................................................... $ - $ 11,910
Receivables and other assets............................................ 104 9,385
Inventories............................................................. - 61,449
Commercial land......................................................... 109 252
Liabilities
Revolving credit agreement.............................................. - (21,000)
Mortgages payable....................................................... - (1,262)
Accounts payable and accrued expenses................................... (650) (21,883)
-------- ----------
Net assets (liabilities)..................................................... $ (437) $ 38,851
======== ==========
F-15
8. QUARTERLY QUARTERLY FINANCIAL RESULTS FOR THE YEARS ENDED
FINANCIAL NOVEMBER 30, 1999 AND 1998 ARE AS FOLLOWS
RESULTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS):
(UNAUDITED)
Three Months Ended
-------------------------------------------------------
February 28, May 31, August 31, November 30,
1999 1999 1999 1999
------------- --------- ------------ --------------
Net loss from continuing
operations........................ $ 159 $ 285 $ 178 $ 39
Net (loss) income from
discontinued operations........... 92 (379) (100) 147
Net income from the sale of
Calton Homes...................... 3,886 668 - (136)
============= ========= ============ ==============
Net (loss) income...................... $ 4,137 $ 574 $ 78 $ 50
------------- --------- ------------ --------------
Net income per share
Basic(b).......................... $ .16 $ .03 $ - $ -
============= ========= ============ ==============
Diluted(b)........................ $ .15 $ .02 $ - $ -
============= ========= ============ ==============
Three Months Ended
-------------------------------------------------------
February 28, May 31, August 31, November 30,
1998 1998 1998 1998
------------- --------- ------------ --------------
Net income from continuing
operations(a)..................... $ (301) $ (251) $ (352) $ (1,056)
Net income (loss) from
discontinued operations........... (236) 657 1,052 4,842
----------- --------- ------------ --------------
Net (loss) income...................... $ (537) $ 406 $ 700 $ 3,786
----------- --------- ------------ --------------
Net (loss) income per share,
basic and diluted................. $ (.02) $ .02 $ .03 $ .13
----------- --------- ------------ --------------
(a) The increase in the net loss from continuing operations
for the three months ended November 30, 1998 is primarily a
result of intercompany charges from continuing operations to
discontinued operations.
(b) Net income per share does not agree to the per share
amounts presented on the face of the income statement as a
result of the impact of the stock repurchase program.
9. SUBSEQUENT On January 24, 2000 the Company purchased an additional
EVENTS 375,000 shares of common stock and a five-year warrant which
entitles the Company to purchase an aggregate of 225,000 shares
of CorVu Corporation common stock. The Warrant entitles the
Company to acquire certain specified quantities of shares at
specified exercise prices ranging from $2.00 per share to $8.00
per share. The aggregate exercise price is $900,000. The
aggregate acquisition amount for the stock and warrant was
$750,000. CorVu Corporation is traded under the symbol "CRVU" on
the OTC Bulletin Board. As of February 9, 2000 the common stock
was traded at $6.25 per share. Both the warrants and stock are
not registered and have current restrictions on trading.
In January 2000, the Company acquired a collective direct
and indirect (through ownership in a parent company) 50.4% equity
interest in PrivilegeONE Networks, Inc., a newly formed company
engaged in the development of a co-branded loyalty credit card
program. The purchase
F-16
price for the Company's interest was comprised of $105,000 of
cash and a warrant to acquire 1,200,000 shares of Common Stock at
an exercise price of $2.50 per share. The warrant becomes
exercisable only if PrivilegeONE surpasses certain specified
earnings targets. In addition to its equity interest, the Company
has agreed to loan up to $1,500,000 to PrivilegeONE pursuant to a
note which bears interest at the rate of 10% per annum and
becomes due in January 2004.
F-17
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-70628, 33-75184 and 333-28135) of Calton, Inc. of
our report dated January 12, 2000, except as to the information described in
Note 9, which is as of February 18, 2000 relating to the financial statements
and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers, LLP
Florham Park, New Jersey
February 28, 2000
F-18
SCHEDULE II
CALTON, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
Additions
----------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other At End
Description of Year Expenses Accounts Deductions of Year
----------- ------------- ------------- ------------- ---------- -------------
Year ended November 30, 1997:
Net realizable value reserves for inventory $ 1,113 $ 750 $ - $ 882(A) $ 981
============= ============= ============= ========== =============
Valuation allowance for net deferred tax asset $ 19,628 $ - $ - $ 3,538(B) $ 16,090
============= ============= ============= ========== =============
Year ended November 30, 1998:
Net realizable value reserves for inventory $ 981 $ - $ - $ 726 $ 726
============= ============= ============= ============ =============
Valuation allowance for net deferred tax asset $ 16,090 $ - $ - $ 2,549 $ 13,541
============= ============= ============= ============ =============
Year ended November 30, 1999:
Net realizable value reserves for inventory $ 255 $ - $ - $ 100 $ 155
============= ============= ============= ============ =============
Valuation allowance for net deferred tax asset $ 13,541 $ - $ - $ 4,736(c) $ 8,805
============= ============= ============= ========== =============
(A) Represents the utilization of reserves recorded when affected homes are
delivered and land is sold.
(B) Represents the change in the valuation allowance due to the changes in the
deferred tax assets and the impact of the IRS Code Section 382 limitation
on those assets.
