<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, 1999
[ ] 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. 0-23450
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
The Company's quarterly reports for the periods ended March 31, 1999 and
June 30, 1999, on Form 10-QSB were filed late. The following officers,
directors, and beneficial owners of 10% or more of the Company's Common Stock
were delinquent in filing an Annual Statement of Changes in Beneficial Ownership
on Form 5: Michael G. Todd, Herbert Russell, John W. DeHaven, and David R. Paes.
The Form 5 was filed by the above officers, directors and beneficial owners were
filed late.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock ($.01 Par Value) 4,090,361
(Title of Class) Shares Outstanding as of January 31, 2000
Transitional Small Business Disclosure Format: [_] YES [X] NO
1
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CAPITOL COMMUNITIES CORPORATION
Form 10-QSB
QUARTER ENDED December 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(Unaudited)................................................... 3
Consolidated Balance Sheet
December 31, 1999............................................ 3
Consolidated Statement of Cash Flows
For the Three Months Ended December 31, 1999 and 1998........ 4
Consolidated Statement of Operations
For the Three Months ended December 31, 1999 and 1998........ 5
Consolidated Statement of Stockholders' Equity
For the Three Months ended December 31, 1999................. 6
Notes to Consolidated Financial Statements December 31, 1999...... 7
Item 2. Management's Discussion And Analysis of Plan of Operation.... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 13
Item 3. Defaults Upon Senior Securities.............................. 13
Item 6. Exhibits and Reports on Form 8-K............................. 14
Signatures............................................................. 14
</TABLE>
2
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Capitol Communities Corporation
Balance Sheet
December 31, 1999 and 1998
<TABLE>
<CAPTION>
UNAUDITED
December 31, September 30,
1999 1999
<S> <C> <C>
Current Assets
Cash in Bank $ 178,333 $ 864,381
Accounts Receivable 51,851 51,554
Notes Receivable- current 48,000 383,000
Prepaid Assets 1,583 3,085
----------- ------------
Total Current Assets 279,767 1,302,020
Plant property and equipment
Furniture and Equipment
net of accumulated depreciation of
$19,813 and $17,982 21,953 23,784
Other Assets
Land and Real Estate Holdings 5,552,802 5,552,377
Investment in Trade Ark Properties 2,791,779 2,844,474
Loan origination costs
net of amortization of $1,335,588 and
$1,173,902 460,754 554,656
Notes Receivable- non current 132,000 144,000
Total Other Assets 8,937,335 9,095,507
----------- ------------
Total Assets $ 9,239,055 $ 10,421,311
=========== ============
Current Liabilities
Notes Payable 12,010,189 12,488,025
Accounts Payable & Accrued Expenses 1,394,817 1,225,552
----------- ------------
Total Current Liabilities 13,405,006 13,713,577
Non Current Liabilities
Notes Payable - -
Total Liabilities 13,405,006 13,713,577
Shareholders' Equity
Preferred stock-$.01 par value, none issued - -
Common Stock-$.01 par value, 40,000,000
shares authorized 76,300 76,300
7,630,050 shares outstanding
Additional Paid in Capital 7,470,913 7,470,913
Treasury Stock (4,795,852) (4,795,852)
Accumulated Deficit (6,917,312) (6,043,627)
----------- ------------
Total Shareholders' Equity (4,165,951) (3,292,266)
Total Liabilities and
Shareholders' Equity $ 9,239,055 $ 10,421,311
=========== ============
3
</TABLE>
<PAGE>
Capitol Communities Corporation
Statements of Cash Flows
For the Three Months Ended December 31, 1999 and 1998
UNAUDITED
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (873,685) $(1,033,309)
Amortization 317,613 322,265
Depreciation 1,831 5,980
Adjustments to Reconcile Income
to Net Cash Used for operating Activities
(Increase) Decrease in Receivables (297) 36,896
(Increase) Decrease in Real Estate Holdings (425) 272,483
(Increase) Decrease in Investments 52,695
(Increase) Decrease in Deposits
(Increase) Decrease in Accrued Interest Receivable
(Increase) Decrease in PrePaid Assets (1,502) 21,211
(Increase) Decrease in Inventory - (8,473)
Increase (Decrease) in Accrued Expenses 169,265 (183,248)
Increase (Decrease) in Deferred Revenue
Increase (Decrease) in Accrued Interest Payable
Other 12,502
----------- -----------
Net Cash Used for Operations (334,505) (553,693)
Cash Flows from Investing Activities:
Acquisition of Notes Receivable - (240,000)
Collections of Notes Receivable 347,000 20,430
Acquisition of Furniture and Fixtures (35,123)
Increase (decrease) in loan fees (220,707) (496,339)
