<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _____ to_____
Commission File No.
CAPITOL COMMUNITIES CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
Nevada 88-0361144
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25550 Hawthorne Boulevard
Suite 207
Torrance, CA 90505
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (310) 375-2266
Check whether the issuer (1) filed all reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act during the past 12 months (or for
such period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
[X] YES [ ] NO
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
<PAGE>
Common Stock ($.01 Par Value) 7,188,000
-----------------------
(Title of Class) Shares Outstanding as of
January 31, 1997
Transitional Small Business Disclosure Format: [ ] YES [X] NO
2
<PAGE>
CAPITOL COMMUNITIES CORPORATION
Form 10-QSB
QUARTER ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) . . . . . . . . . . . . . . . . 4
Consolidated Balance Sheet
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows
For the Three Months Ended December 31, 1996 and 1995 . . . . . 6
Consolidated Statement of Operations
For the Three Months ended December 31, 1996 and 1995 . . . . . 7
Notes to Consolidated Financial Statements
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion And Analysis or Plan of Operation . . . 10
PART II. OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits And Reports on Form 8-K . . . . . . . . . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
--------------------------------
Capitol Communities Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1996 and September 30, 1996
UNAUDITED
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1996
------------------ -------------------
<S> <C> <C>
Current Assets
Cash in Bank $ 72,709 $ (185,911)
Accounts Receivable 25,003 1,056
Prepaid Assets 302,964 6,893
Accrued Interest 123,893 62,140
----------- -----------
Total Current Assets 524,569 (115,822)
Loan & Origination Fees,
Net of Amortization 197,293 211,601
Other Assets
Deposits 129 129
Real Estate Holdings 8,951,384 9,156,357
Investments 3,500,000 3,500,000
----------- -----------
Total Other Assets 12,451,513 12,656,486
Total Assets $13,173,375 $12,752,265
=========== ===========
Current Liabilities
Accounts Payable & $ 998,350 $ 1,108,924
Accrued Expenses
Accrued Interest 536,843 251,712
Notes Payable 2,110,548 1,995,975
----------- -----------
Total Current Liabilities 3,645,741 3,356,611
Notes Payable 6,926,712 6,941,558
----------- -----------
Total Liabilities 10,572,453 10,298,169
Shareholders' Equity
Preferred Stock - -
Common Stock 7,188 7,000
Additional Paid in Capital 5,139,920 4,764,108
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
Accumulated Deficit (2,546,186) (2,317,012)
Total Shareholders' Equity 2,600,922 2,454,096
----------- -----------
Total Liabilities and
Shareholders' Equity $13,173,375 $12,752,265
=========== ===========
</TABLE>
5
<PAGE>
Capitol Communities Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 1996 and 1995
UNAUDITED
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows and Operating Activities:
Net Loss $(229,174) $(319,352)
Amortization 14,308 14,308
Adjustments to Reconcile Income
to Net Cash Used for operating Activities
(Increase) Decrease in Receivables (23,947) 11,332
(Increase) Decrease in Real Estate Holdings 204,973 (50,260)
(Increase) Decrease in Accrued Interest
Receivable (61,753) (64,120)
(Increase) Decrease in PrePaid Assets (296,071) (8,072)
Increase (Decrease) in Accrued Expense (110,574) 152,740
Increase (Decrease) in Accrued Interest
Payable 285,131 88,197
Net Cash Used for Operations (217,107) (175,227)
Cash Flows from Financing Activities:
Increase in Notes Payable 99,727 (1,409)
Cash Flows from Investing Activities:
Issuance of Common Stock 376,000 -
--------- ---------
Net Increase (Decrease) in Cash 258,620 (176,636)
Beginning Cash (185,911) 265,703
--------- ---------
Ending Cash $ 72,709 $ 89,067
========= =========
</TABLE>
6
<PAGE>
Capitol Communities Corporation and Subsidiaries
Consolidated Statements of Operations
For the Three months Ended December 31, 1996 and 1995
UNAUDITED
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Sales $ 218,574 $ 0
Cost of Sales 43,701 -
---------- ----------
Gross Profit 174,873 -
Operating Expenses:
General & Administrative
Expenses 465,800 383,501
---------- ----------
Net Income (Loss) Before
Interest Income (290,927) 383,501
Interest Income 61,753 64,149
---------- ----------
Net Income (Loss) ($229,174) ($319,352)
========== ==========
Net Income (Loss) per share (0.032) (0.046)
========== ==========
Weighted average shares outstanding: 7,115,283 7,000,000
========== ==========
</TABLE>
7
<PAGE>
CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------
Background
----------
The consolidated balance sheet at December 31, 1996 and the related
statements of operations and cash flows for three months period
ended December 31, 1996 include the accounts of Capitol Communities
Corporation and its wholly owned subsidiaries and are unaudited. All
intercompany accounts and transactions have been eliminated in
consolidation.
These unaudited interim consolidated financial statements should be
read in conjunction with the September 30, 1996 financial statements
and related notes. The unaudited interim financial statements
reflect all adjustments which are, in the opinion of management,
necessary for a fair statement of results for the interim periods
presented and all such adjustments are of a normal recurring nature.
Interim results are not necessarily indicative of results for a full
year.
The Company was originally incorporated in the State of New York on
November 8, 1968 under the name of Century Cinema Corporation. In
1983, the Company merged with a privately owned company, Diagnostic
Medical Equipment Corp., and as a result changed its name to that of
the acquired company. By 1990, the Company was an inactive publicity
held corporation. In 1993, the Company changed its name to AWEC
Resources, Inc., and commenced operations. On February 11, 1994, the
Company formed a wholly-owned subsidiary, AWEC Development Corp., an
Arkansas corporation, which later changed its name to Capitol
Development of Arkansas Inc., on January 29, 1996. The Company was
formed to develop and sell real estate properties. In May 1994, the
Company formed a wholly-owned subsidiary, AWEC Homes, Inc., an
Arkansas corporation for the purpose of building single-family
homes. The subsidiary's name was changed to Capitol Homes, Inc., on
January 29, 1996.
In order to effectuate a change in domicile and name change,
approved by a majority of the Predecessor Corporation shareholders,
the Predecessor Corporation merged, effective January 30, 1996, into
Capitol Communities Corporation, a Nevada corporation formed in
August 1995 solely for the purpose of the merger.
Revenue Recognition
-------------------
The full accrual method is used to determine the recognition of
revenue, in which both the earning price is virtually complete. The
profit is determined when both
8
<PAGE>
of these criteria are met; revenue is recognized.
CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
------------------------------------------------
POLICIES (Continued)
--------------------
Earnings/Loss Per Share
-----------------------
Primary earnings per common share are computed by dividing the net
income (loss) by the weighted average number of shares of common
stock and common stock equivalents outstanding during the year. The
number of shares used for the fiscal year ended September 30, 1996
was 7,000,000 and for the three months ended December 31, 1996 was
7,115,000.
NOTE 2 - CAPITOL TRANSACTIONS
--------------------
In May 1993, the Company executed a 15 to 1 reverse stock split.
In September 1993, the Company issued an additional 4,282,126 shares
of common stock to existing stockholders.
In October 1993, the Company issued to Petro Source 6,079,000
shares of common stock to acquire royalty interests in oil and gas
properties owned by Petro Source Energy Corp.