(C) The majority of the change in valuation allowance is due to the sale of
Calton Homes, Inc., and did not have an income statement impact.
F-19
INDEX TO EXHIBITS
2.1 Agreement for Sale and Purchase of Assets dated as of November
26, 1997 between Beazer Homes Corp., Beazer Homes USA, Inc.,
Calton Homes of Florida, Inc. and Calton Homes, Inc.,
incorporated by reference to Exhibit 2 to Form 8-K of Registrant
dated December 1, 1997.
2.2 Amended and Restated Stock Purchase Agreement effective September
2, 1998 among Calton, Inc., Calton Homes, Inc. and Centex Real
Estate Corp., incorporated by reference to Exhibit 2 to Form 8-K
of Registrant dated December 31, 1998.
2.3 Amendment No. 1 to Amended and Restated Stock Purchase Agreement
dated as of December 28, 1998 among Calton, Inc., Calton Homes,
Inc. and Braewood Development Corp. (assignee of Centex Real
Estate Corp.), incorporated by reference to Exhibit 2.1 to Form
8-K of Registrant dated December 31, 1998.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant filed with the Secretary of State, State of New Jersey
on May 28, 1993, incorporated by reference to Exhibit 3.2 to
Amendment No. 1 to Form S-1 Registration Statement under the
Securities Act of 1933, Registration No. 33-60022, Certificate of
Amendment to Amended and Restated Certificate of Incorporation of
Registrant filed with the Secretary of State, State of New Jersey
on April 27, 1994, incorporated by reference to Exhibit 3(b) to
Form S-1 Registration Statement under the Securities Act of 1933,
Registration No. 33-76312, and Certificate of Amendment to
Amended and Restated Certificate of Incorporation of Registrant
filed with the Secretary of State, State of New Jersey on May 29,
1997, incorporated by reference to Exhibit 3.1 to Form 10-K of
Registrant for the fiscal year ended November 30, 1997, and
Certificate of Amendment to Amended and Restated Certificate of
Incorporation of Registrant filed with the Secretary of State,
State of New Jersey on February 2, 1999, incorporated by
reference to Exhibit 3.1 to Form 10-K of Registrant for the
fiscal year ended November 30, 1998.
3.2 By Laws of Registrant, as amended, incorporated by reference to
Exhibit 3.2 to Form 10-K of Registrant for the fiscal year ended
November 30, 1998.
4.1 Warrant to Purchase Common Stock of Calton, Inc. dated June 12,
1997 issued to BankBoston, N.A., incorporated by reference to
Exhibit 10.2 to Form 8-K of Registrant dated June 12, 1997.
4.2 Warrant to Purchase Common Stock of Calton, Inc. dated January
2000 issued to Taytrowe Van Fechtmann World Companies, Inc.
4.3 Rights Agreement dated February 1, 1999 by and between the
Registrant and First City Transfer Company as Rights Agent,
including forms of Rights Certificate and Election to Purchase
included as Exhibit B thereto, incorporated by reference to
Exhibit 1 to Form 8-A Registration Statement of Registrant filed
with the Securities and Exchange Commission on February 2, 1999.
(*) 10.1 1996 Equity Incentive Plan, incorporated by reference to Exhibit
10.1 to Form 10-K of Registrant for the fiscal year ended
November 30, 1996.
(*) 10.3 Registrant's Amended and Restated 1993 Non-Qualified Stock Option
Plan, incorporated by reference to Exhibit 10.3 to Form 10-K of
Registrant for the fiscal year ended November 30, 1995.
(*) 10.4 Incentive Compensation Plan of Registrant.
E-1
(*) 10.6 Severance Policy for Senior Executives of Registrant,
incorporated by reference to Exhibit 10.6 of Form 10-K of
Registrant for the fiscal year ended November 30, 1994.
(**) 10.7 Executive Employment Agreement dated as of November 21, 1995
between Registrant and Anthony J. Caldarone, incorporated by
reference to Exhibit 10.7 to Form 10-K of Registrant for the
fiscal year ended November 30, 1995 and Amendment to Executive
Employment Agreement dated as of April 14, 1999.
10.8 Senior Secured Credit Agreement dated as of June 12, 1997, among
Calton Homes, Inc., Calton Homes of Florida, Inc. and BankBoston,
N.A., incorporated by reference to Exhibit 10.1 to Form 8-K of
Registrant dated June 12, 1997.
10.9 Consulting Agreement between Registrant and Braewood Development
Corp. dated December 31, 1998, incorporated by reference to
Exhibit 10.9 to Form 10-K of Registrant for the fiscal year ended
November 30, 1998.
(*) 10.10 2000 Equity Incentive Plan.
(*) 10.11 Option Agreement dated July 19, 1999 between the Company and
Kenneth D. Hill. Agreements identical in term and content between
the Registrant and each of Matthew R. Smith and Robert K. Hill
have been executed. These documents have not been reproduced
herein.
(**) 10.12 Employment Agreement dated as of July 19, 1999 between
eCalton.com, Inc. and Kenneth D. Hill.
21. Subsidiaries of the Registrant.
27. Financial Data Schedule.
(*) Constitutes a compensatory plan required to be filed by an exhibit pursuant
to Item 14(c) of Form 10-K.
(**) Constitutes a management contract required to be filed pursuant to Item
14(c) of Form 10-K.