----------- -----------
Net Cash used in Investing Activities: 126,293 (751,032)
Cash Flows from Financing Activities:
Increase in Notes Payable 20,000 1,851,169
Payment of Notes Payable (497,836) (952,452)
Issuance of Common Stock - 228,176
----------- -----------
Net Cash used in Financing Activities: (477,836) 1,126,893
Net Increase (Decrease) in Cash (686,048) (177,832)
Beginning Cash 864,381 1,047,021
Ending Cash $ 178,333 $ 869,189
=========== ===========
</TABLE>
4
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Capitol Communities Corporation
Consolidated Statements of Operations
For the Three months Ended December 31, 1999 and 1998
UNAUDITED
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Revenues:
Sales $ 0 $ 5,000
Miscellaneous 525 -
Income
Cost of Sales - -
---------- -----------
Gross Profit $ 525 5,000
Operating Expenses:
General & Administrative Expenses 528,557 627,208
---------- -----------
Net Income (Loss) Before
Interest Income (528,032) (622,208)
Operations of Unconsolidated Investments (52,695)
Interest Income 7,186 10,412
Interest Expense (300,144) (352,839)
---------- -----------
Net Income (Loss) from continuing operations $(873,685) $(964,635)
Net Income (Loss) from discontinued operations - (68,674)
Net Income (Loss) $(873,685) $(1,033,309)
========== ===========
Basic Earnings (Loss) per share (0.214) (0.148)
========== ===========
Weighted average shares outstanding: 4,090,361 6,960,288
========== ===========
</TABLE>
5
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Capitol Communities Corporation
Schedule of Owners Equity
For the Three Months Ended December 31, 1999
Unaudited
<TABLE>
<CAPTION>
Common Additional Treasury Retained
Shares Stock Paid in Capital Stock Earnings
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at 9/30/99 7,630,050 $76,300 $7,470,913 $(4,795,851) $(6,043,627)
Net Income (Loss) for year
ended 9/30/99 #REF!
Balance at 9/30/99 7,630,050 $76,300 $7,470,913 $(4,795,851) #REF!
</TABLE>
6
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CAPITOL COMMUNITIES CORPORATION AND SUBSIDIARIES
- ------- ----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
June 30, 1999
-------------
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------
Background
----------
The consolidated balance sheet at December 31, 1999 and the related
statements of operations and cash flows for the three month period
ended December 31, 1999, include the accounts of Capitol Communities
Corporation and its wholly owned subsidiaries and are unaudited.
All inter-company accounts and transactions have been eliminated in
consolidation.
These unaudited interim consolidated financial statements should be
read in conjunction with the September 30, 1999 fiscal year end
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
publicly 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.
7
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Revenue Recognition
-------------------
The full accrual method is used to determine the recognition of revenue. In
order to recognize revenue and profit under the full accrual method the
following criteria must be met. The profit from the sale must
be determinable, that is, the collectibility of the sales price is
reasonably assured, or any portion which may not be collectible can be
reasonably estimated. In addition, the earnings process must be complete,
with no significant activities required of the seller after the sale in
order to earn the profit from the sale.
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 three months ended December 31, 1999 was 4,090,361 and for the
three months ended December 31, 1998 was 6,960,288.
NOTE 2 - GOING CONCERN CONSIDERATIONS
The company has incurred significant losses from operations for the current
year, has a substantial accumulated deficit, has non-productive assets and
is highly illiquid. The Company is currently in default on a $3.4 million
mortgage and a $1.4 million mortgage as well as $330,324 of short term
unsecured debt. No claim for payment has been made for a $200,000 note due
January 6, 1996. Management has begun implementation of plans to make the
company more viable. The ultimate outcome of these plans can not be
determined.
NOTE 3 - SUBSEQUENT EVENTS
On January 14, 2000 the Company paid First Arkansas Valley Bank $128,608 to
bring current and extend the maturity date of the First Arkansas Valley
Bank line of credit, from December 2, 1999 to July 14, 2000. The line of
credit bears interest at a fixed rate of 10% per annum and upon maturity
all principal and all accrued interest is due. The balance owing on the
First Arkansas Valley Bank line of credit as of January 31, 2000 was
$1,345,000.