In July 1995, the Company executed a 5 to 1 reverse stock spilt.
In July 1995, the Company issued an additional 4,772,996 shares of
common stock to existing stockholders.
In October 1996, an individual pursuant to a consulting agreement,
exercised an option to purchase 38,000 shares of common stock.
In November 1996,an individual pursuant to a consulting agreement,
exercised an option to purchase 150,000 shares of common stock.
9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
---------------------------------------------------------
Although the Company has yet to commence development, its primary business
focus is the development and sale of real estate on the approximately 1,840
acres it owns in the City of Maumelle, Arkansas (the "Maumelle Property"), a
5,000 acre planned community located fifteen miles from downtown Little Rock.
The Company believes that its ability to generate revenues in the future from
real estate development activities will depend in large part on its ability to
solve its current illiquidity problems, the success of the Company's future
capital-raising efforts to overcome its present illiquidity position, and the
Company's ability to develop or acquire greater construction, sales and other
real estate development expertise than the Company now possesses. The following
discussion should be read in conjunction with the financial statements and the
notes thereto appearing in Item 1 of this Part I (the "Financial Statements").
Financial Condition
There continues to be substantial doubt about the Company's ability to
continue as a going concern, due to its current illiquidity and uncured defaults
in most of its secured debt. As discussed in more detail below, the Company
obtained $200,000 in secured short-term debt financing from private sources in
February 1997, and is attempting to obtain up to an additional $400,000 in such
financing by the end of the Company's second fiscal quarter. There can be no
assurance, however, that such additional financing can be obtained, or that it
will be obtained in time to permit the Company to forestall foreclosure on the
property securing its defaulted debt obligations. Even if such financing is
obtained, the Company will required substantial additional capital to satisfy
its long-term liquidity requirements.
At December 30, 1996, the Company had total assets of $13,173,375, an
increase of $421,110, or 3.3%, over the Company's total assets as of Company's
fiscal year end, September 30, 1996.
Change in Financial Condition Since the End of the Last Fiscal Year. At
December 31, 1996, the Company had total assets of $13,173,375, an increase of
$421,110, or 3.3% over the Company's total assets as of the Company's fiscal
year end of September 30, 1996. The Company had cash of $72,709 at December 31,
1996 compared to a negative cash position of $185,911 at September 30, 1996, an
improvement of $258,620. This improvement resulted from sales generated during
the quarter, as well as from the cancellation of a payment sent to Resure, Inc.
("Resure"), for the October l, 1996 mortgage payment due under the Resure Note I
(as defined below). The payment was made on September 30 in anticipation of
receipts to make the payment. Those receipts were not available as anticipated.
Resure subsequently delayed the due date of that payment until April l, 1997 in
exchange for the pledge of 200,000 shares of the Company's common Stock from two
major stockholders, as described in more detail below. This rescheduling
increased cash by $101,591.
Prepaid assets increased from $6,893 on September 30, 1996 by $296,071 to
$302,964 on
10
<PAGE>
December 31, 1996. This increase was due to the prepayment of amounts owed
under two separate financial consulting contracts. One contract extends through
September 30, 1997, while the other contract extends through December 31, 1997.
The prepaid portion of these contracts at December 31, 1996 was $297,000. The
prepayment of these amounts did not result in an increase in cash, because no
cash was paid. Instead the consultants were given credits against the exercise
price of certain stock options granted to them pursuant to the consulting
contracts.
The carrying value of the Company's real estate holdings declined by
$204,973 during the quarter from $9,156,357 to $8,951,384. The largest component
of this decrease was the elimination of $208,172 of Special Taxes on certain
Maumelle Property commercial tracts. This cost had previously been capitalized,
so the elimination reduced the carrying value of the property. The Special Tax
reduction occurred as a result of a bond refinancing by the Improvement District
containing the bulk of the Company's commercial land. The sale of a portion of
one of the Commercial sites in December resulted in a reduction of real estate
holdings of $30,801. This represents the allocated and land improvement cost of
that particular site, which was recognized as part of the cost of sales.
Additions to real estate holdings resulted from expenditures of $19,420 in
connection with the revival of an option contract concerning the west Little
Rock, Capitol Lakes Estates project. See Item 5, Other Information. The option
contract was renewed after a favorable appeal of the previous denial of zoning
and annexation. Additional capitalized costs totaling $14,580 were incurred for
various tracts within the Maumelle Property, primarily for preliminary
engineering costs, including surveys and preliminary plats.
Total liabilities of the Company at December 31, 1996, had increased to
$10,572,453, an increase of $274,284 over the September 30, 1996 total of
$10,298,169. The liability for accrued interest increased from $251,712 to
$536,843. The increase of $285,131 includes the addition of $88,219 of interest
resulting from the cancellation of the payment made to Resure at September 30,
1996 due to the Company's inability to acquire sufficient cash that had been
anticipated to be received during October. The balance of the increase reflects
that no interest was paid during the three months ended December 31, 1996. The
current liability for notes payable increased by $114,573 during the quarter
from $1,995,975 to $2,110,548. This increase included a $14,846 reclassification
of notes payable to current liability for a principal payment due within one
year of December 31, 1996. The increase also included $87,260 in new borrowings.
The cancellation of the payment due to Resure on October 1, 1996 increased the
liability by $13,372.
Accounts payable and accrued expenses decreased by $ 110,574. At September
30, 1 996 the liability for accounts payable and accrued expenses totaled
$1,108,924. At December 31, 1996 the balance was $998,350. Accrued Special Taxes
payable and accrued real estate taxes decreased by $208,172 and $12,419
respectively. The Special Tax decrease was a result of the bond refinancing by
the Improvement District encompassing the bulk of the Company's commercial land.
The real estate tax decrease reflected the payment of $27,417 of taxes less the
accrual of $14,998 in new taxes. These decreases were partially offset by
additional accounts payable incurred during the three months ended December 31,
1996 including an additional
11
<PAGE>
$60,000 in officers salary, $4,500 in accrued Directors' fees and $5,400 in
office lease payable.
Shareholders' Equity increased 5.98% despite a loss for the quarter of
$229,174. The increase reflects the issuance of 188,000 new shares of the
Company's common stock at $2.00 per share. The shares were issued to the
Company's financial consultants upon the exercise of stock options granted to
the, pursuant to the financial consulting agreements discussed above.
Comparison of Financial Condition as of the End of the Fiscal Quarters
Ended December 31, 1996 and 1995. At December 31, 1996, the Company had total
assets of $13,173,375, an increase of $284,779, or 2.2% over the Company's total
assets as of December 31, 1995.
Prepaid assets increased from $5,500 December 30, 1995 to $302,964 on
December 31, 1996. This increase was due to the financial consulting contract
prepayments discussed above. The prepaid portion of these contracts at December
31, 1996 was $297,000.
Total liabilities of the Company at December 31, 1996 had increased to
$10,572,453, an increase of $926,693 over the December 31, 1995 total of
$9,645,760. The liability for Accrued interest increased from $128,592 to
$536,843. The increase of $408,251 includes an additional year of accrued
interest on the Century and Davister notes discussed below, which was not paid.
In addition, the October 1, 1996 payment to Resure was rescheduled to April 1,
1997, resulting in additional accrued interest due to Resure compared to
December 31, 1995. The current liability for notes payable increased by
$510,591, from $1,599,957 at December 31, 1995 to $2,110,548 at December 31,
1996. This increase included the reclassification of the $350,000 Century Note
II (as defined below) to a current liability at December 31, 1996. The maturity
of this note was accelerated due to the default on the Century promissory notes.
This increase also included $87,260 in new borrowings. Additionally, $73,288 of
the notes payable to Resure was classified to current liabilities based upon the
scheduled amortization of the notes.
Accounts payable and Accrued Expenses increased by $431,139. At December
31, 1995, the liability for accounts payable and accrued expenses totaled
$567,211. At December 31, 1996, the balance was $998,350. Accrued Special Taxes
payable decreased by $80,796 to $0 at December 31, 1996. The Special Tax
decrease was a result of the bond refinancing by the Improvement District
encompassing the bulk of the Company's commercial land. Accrued real estate
taxes payable increased from $73,425 to $105,998, an increase of $32,572. In
addition, accounts payable incurred during the twelve month period through
December 31 , 1996, included an additional $240,000 in officer's salary, $18,000
in accrued Directors' fees and $21,600 in office lease payable.
Shareholders' equity decreased $641,914 despite cumulative losses between
December 31, 1995 and December 3, 1996, of $1,017,914. The increase in common
stock and additional paid in capital reflects the issuance of 188,000 new shares
of the Company's common stock at $2.00 per share, pursuant to the financial
consultant stock options discussed above.
12
<PAGE>
Results of Operations
Comparison of Three Months Ended December 31, 1996 to the Three Months
----------------------------------------------------------------------
Ended December 31, 1995. For the quarter ended December 31, 1996, the Company
- -----------------------
experienced a loss of $229,174 compared with a loss of $319,352 for the quarter
ended December 31, 1995. The difference in performance was primarily due to
fees paid to consultants retained in October 1996. The expense recognized in
the quarter ended December 31, 1996 from these fees and costs totaled
$79,000. The dissolution of the Monterra Group joint venture in California
resulted in an additional $18,122 in fees incurred in the quarter ended December
31, 1996. There were no comparable expenses in the quarter ended December 31,
1995.
Sales increased by $218,574 for the three months ended December 31, 1996
from $0 for the three months ended December 31, 1995, as a result of the sale of
a commercial two-acre parcel of the Maumelle Property for a sales price of
$110,000 and the sale of timber from the undeveloped single family portion of
the Maumelle Property in the amount of $90,452. The dissolution of the joint
venture with the Monterra Group provided sales of $18,122 from the net proceeds
of the sale of the lots. The gross profit for the three months ended December
31, 1996 was $174,873. There was no gross profit for the three months ended
December 31, 1995 since there were no sales or costs of sales incurred during
that quarter.
For the three months ended December 31, 1995 and the three month period
ended December 31, 1996, general and administrative expenses increased from
$383,501 to $465,800, respectively. This increase was due to the payment of
the consulting fees associated with the Monterra Group joint venture in the
amount of $18,122 and the above-mentioned financial consulting fees of $79,000.
The major portion of the general and administrative expenses for the three
months ended December 31, 1996, were accrued by the Company, and include
expenses such as officers' salaries, office lease and directors' fees.
Management and consulting fees for the three months ended December 31, 1995 to
the three moth period ended December 31, 1996 increased from $36,239 to $97,372.
Although fees to Maumelle Enterprises, Inc. ("Maumelle Enterprises") decreased
in the quarter ended December 31, 1996, there was an increase in fees to outside
consultants for financial consulting services during that period and the above-
mentioned Monterra Group fees were incurred during that period as well.
The Company does not foresee any significant elements of income or loss
that would not arise from its ordinary course of business, except for the losses
that would likely arise if the Company were to lose the approximately 1,110.76
acres of land secured by defaulted debt obligations. As set forth elsewhere in
this Report, the Company has no immediate source of cash for bringing its
obligations current, other than the Bridge Loans, discussed below.
13
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents amount to $72,709 or 0.55% of total assets at
December 31, 1996, as compared with negative $185,911 at September 30, 1996.
The Company's liquidity position at December 31, 1996, is not adequate to meet
the Company's liquidity requirements, which include approximately $8,600,000 in
defaulted debt. The Company's status as a going concern remains in doubt.
The Company has, as of February 14, 1997, borrowed $200,000 from private
sources, with net proceeds to the Company of $150,000, and is attempting to
borrow an additional $400,000 from private sources by the end of the second
quarter of this fiscal year, with anticipated net proceeds to the Company of
approximately $300,000 (collectively, the "Bridge Loans"). The promissory notes
evidencing the Bridge Loans (the "Bridge Notes") bear interest at a rate of 10%
per annum and mature nine months from the date of issuance. The Bridge Loan is
unsecured, however the Company is obligated to provide a guarantee bond to the
Bridge Note holders at a cost to the Company of approximately 10% of the gross
proceeds received from the Bridge Loans and has committed to pay the investment
banking firm that is assisting the Company in obtaining the Bridge Loans a fee
equal to 15% of Bridge Loans gross proceeds.
There can be no assurance that the Company can obtain the additional
$400,000 in Bridge Loans. Even if the Company is able to obtain such financing,
the Company will need to obtain additional funds to reinstate or refinance its
defaulted loans, meet its operating costs, and commence substantial development
activities. There can be no assurance that the holders of the Company's
defaulted secured debt will cooperate with the Company in its efforts to cure
its current loan defaults.
The following Company debt obligations are currently in default. A
$1,400,000 recourse note to Century Realty Inc. ("Century) secured by
approximately 36 acres of commercial lots (the "Century Note I"), matured
January 9, 1996, and remains unpaid. Based on cross-default provisions in a
Century $350,000 unsecured recourse note ("the Century Note II"), Century claims
that the Century Note II is also now in default. Century filed a foreclosure
complaint against the Company with respect to this debt on August 12, 1996. On
September 16, 1996, the Company filed an answer and counterclaim against Century
claiming the Century Note I and the Century Note II were usurious. There can be
no assurance, however, that the Company will prevail in this litigation.
Although the Company has continued to negotiate with representatives of Century
to settle the suit, the Company has been unable to meet Century's proposed terms
due to its lack of liquidity.
The Company did not make the $101,591.16 October 1, 1996 payment due to
Resure, Inc. ("Resure"), under a $3,500,000 recourse note secured by
approximately 1,111-acre large residential tract of the Maumelle Property (the
"Resure Note I"), but was granted an extension until April 1, 1997, in
consideration of a pledge of 200,000 shares of the Company's common stock by two
of the Company's major shareholders, Charlie Corporation and Prescott
14
<PAGE>
Investments Limited Partnership (the "Pledge Agreement"). The Company has not
made the $101,591.16 quarterly payment due January 1, 1997, but intends to make
this payment by February 20, 1997, from the proceeds of the Bridge Loans. The
Company currently has no source of cash to pay the extended Resure Note I
payment due on April 1, 1997.
Until the Company is able to cure the Resure Note I January, 1997, payment
default, the Company remains in default on a $3,500,000 non-recourse loan to
Resure, secured by approximately 410 acres of the large residential tract of the
Maumelle Property (the "Resure Note II"), due to cross-default provisions in the
Resure Note I. As of February 13, 1997, Resure has not instituted any
proceeding or action against the Company. There can be no assurance, however,
that Resure will not institute such proceedings if the Company is not able to
bring the January payment current and remain in compliance under the terms of
the Resure Note I agreement.