8
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
--------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
- --------------------------
Certain matters discussed in this Form 10-QSB are forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995. Such
forward-looking statements are generally accompanied by words such as "intends,"
"projects," "strategies," "believes," "anticipates," "plans," and similar terms
that convey the uncertainty of future events or outcomes. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in this ITEM 2 "MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION --Factors That May Affect Future Results and
Market Price of Stock." Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof and are in all cases subject to the Company's ability to,
(1)cure its current severe liquidity problems caused by its current short-term
debt obligations, and (2) to raise sufficient capital to commence meaningful
operations. If the Company cannot restructure, or retire its current debt, the
Company's status as a viable going concern will remain in doubt. There can be no
assurance that the Company will be able to raise sufficient capital to cure its
liquidity problems and pursue the business objectives discussed herein. Capitol
Communities Corporation undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should carefully review the risk factors described in
other documents the Company files from time to time with the Securities and
Exchange Commission, including without limitation those identified in the "Risk
Factors" section of the Company's Registration Statement filed with the
Securities and Exchange Commission (the "SEC") in September 1996 on Form 10-SB.
The the following discussion should be read in conjunction with the
unaudited financial statements appearing in Item 1, of this Part 1 ("the
Financial Statements"), and the information provided later in Item 2, of this
Report. As noted below in this Report, the Company needs to convert into long-
term debt, or replace or retire its current long term obligations and raise
additional capital to overcome its present illiquidity and commence significant
operations.
Management does not believe the historical financial information presented
in the Financial Statements is indicative of likely future results of
operations, due to the fact that the Company significantly changed the nature of
its business activities from real estate development and vacation interval
operations to land sales from its existing real estate inventory located in
9
<PAGE>
Maumelle, Arkansas (the "Maumelle Property"). The Company believes that its
ability to generate revenues in the future from real estate development will
depend in large part on its ability to extend, replace, convert into long term
debt or retire its current short term debt and raise additional capital.
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 some of its secured short-term debt, as discussed in more detail below. The
Company is currently negotiating to secure additional debt financing, however,
there can be no assurance that financing can be obtained, or that the Company
will be able to raise the additional capital needed to satisfy long-term
liquidity requirements.(See "LIQUIDITY AND CAPITAL RESOURCES," below).
Change in Financial Condition Since the End of Last Fiscal Year. At
----------------------------------------------------------------
December 31, 1999, the Company had total assets of $9,239,055, a decrease of
$1,182,256 or 11.34% of the Company's total assets as of the Company's fiscal
year end of September 30, 1999. The Company had cash of $178,333 at December 31,
1999 compared to $864,381 at September 30, 1999, a decrease of $686,048.
The current portion of Notes Receivable decreased from $383,000 on
September 30, 1999 by $335,000 to $48,000 on December 31, 1999.
The carrying value of the Company's real estate holdings remained almost
unchanged during the three months, increasing from $5,552,377 to $5,552,802. The
Company's investment in Trade Ark, decreased from $2,844,474 to $2,791,779
reflecting the Company's portion of the net loss by Trade Ark, which is
accounted for by the equity method.
Total liabilities of the Company at December 31, 1999 were $13,405,006, a
decrease of $308,571 from the September 30, 1999 total of $13,713,577. The
current liability for notes payable decreased by $477,836 during the three
months, from $12,488,025 to $12,010,189. This resulted primarily from the
payment of a $250,000 short term note and a reduction in the unsecured short
term notes. The Company decreased its unsecured short term notes payable from
$6,835,544 at September 30, 1999 by $220,722 to $6,614,822 at December 31, 1999.
Accounts payable and accrued expenses increased by $169,265. At September
30, 1999 the liability for accounts payable and accrued expenses totaled
$1,225,552. At December 31, 1999 the balance was $1,394,817. Accrued Interest
Payable increased by $134,369 from $741,578 at September 30, 1999 to $875,947 at
December 31, 1999. Accrued real estate taxes payable increased from the
September 30, 1999 balance of $9,976 to a balance of $13,301, an increase of
$3,325, as of December 31, 1999.
Shareholders' Equity decreased by $873,685. The decrease results entirely
from the operating loss of $873,685 for the three month period ending December
31, 1999. During the period from September 30, 1999 to December 31, 1999 the
Company did not have any capital transactions.