Under the terms of the Resure Note I, if the payment is not current Resure
may withhold the semi-annual interest payments payable to the Company under the
Resure Debenture (a debenture issued to the Company in return for the Resure
Note II). If this were to occur, the Company may not have any source of income
to pay the installment payments required under the Resure Note II.
The Company continues to be in default on a $200,000 unsecured recourse
note payable to Davister Corp. (the "Davister Note") which matured January 9,
1996.
To retire or refinance the above defaulted debt obligations, service other
existing debt and meet the Company's anticipated future operating cash needs,
the Company must raise additional operating capital. There can be no assurance,
however, that such capitol can be raised.
The Company is currently negotiating with an investment banking firm to
arrange debt and construction financing in the amount of $20,000,000 (the
"Construction Financing Loan"). If the Construction Financing Loan is obtained,
the Company intends to use the net proceeds to begin operations as a home
builder and to service existing debt. The Company intends to use part of the
unsecured portions of the Maumelle Property to secure $10,000,000 of the loan,
with the remaining $10,000,000 to be secured by home construction. Such
negotiations remain in their initial stage, however, and there can be no
assurance that the Company will be able to obtain the Construction Financing
Loan on good terms or at all.
The Company has liquidated part of its assets through the sale of portions
of the Maumelle Property to obtain operating funds and pay debt and may
liquidate additional parcels of the Maumelle Property during the 1997 fiscal
year for such purposes.
The Company raised $110,000 from a sale of a 2-acre parcel of its Maumelle
Property commercial lots, which closed on December 31, 1996. The Company
expects to raise $542,000 from the pending sale of another 11 acre parcel of
Maumelle Property commercial lots. The 11-
15
<PAGE>
acre sale is expected to close on or before March 31, 1997, with net proceeds to
the Company of approximately $500,000. Sale proceeds will be used to pay accrued
interest on the Company's $3,500,000 recourse note payable to Resure Inc., to
pay other existing debt obligations, and for general corporate purposes.
In order to service existing debts and meet operating expenses, the Company
may decide to sell a 19-acre multi-family parcel of the Maumelle Property and a
70-acre single-family parcel of the Maumelle Property. Management believes that
the sale of both properties could provide the Company with gross proceeds of
approximately $2,600,000. There can be no assurance, however that the Company
will be able to sell the property for this amount or at all.
In respect to prospective long-term liquidity, the Company intends to
generate the bulk of its cash from operations by building and selling homes
initially on the Maumelle Property, assuming the Company can obtain the
necessary financial resources to overcome its present illiquidity and begin
substantial building operations.
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION.
The Company recently revived an option agreement (the "Option Agreement"),
originally dated October 24, 1995, to purchase approximately 192 acres located
in Little Rock and zoned for single-family homes. The Company has paid to the
owner of the property a contract revival fee in the amount of $1,000. The
purchase price for the property under the Option Agreement is $1,190,945. The
Company has until April 15, 1998, to exercise its option to purchase the
property.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
EXHIBITS
The following Exhibits are filed as part of this Report. (Exhibits numbers
correspond to the exhibits required by Item 601 of Regulation S-B for an annual
report on Form 10-KSB,
2.1.1 Articles of Merger, filed with State of Nevada, dated November 29, 1995,
merging AWEC Resources into Capitol Communities Corporation.*
2.1.2 Agreement of Merger, filed with State of Nevada, dated November 15, 1995,
between AWEC Resources, Inc., and Capitol Communities Corporation.*
16
<PAGE>
2.2 Certificate of Merger, filed with State of New York, dated January 5,
1996, merging AWEC Resources, Inc., into Capitol Communities
Corporation.*
3.1.1 Articles of Incorporation of Capitol Communities Corporation, dated
August 18, 1995.*
3.1.2 Certificate of Amendment of Articles of Incorporation of Capitol
Communities Corporation, dated February 6, 1996.*
3.2 Bylaws of Capitol Communities Corporation, dated August 22, 1995.*
10.1 Contribution Agreement, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.2 Subordinated Surplus Debenture, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.3 Non-Recourse Promissory Note, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.4 Non-Recourse Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.5 Security Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.6 Environmental Indemnity Agreement, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.7 Loan Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.8 Promissory Note, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.9 Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.10 Environmental Indemnity Agreement, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.11 Agreement for Refinance of Secured Note, dated September 11, 1995 between
Century Realty, Inc., AWEC Resources, Inc., and AWEC Development
Corporation.*
17
<PAGE>
10.12 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. in the amount of $1,400,000.*
10.13 Mortgage, dated September 11, 1995, between AWEC Development Corporation
and Century Realty, Inc. in the amount of $350,000.*
10.14 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc.*
10.15 Guaranty, dated September 11, 1995, between AWEC Development Corporation
and Century Realty, Inc.*
10.16 Stock Option Agreement, dated September 11, 1995, between Century Realty,
Inc., and AWEC Development Corporation.*
10.17 Release Deed, dated September 9, 1995, between Century Realty, Inc., and
AWEC Development Corporation.*
10.18 Employment Agreement, dated July 14, 1995 between the Company and Michael
G. Todd.*
10.19 Olsen Consultant Agreement, dated October 7, 1996 between the Company and
Jens Olsen.**
10.20 Purchase Agreement, dated October 24, 1995, between John L. Burnett,
Trustee for Wood Heath Joint Venture and the Company.
11 Statement re: computation of per share earnings
27 Financial Data Schedule
* Exhibit(s) incorporated by reference from the Registration on Form 10-
SB of the Company, Registration No.915636 filed on September 16, 1996.
** Exhibit incorporated by reference from the Current Report on Form 8-K,
Commission File No. 915636 filed on October 18, 1996.
b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed by the Company during the
fiscal quarter ended December 31,1996:
The Company filed a Current Report on Form 8-K, Commission File No.
915636 on
18
<PAGE>
October 18, 1996 to report the termination of the Financial Consultant Agreement
between the Company and Olsen & Associates Consulting, Inc. and to report that
the Company entered into a Financial Consultant Agreement with Jens Olsen on
October 7, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAPITOL COMMUNITIES CORPORATION
Date: February 18, 1997 By: /s/ Michael G. Todd
Michael G. Todd, Chairman,
President and Chief Executive
Officer
Date: February 18, 1997 By: /s/ David Paes
Treasurer and Vice President
19
<PAGE>
EXHIBIT 10.20
PURCHASE AGREEMENT
("Capitol Lakes Estates")
----------------------------------
THIS PURCHASE AGREEMENT (the "Agreement") made and entered on the date (the
"Effective Date") indicated below as the execution date by the last of the
parties hereto to execute same, by and between John L. Burnett, Trustee
(referred to herein as the "Seller") and AWEC Development Corporation, an
Arkansas corporation (referred to herein as the "Purchaser").
NOW THEREFORE, in consideration of the promises hereinafter contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Purchaser hereby agree as follows:
ARTICLE I
---------
SALE AND PURCHASE OF ASSETS, PURCHASE PRICE
AND PAYMENT PROVISIONS
1.1 Sale and Transfer of Property at Closing. Pursuant to the terms of
----------------------------------------
this Agreement, the Seller will, at the Closing, grant, sell, assign, convey and
transfer to Purchaser any and all interest to that approximately 192.088 acre
parcel real property (the "Property") near Cooper Orbit Road in the City of
Little Rock, Pulaski County, Arkansas, which is described on Exhibit "A" affixed
hereto and by this reference made a part hereof.
1.2 Consideration for Property. As consideration for the conveyance
--------------------------
of the Property, and the representations, warranties, covenants and agreements
set forth in this Agreement by Seller, Purchaser shall pay and deliver to Seller
the sum of One Million One Hundred Ninety Thousand Nine Hundred Forty-Five
Dollars ($1,190,945.00) (the "Purchase Price"), subject to such amount being
adjusted as provided herein, payable, at Closing, to Seller, in cash, or other
immediately available funds in U.S. dollar denominations. The Purchase Price has
been calculated by multiplying the believed acres of the Property times
$6,200.00 per acre. In the event that the Title Survey reflects less than
192.088 acres of land, the Purchase Price shall be reduced to an amount that is
equal to the number of acres of the Property shown by the Title Survey times
$6,200.00. In the event that the Title Survey reflects more than 192.088 acres
of land, the Purchase Price shall be increased to an amount that is equal to the
number of acres of the Property shown by the Title Survey times $6,200.00, but
in no event will the Purchase Price exceed $1,200,000.00.
PURCHASE AGREEMENT/PAGE 1 (10\23\95 Print)
<PAGE>
1.3 Earnest Moneys. Purchaser hereby tenders $10,000.00 to Standard
--------------
Abstract & Title Co., 3420 Old Cantrell Road Little Rock, Arkansas 72202 (the
"Escrow Agent"), as earnest money (the "Earnest Money"). As an inducement to the
Seller to enter into this Agreement and to accept the Earnest Money, Purchaser
agrees that any and all engineering studies, development plans, cost estimates,
communications with governmental agencies and utility companies will be turned
over to the Seller within ten (10) days after notification from Purchaser to
Seller that Purchaser does not intend to close the sale contemplated in this
Agreement. This sum shall be held by Escrow Agent, and if the offer is not
accepted, or if the title requirements are not fulfilled, the Earnest Money
shall be promptly returned to Purchaser. If, after acceptance, Purchaser fails
to fulfill Purchaser's obligations, the earnest Money shall become liquidated
damages and shall be paid to Seller as provided herein, as Seller's sole remedy
for Purchaser's's breach of this Agreement.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser entering into this agreement and to
consummate the transactions contemplated hereby, Seller hereby represents and
warrants to Purchaser as follows:
2.l Authority Relative to Agreement. The Seller, as a Trustee pursuant
-------------------------------
to an express trust, has the power And authority to enter into thin Agreement
and bind himself and the trust to this Agreement. The execution, delivery and
performance of this agreement and the consummation of the transactions
contemplated herein have been duly and effectively authorized by all necessary
action.
2.2 Effect of Agreement. The execution, delivery and performance of
-------------------
this Agreement by Seller and the consummation of the transactions contemplated
herein do not require the consent, waiver, approval license or authorization of
any person, except as otherwise protruded herein.
2.3 Special Assessments. There are no special assessments which have
-------------------
been or are in the process of being levied against the Property.
2.4 Eminent Domain. There are no pending or to the Seller's knowledge,
--------------
threatened condemnation or eminent domain proceeding affecting all or any
portion of the Property.
2.5 Title. The Seller is the sole title holder to the Property.
-----
PURCHASE AGREEMENT PAGE 2 (10\23\95 Print)
<PAGE>
2.6 Law. There are no violations of law, ordinances, rules or
---
regulations of any governmental agencies and the Seller has not received any
notices thereof.
2.7 Signature. The signatory executing this Agreement violates no
---------
agreements by carrying out the terms hereof.
2.8 Set Backs. There are no set back, buffer zone, building line or
---------
platting ordinances or restriction, or any other covenants, agreements, laws,
ordinances or requirements of any kind that would adversely affect or interfere
with the intended use of the Property, as of the date of execution of this
Agreement. Said intended use of the Property is as a single-family/multi-family
residential development.
2.9 Moratorium. The Seller does not have reason to know of any building
----------
or utility moratorium such as, for example, a construction, sewer, water or
other utility service moratorium that would delay or prevent the Purchaser from
constructing, developing or selling the Property as intended.
2.10 Utilities. Each of electrical, telephone and water service is
---------
present, working and available to the Property and in located at the property
line.
2.11 Access. There is unencumbered and adequate access to and from public
------
streets to the Property.
2.12 Environment Rules. No federal, state or local environmental rules,
-----------------
regulations or statutes has been violated by the Seller.
2.13 Flood Insurance. Flood insurance, if necessary, shall be available
---------------
to persons building homes on the Property at reasonable cost and regular rates.
2.14 Services Paid. The Seller has paid or will at Closing pay all
-------------
architects, engineers and other professionals who have been employed by Seller
and who have rendered services in connection with the Property up through the
Closing Date and is not in violation of the terms of any contracts with same.
2.15 Hazardous Materials. To Seller's knowledge, the Property has not
-------------------
been used for the handling, treatment storage or disposal of environmentally
hazardous or toxic materials and that no environmentally hazardous or toxic
substances, are contained in, on or below the Property.
2.16 Violation of Agreement. The Seller does not violate any agreement
----------------------
by entering into this Agreement and/or consummating the transactions
contemplated hereby.
PURCHASE AGREEMENT/PAGE 3 (10\23\95 Print)
<PAGE>
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller entering into this Agreement and to consummate
the transactions contemplated hereby, Purchaser hereby represents and warrants
to Seller as follows:
3.3 Effect of Agreement. The execution, delivery and performance of this
-------------------
Agreement by Purchaser and the consummation of the transactions contemplated
herein do not require the consent, waiver, approval, license or authorization of
any person, except as otherwise provided herein.
3.4 As-is Purchase. The Purchaser is acquiring the Purchased Assets
--------------
as-is, without any representation by Seller, except as otherwise provided
herein.
ARTICLE IV
----------
ADDITIONAL COVENANTS OF PARTIES
4.1 Title Insurance. Seller shall, at Seller's expense, secure a
---------------
commitment (the "Title Commitment") for an owner's policy of title insurance
(the "Title Policy"), on American Land Title Association standard form of
owner'S marketability policy (ALTA Form B), without exceptions other than as
herein below specifically provided or set forth on Exhibit "B" affixed hereto,
to be issued by such title company reasonably acceptable to Purchaser (the
"Title Company"), in an amount not less than the Purchase Price and deliver same
to Purchaser on or before twenty (20) days after the date of execution of this
Agreement by Seller. The Title Policy shall insure Purchaser, that upon
consummation of the purchase and sale herein contemplated, Purchaser will be
vested with good, fee simple, marketable and insurable title to the Property,
subject to no liabilities, encumbrances or exceptions, except as set forth on
Exhibit "B". With respect to any exception contained in the Title Commitment for
unfiled and unrecorded materialman's and mechanics' liens, Seller hereby
covenants and agrees to furnish the Title Company with such affidavits and
indemnities as may be required by the Title Company in order to issue the Title
Policy without such exception. Seller hereby agrees to pay for the cost of the
Title Survey certified to Purchaser and the Title Company and adequate to remove
the so-called standard exceptions from the Title Policy. Any liens related to
debts of Seller which are to be paid or otherwise satisfied at Closing by Seller
shall not be deemed to be title defects.