10
<PAGE>
Results of Operations
- ---------------------
Comparison of the Three Months Ended December 31, 1999 to the Three Months
--------------------------------------------------------------------------
Ended December 31, 1998 For the three months ended December 31, 1999 the
- -----------------------
Company experienced a net loss of $873,685 compared with a loss of $1,033,309
for the three months ended December 31, 1998. While sales and gross profit from
continuing operations were negligible during both periods, general and
administrative expenses decreased by $98,651, from $627,208 to $528,557, and
interest expense decreased by $52,695, from $352,839 to $300,144 resulting in
the decrease in net loss.
Sales decreased by $5,000 to $0 for the three months ended December 31,
1999 from $5,000 for the three months ended December 31, 1998. During the three
months ended December 31, 1999 there were no sales of land. During the three
months ended December 31, 1998, sales of $5,000 resulted from the proceeds from
the sale of a right of way in Maumelle.
General and administrative expenses decreased from $627,208 for the three
months ended December 31, 1998 to $528,557 for the three months ended December
31, 1999. Management fees totaled $36,179 for the three months ended December
31, 1999, a decrease of $53,151 from the $89,330 expense for the three months
ended December 31, 1998. The reduction of general and administrative expenses
and management fees was a result of the divestment of the Vacation Interval
operations. Consulting fees of $46,828 for the three months ended December 31,
1999 decreased by $26,700 from $73,528 for the three months ended December 31,
1998. Amortization expense increased by $13,883 to $317,613 for the three months
ending December 31, 1999 from $303,730 for the three months ended December 31,
1998. This resulted from the costs associated with the short term unsecured
Bridge Loans.
Interest income decreased from $10,412 for the three months ended December
31, 1998 to $7,186 for the three month period ended December 31, 1999.
Interest expense decreased by $52,695 from $352,839 for the three months
ended December 31, 1998 to $300,144 for the three months ended December 31,
1999. The decrease resulted from the decrease in debt by the Company.
The operating loss recorded for unconsolidated subsidiaries accounted for
under the Equity method totaled $52,695 for the three months ended December 31,
1999. There was no similar activity during the three months ended December 31,
1998. The Trade Ark investment comprised all of the Company's investment in
unconsolidated subsidiaries.
The loss from discontinued operations of $68,674 for the three months ended
December 31, 1998 decreased to $0 for the three months ended December 31, 1999,
due to the completion of the divestment of discontinued operations in June 1999.
During the period ending December 31, 1998 these operations had sales totaling
$401,339, cost of sales of $75,952 and operating expenses, including interest
expense, of $359,399.
Liquidity and Capital Resources
- -------------------------------
11
<PAGE>
Cash and cash equivalents amount to $178,333 or 11.34% of total assets at
December 31,1999, as compared with $864,381 at September 30, 1998. The Company's
liquidity position at December 31, 1999, is not adequate to meet the Company's
liquidity requirements. As of December 31, 1999, the Company has approximately
$3,989,367 in defaulted debt, and $10,301,000 in short-term debt due within the
next six months. The Company's status as a going concern remains in doubt.
As of December 31, 1999, the Company has borrowed $6,614,822 from private
sources, (the "Bridge Loans"). The majority of the promissory notes evidencing
the Bridge Loans, (the "Bridge Notes") bear interest at a rate of 10.9% per
annum and mature nine months from the date of each Note. The Bridge Loans are
unsecured, however the Company has provided a guarantee bond to the Bridge Note
holders at a cost to the Company of approximately 5% of the gross proceeds
received from the Bridge Loans. The Company has also paid the investment banking
firm that assisted the Company in obtaining the Bridge Loans a fee equal to 15%
of Bridge Loans gross proceeds received.
In the next fiscal year, the Company intends to replace the notes with long
term debt or equity capital. In the interim, Management intends to negotiate
with the present note holders to reinvest the Bridge Notes for an additional
nine month period. If some or all of the note holders choose not to reinvest,
the Company will have to replace the maturing notes with debt or equity capital.
There can be no assurances, however, that the Company will be able to obtain the
funds necessary to pay the matured Bridge Notes.
The Company is current on its debt, except the recourse note owed to Resure
Inc. (the "Resure Note I"), which matured October 1, 1999 (discussed below), a
$200,000 recourse note payable to Davister Corp. (the "Davister Note"), which
matured January 9, 1996, and on a revolving line of credit from the First
Arkansas Valley Bank ("First Valley Bank Line of Credit I") which matured on
December 2, 1999 in the amount of $1,457,966.