If the Title Commitment discloses judgments, bankruptcies or other returns
against other persons having names the same as or similar to that of the Seller,
the Seller, on request, shall deliver to Purchaser and the Title Company,
affidavits showing that such judgments, bankruptcies or other returns are not
against the Seller. Seller shall also deliver any reasonable affidavits and
reasonable documentary evidence required by the Title Company to eliminate all
exceptions other than the approved exceptions appearing in the Title Commitment.
PURCHASE AGREEMENT/PAGE 4 (10\23\95 Print)
<PAGE>
4.2 Documentary Transfer Fees and Closing Costs. Seller shall pay
-------------------------------------------
one-half of the closing fees, half the cost for the documentary stamps (a), and
other closing charges customarily paid by Seller. Purchaser shall pay one-half
of the closing fees, half the cost for the documentary stamps (b), the premium
for the title insurance policy issued pursuant to the Title Commitment, the
filing fees for recording the Deed and other closing charges customarily paid by
Purchaser.
4.3 Real Estate Taxes Prorated. All general real estate taxes on the
--------------------------
Property due prior to the Date of Closing shall be paid by Sellers
contemporaneously herewith. All current year general real estate taxes for the
Property shall be prorated as of the Date of Closing.
4.4 Environmental Report; Investigation. Contemporaneously with the
-----------------------------------
execution of this Agreement by both Seller and Purchaser, Purchaser shall have
the right, at Purchaser's expense, to engage an environmental engineering firm
acceptable to Purchaser to prepare and deliver to Purchaser before Closing, a
Level 1 Environmental Report for the Property. Seller agrees to reimburse to
Purchaser the cost of such report obtained by Purchaser, not to exceed
$1,500.00.
Purchaser shall have the right, without obligation, to enter upon the
Property prior to the Closing to undertake sampling at the Property at
Purchaser's own expense. Seller shall, upon request of Purchaser, provide to
Buyer a description of all known operations, past and present, undertaken at the
Premises and any existing maps and diagrams designating the location of pat and
present operations and past and present storage of hazardous substances and
wastes, above and below ground, at the Property. If Buyer's sampling reveals
that there has been a spill or discharge of a hazardous substance or waste at
the Property, Purchaser shall have the right to terminate this Agreement by
giving written notice of such termination to Seller prior to the Closing Date.
4.5 Title Survey and Property Information. Within ten (10) days after
-------------------------------------
the Effective Date of this Agreement, Seller shall provide to Purchaser, at
Seller's cost, copies of all existiing to the Property in Seller's possession or
obtainable by Seller without additional cost or expense to Seller with good
faith effort which Seller agrees to exercise. Within thirty (30) days after the
Effective Date of this Agreement, shall have prepared by a land surveyor who is
certified and qualified under the laws of the state of Arkansas and Purchaser
approves, and delivered to Purchaser, at Seller's expense, an ALTA A survey (the
"Title Survey") sufficient for the Title Company to delete the standard survey
exception to the Title Commitment and all other exceptions to the Title
Commitment which can reasonably be deleted by reference to a survey. The Title
Survey shall, in addition to all other requirements, set forth the following:
(i) perimeter boundaries and a metes and bounds legal description; (ii) all
adjacent roadways (rights-of-way); (iii) recorded easements; (iv) any
encroachments and unrecorded easements noted by inspection; (v) a statement
pertaining to flood plains; (vi) location, capacity and sizing of all water,
natural gas and electricity utility to, on or in the proximity of the Property;
(vii) any other reasonable requirement to remove exceptions to the Title
Commitment; and (viii) certification to parties reasonably required by
Purchaser.
PURCHASE AGREEMENT/PAGE 5 (10\23\95 Print)
<PAGE>
ARTICLE V
---------
THE CLOSING
5.1 Closing Date. Closing of this Agreement (the "Closing") shall occur
------------
at 11:00 a.m. on March 15, 1996, or such other time as may be mutually agreed
upon, in writing, by the parties hereto (the "Closing Date"); provided, however,
that the Closing and the Closing Date shall be extended to occur at 11:00 a.m.
on July 15, 1996, if, on or before March 15, 1996 Purchaser shall pay to Escrow
Agent the sum of $25,000.00 in cash (the "Extension Payment"). The Extension
Payment shall for all purposes under this Agreement become and be deemed Earnest
Money pursuant to Section 1.3 hereof and except as set forth in the next
sentence shall be nonrefundable but shall be applied to the payment of the
Purchase Price at Closing. Except as otherwise specifically provided in Article
4 or elsewhere in this Agreement, if Purchaser does not close the transaction
contemplated herein for any reason other than a material breach by the Seller,
then Seller shall retain the Earnest Money and the Extension Payment as
liquidated damages for Purchaser's breach of this Agreement and neither party
shall have any further liability or obligation hereunder. With respect to the
Closing Date, time is of the essence.
5.2 Place of Closing. Closing shall occur at Beach Abstract & Title
----------------
Company, Little Rock, Arkansas, or at such other location as is agreeable to the
parties hereto.
5.3 Deliveries by Seller to Purchaser at Closing. At the Closing, Seller
--------------------------------------------
shall deliver or cause to be delivered to Purchaser the following executed
instruments:
(a) Deed. A General Warranty Deed or Trustee Deed (as may be required
----
by the Title Company) conveying fee simple absolute title in the Property to
Purchaser.
(b) Additional Documents. All such further instruments and
--------------------
documents as Purchaser may reasonably request for the more effective conveyance,
assignment or transfer to Purchaser of the Property.
5.4 Deliveries by Purchaser to Seller at Closing. At the Closing,
--------------------------------------------
Purchaser will deliver to Seller:
(a) The Purchase Price.
5.5 Deliveries. Seller shall vacate the Property and deliver possession
----------
to Purchaser as of the Date of Closing.
ARTICLE VI
----------
MISCELLANEOUS
6.1 Binding Agreement: Assignment. This Agreement may be assigned in
-----------------------------
whole or in part by Purchaser only with the prior written consent of the Seller,
which consent will not be unreasonably withheld. This Agreement and the right of
the parties hereunder shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
6.2 Construction. Within this Agreement, the singular shall include the
------------
plural and the plural shall include the singular, and any gender shall include
the other gender, all as the meaning in the context of this Agreement shall
require.
PURCHASE AGREEMENT/PAGE 6 (10\23\95 Print)
<PAGE>
6.3 Waiver of Compliance. The failure by either of the parties hereto to
--------------------
comply with any covenant or agreement herein or in any agreement attached hereto
or referred to herein may be expressly waived in writing, but such waiver or
failure to insist upon strict compliance with any obligation, covenant or
agreement shall not operate as a waiver of, or estoppel with respect to any
subsequent or other failure.
6.4 Entire Agreement. This Agreement, including the documents attached
----------------
hereto or referred to herein contains the entire understanding of the parties
hereto with respect to the subject matter contained herein. There are no
restrictions, promises, warranties, covenants or undertakings other than as
expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such matters.
6.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Arkansas.
6.6 Modification. No provisions of this Agreement or any agreement
------------
attached hereto or referred to herein may be waived, changed or modified or
discharged, except by an agreement in writing signed by the party or parties
against whom enforcement of such waiver, change or modification, or by whom
discharge is sought.
6.7 Further Documents and Assurance. Each of the parties hereto agree to
-------------------------------
execute all of such further instruments and documents and to take all such
further action as the other party may reasonably require in order to effectuate
the terms and proposals of this Agreement.
6.8 Headings. The headings of the sections and articles of this
--------
Agreement are inserted for convenience only and shall not constitute a part
hereof.
6.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which taken together shall constitute one agreement.
6.10 Notices. Any notice, request, instruction or other document to be
-------
given hereunder to any party shall be in writing and (i) delivered personally or
(ii) sent by registered or certified mail, postage prepaid, return receipt
requested, or (iii) by overnight delivery, or (iv) by facsimile machine as
follows:
IF TO PURCHASER: Mr. David Paes, Treasurer
AWEC Development Corporation
600 Pine Forest Drive, Suite 111
Maumelle, Arkansas 72113
Facsimile: (501) 851-4887
IF TO SELLER: John L. Burnett, Trustee
1501 No. University
Suite 800
Little Rock, AR 72217
Facsimile: (501) 664-0104
WITH COPY TO: Mr. Ed Dozier
E. W. Dozier Company
284 Riverridge Point
Little Rock, Arkansas 72227
Facsimile: (501) 223-3303
PURCHASE AGREEMENT/PAGE 7 (10\23\95 Print)
<PAGE>
Each notice given pursuant hereto shall be deemed delivered as of the date and
time such notice is received at the address or facsimile number set forth
herein. Any address or facsimile number may be changed by Notice given in the
manner provided herein. Any notice to be given by a party hereto may be given by
that party's attorney.
6.11 Authority. Each of the undersigned personally warrant and represent
---------
their individual authority to sign this Agreement in such capacity as such
signature is affixed hereto.
6.12 Expenses. Seller and Purchaser shall each pay their, its or his own
--------
expenses, including, without limitation, counsel, accounting fees and expenses,
incident to the preparation and carrying out of this Agreement and the
consummation of the transactions contemplated herein and the exhibits hereto.
6.13 Recitals. The Recitals of this Agreement are expressly made a part
--------
of this Agreement.
6.14 Limitation of Liability. Notwithstanding anything contained herein
-----------------------
to the contrary, in the event of a default hereunder by Seller, Purchaser's sole
remedies hereunder shall be termination of this Agreement and a return of his
Earnest Money and if applicable, Extension Payment, exercised by written notice
to Seller, or, at Purchaser's option a suit for specific performance, together
with a right of reimbursement from Seller of Purchaser's out-of-pocket costs
incurred in such specific performance suit, including attorney's fees, if
Purchaser prevails in such lawsuit. Notwithstanding anything contained herein to
the contrary, in the event of a default hereunder by Purchaser, Seller's sole
remedy hereunder shall be to retain the Earnest Money, and, if applicable, the
Extension Payment, as liquidated damages and neither party shall have any
further liability or obligation hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the dates reflected below their respective signatures hereinafter.
SELLER:
/s/ John L. Burnett, Trustee
------------------------
John L. Burnett, Trustee
DATE OF EXECUTION: October 24, 1995
----------------
PURCHASER:
AWEC DEVELOPMENT CORPORATION
BY: /s/ David Paes
----------
David Paes
TITLE: Vice President
DATE OF EXECUTION: October 24, 1995
----------------
PURCHASE AGREEMENT/PAGE 8 (10\23\95 Print)
<PAGE>
EXHIBIT A
DESCRIPTION OF PROPERTY
NW 1/4, S 1/2, NW 1/4, Part of the N 1/2, SW 1/4, Section 7, T-1-N, R-13-W,
Pulaski County, Arkansas, more particularly described as follows:
Beginning at the NW corner of Section 7, T-1-N, R-13-W, thence S 89 degrees, 05'
E along the North line of said Sec. 7, 1244.38' to the NE corner of the NW 1/4
NW 1/4 of said Sec. 7; thence S 00 degrees 04' E along the East line of said NW
1/4 NW 1/4 1300.12' to the SE corner of said NW 1/4 NW 1/4; thence N 89 degrees
37' E along the North line of the SE 1/4 NW 1/4 of said Section 7 1320' to the
NE corner of said SE 1/4 NW 1/4; thence S 00 degrees 04' E along the East line
of said SE 1/4 NW 1/4 and the NW 1/4 SW 1/4 2619.44' to the SE corner of said NE
1/4 SW 1/4; thence S 89 degrees 23' W along the South line of said NE 1/4 SW 1/4
1320.66' to the SW corner of said NE 1/4 SW 1/4; thence S 89 degrees 19' W along
the South line of the NW 1/4 SW 1/4 of said Section 7, 494.58'; thence N 00
degrees 41' W 10O'; thence S 89 degrees 19' W 201.6'; thence South 20 degrees
37' E 106.42' to a point on the South line of said NW 1/4 SW 1/4; thence South
89 degrees 19' W along the South line of said NW 1/4 SW 1/4 53.2' to the SE
corner of Lot 1 Spring Valley Manor; thence N 20 degrees 37' W along the last
line of said Lot 1 223.4' to the NE corner of said Lot 1; thence S 89 degrees
19' W along the North line of said Lot 1 169.3' to the NW corner of said Lot 1;
thence S 00 degrees 41' E along the West line of Lot 1 210' to the SW corner of
said Lot 1 which is a point on the South line of said NW 1/4 SW 1/4; thence S 89
degrees 19' W along the South line of said NW 1/4 SW 1/4 249.7' to the SW corner
of said NW 1/4 SW 1/4; thence N 00 degrees 03' W along the West line of the NW
1/4 SW 1/4 and the NW 1/4 of Section 7 3959.54' to the point of beginning
containing 192.088 acres, more or less.
PURCHASE AGREEMENT/PAGE 9 (10\23\95 Print)
<PAGE>
EXHIBIT "B"
EXCEPTIONS TO TITLE COMMITMENT AND TITLE POLICY
(None)
PURCHASE AGREEMENT/PAGE 10 (10\23\95 Print)
<PAGE>
SECOND AMENDMENT TO PURCHASE AGREEMENT
("CAPITOL LAKES ESTATE")
-------------------------------------------
This Second Amendment to Purchase Agreement (this "Second Amendment") is
made and entered effective on the 14/th/ day of June, 1996, by and between John
L. Burnett, Trustee(hereinafter referred to as the Seller") and Capitol
Development of Arkansas, Inc., (previously known as AWEC Development
Corporation), an Arkansas corporation (hereinafter referred to as the
"Purchaser"). This Second Amendment is intended to amend and modify that
Purchase Agreement between Buyer and Seller dated effective October 24, 1995
(the "Purchase Agreement"), as modified by that letter addressed to Purchaser
from Seller dated March 15, 1996, a copy of which is marked Exhibit "A" and
affixed hereto (the "Letter Amendment").
NOW, THEREFORE, the Purchaser and Seller hereby agree to amend the Purchase
Agreement, as modified by the Letter Amendment, as follow:
1. Section 5.1 of the Purchase Agreement, as modified by the
Letter Amendment, is hereby stricken and the following new section 5.1
replacement
"5.1 Closing Date. Closing of this agreement (the "Closing") shall
------------
occur at 11:00 a.m. on June 15, 1996, or such other time as may be mutually
agreed upon, in writing, by the parties hereto (the "Closing Date");
provided, however, that the Closing and the Closing Date shall be extended
to occur at 11:00 a.m. on October 15, 1996, if, on or before June 15, 1996
Purchaser shall pay to Escrow agent the gum of $25,000.00 in cash (the
"Extension Payment"). The extension Payment shall for all purpose under
this Agreement become and be deemed Earnest Money pursuant to Section 1.3
hereof and except as set forth in the next sentence shall be non-refundable
but shall be applied to the payment of the Purchase Price at Closing.
Except as otherwise specifically provided in Article 4 or elsewhere in this
Agreement, if Purchaser does not close the transaction contemplated herein
for any reason other than a material breach by the Seller, then Seller
shall retain the Earnest Money and the Extension Payment as liquidated
damages for Purchaser's breach of this Agreement and neither party shall
have any further liability or obligation hereunder; provided, however that
if the City of Little Rock, Arkansas does not grant all necessary approvals
and permits to the Purchaser's sewer utility infrastructure construction
plan prior to October 1, 1996, then at any time prior to Closing, Purchaser
shall have the right, upon notice to Seller, to terminate its obligations
under this Agreement whereupon the $25,000.00 Extension Payment shall be
returned by Seller to Purchaser and Purchaser and Seller shall have no
further obligations of one to the other pursuant to this Agreement. With
respect to the Closing Date, time is of the essence."
2. Except as modified by this Second Amendment, all other terms and
conditions of the Purchase Agreement, as modified by the Letter Amendment, are
hereby confirmed and incorporated herein by this reference. Each of the
capitalized terms used ln this Second Amendment shall have the same meaning as
defined in the Purchase Agreement, unless the context herein otherwise requires.
<PAGE>
3. Seller hereby acknowledges receipt of the sum of $25,000.00
as the Extension Payment pursuant to section 5.1 of the Purchase Agreement, as
amended hereby.
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment to
Purchase Agreement effective on the date first above mentioned.
SELLER:
/s/ John L. Burnett
----------------------------------------
JOHN L. BURNETT, TRUSTEE
PURCHASER:
CAPITOL DEVELOPMENT OF ARKANSAS, INC.
BY: /s/ David Paes
----------------------------------
TITLE: Vice President
-------------------------------
SECOND AGREEMENT/2
<PAGE>
March 15, 1996
Mr. David Paes
Capitol Development of Arkansas, Inc.
600 Pine Forest Dr., Suite 111
Maumelle, AR 72113
RE: JOHN L. BURNETT, TRUSTEE TO AWEC DEVELOPMENT CORP.
- --- --------------------------------------------------
Dear Mr. Paes:
Please let this letter serve as an amendment to the Purchase Agreement between
John L. Burnett, Trustee, and AWEC Development Corporation (now known as Capitol
Development of Arkansas, Inc.) for the sale and purchase of approximately 190
acres of land in Pulaski County, Arkansas. Said Purchase Agreement was
originally dated October 24, 1995.
It is hereby agreed that the closing of this agreement is extended from 11:00
AM, March 15, 1996 to a new date of June 15, 1996. It is further amended that
the closing and closing date may be further extended to occur at 11:00 AM on
October 15, 1996 if, on or before June 15, 1996, Purchaser shall pay the escrow
agent the sum of $25,000.00 in cash (the extension payment).
If you would like this amendment in more formal form, please ask your attorney
to prepare a more formal amendment and return it to me. However, unless I hear
otherwise, we will use this letter as the amendment to the original Purchase
Agreement.
Please acknowledge your agreement to these changes by signing in the appropriate
place and returning a copy to me in the envelope provided.
Sincerely yours,
RECTOR PHILLIPS MORSE, INC.
/s/ John L. Burnett
John L. Burnett, Trustee
JLB/bd
enclosure
ACKNOWLEDGED BY:
/s/ David Paes, Vice President 3/12/96
David Paes Date
Capitol Development of AR, Inc.
<PAGE>
September 16, 1996
Mr. David Paes
Capitol Development of Arkansas, Inc.
600 Pine Forest Dr., Suite 111
Maumelle, AR 72113
RE: CAPITOL LAKES ESTATES
Dear Mr. Paes:
This letter is to confirm the agreement between John L. Burnett, Trustee for
Wood Heath Joint Venture and Capitol Development of Arkansas, Inc. regarding the
Capitol Lakes Estates development on Cooper Orbit Road in Little Rock, Arkansas.
We have agreed to the following general terms:
1. Upon payment of $1,000.00 by Capitol Development to John L. Burnett,
Trustee for Wood Heath Joint Venture, the Purchase Agreement originally
dated October 24, 1995 and its amendments dated March 15, 1996 and June 14,
1996 is hereby reinstated, and said contract shall not expire until October
15, 1996.
2. An extension of the closing date is hereby granted effective October 15,
1996 and expiring at midnight, April 15, 1997.
3. Two additional six month extensions (April 16, 1997 to October 15, 1997 and
October 16, 1997 to April 15, 1998) will be granted upon request by the
Purchaser, along with a payment to Seller of $10,000.00 for each extension.
4. One additional six month extension from October 16, 1997 to midnight, April
15, 1998 will be granted upon request by the Purchaser, and a payment to
the Seller of $20,000.00.
5. All payments listed above made payable to Seller from Purchaser shall be
nonrefundable and shall not represent a reduction in the purchase price of
the property. All payments when made shall be immediately disposable by the
Seller.
Sincerely yours,
John L. Burnett, Trustee
for Wood Heath Joint Venture
JLB/bd
ACKNOWLEDGED:
/s/ David Paes, Vice President 9-17-96
- -------------------------------------- ---------------------------
Capitol Development of Arkansas, Inc. Date
<PAGE>
Exhibit 11
CAPITOL COMMUNITIES CORPORATION
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended December 31,
1996 1995
---------- ----------
<S> <C> <C>
Shares Outstanding Beginning 7,000,000 7,000,000
Of Period
Shares Issued During Period
October 7, 1996 38,000 -
November 12, 1996 150,000 -
Weighted average number of 7,115,000 7,000,000
shares outstanding
Total 7,115,000 7,000,000
Earnings (loss) applicable to $ (229,174) $ (319,352)
common shares
Earnings (loss) per share of $ (0.032) $ (0.046)
common stock
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1996 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 72,709
<SECURITIES> 3,500,000
<RECEIVABLES> 25,003
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 524,569
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,173,375
<CURRENT-LIABILITIES> 3,645,741
<BONDS> 0
0
0
<COMMON> 7,188
<OTHER-SE> 2,600,204
<TOTAL-LIABILITY-AND-EQUITY> 13,173,375
<SALES> 218,574
<TOTAL-REVENUES> 280,327
<CGS> 43,701
<TOTAL-COSTS> 43,701
<OTHER-EXPENSES> 268,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 196,969
<INCOME-PRETAX> 229,174
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229,174
<EPS-PRIMARY> (.032)
<EPS-DILUTED> (.032)
</TABLE>