. As of December 31, 1999, the Company has not paid the July 1 and October 1,
1998 payments or the January 1, April 1, and July 1, 1999 and October 1, 1999
payments to Resure for an aggregate past due of amount of principal and interest
of $3,989,367. On April 19, 1999, a foreclosure action was instituted by the
Resure Liquidator against the Operating Subsidiary in the Chancery Court of
Pulaski County, Arkansas. Resure is seeking to foreclose on approximately 701
acres of the Large Residential Tract of the Maumelle Property that secures the
Resure Note I and Developer's Fees. On May 28, 1999, the Operating Subsidiary
filed an answer generally denying the claims. The Company is currently
negotiating with Resure to retire the liability on a discounted basis and have
the lawsuit dismissed. The Company intends to pay off the Resure and Davister
Note liabilities from proceeds from the sale of some of the Maumelle Property
and/or by obtaining additional equity. There can be no assurance, however, that
the Company will prevail in the litigation or that negotiations with Resure will
be successful or even if they are that the Company will be able to raise the
required funds. See Part II, ITEM 1, "LEGAL PROCEEDINGS."
Although the Davister Note has matured, the lender has not demanded payment
or instituted collection proceedings. The Company intends to retire this debt in
fiscal year 1999, from debt financing or generated revenues. There can be no
assurance, however, that the Company will be able
12
<PAGE>
to raise the required capital to retire the Davister Note.
The Company intends to raise operating capital by selling debt and/or
equity securities to the public or in private transactions and by the sale of
certain portions of the Maumelle Property. There can be no assurance, however,
that the Company will be able to raise sufficient funds to cure its defaulted
debt obligations and retire its short-term debt, most of which will mature
within the next six months. If the Company cannot refinance, restructure or
retire this debt or raise additional equity and/or capital, the Company's status
as a viable going business concern will remain in doubt.
In respect to prospective long-term liquidity, the Company intends to
generate the bulk of its cash from operations by developing and selling
residential lots, initially on the Maumelle Property and by selling additional
equity. This assumes that the Company can obtain the necessary financial
resources to overcome its present illiquidity.
Subsequent to December 31, 1999, the Company brought current the First
Arkansas Bank Line of Credit I. On January 14, 2000, the Company paid First
Arkansas Bank $128,608 to bring current and extend the maturity date of the
First Arkansas Line of Credit I from December 2, 1999 to July 14, 2000. The line
of credit bears interest at a fixed rate of 10% per annum and upon maturity all
principal and all accrued interest is due. The balance owing on the First
Arkansas Line of Credit I, as of January 31, 2000, was $1,345,000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 19, 1999, Nathaniel S. Shapo, Director of Insurance of the State
of Illinois, as Liquidator of Resure Inc., instituted a foreclosure action
against the Operating Subsidiary and the Bank of Little Rock, in the Chancery
Court of Pulaski County, Arkansas (the "Resure lawsuit"). The Resure Liquidator
is seeking to foreclose on approximately 701 acres of the Large Residential
Tract of the Maumelle Property securing the $3,500,000 Resure Note I, which is
currently in default. The action also seeks $2,000,000 in Development Fees the
Liquidator claims the Operating Subsidiary owes under the terms and conditions
of the September 30, 1997, Settlement Agreement, which is secured by the same
701 acres as the Resure Note I.
On May 28, 1999, the Operating Subsidiary filed an answer, generally
denying the claims. The Court has set a trial date of March 21, 2000 to hear the
claim. There can be no assurance, however, that the Operating Subsidiary will
prevail in the action or that it will be able to negotiate a favorable
settlement with Resure prior to the trial or any foreclosure.
The Company is involved in a pending legal action arising out of the normal
course of its business. In the opinion of Management, the outcome of such legal
action will not have a material adverse effect on the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
13
<PAGE>
The Company incorporates by reference the information regarding defaults of
certain debt obligations from Part I, ITEM 2 "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF PLAN OF OPERATION - Liquidity and Capital Resources," and Part II,
ITEM 1, LEGAL PROCEEDINGS."
ITEM 5. OTHER INFORMATION.
The Company incorporates by reference the information in Part I, ITEM 2,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION - Liquidity and
Capital Resources."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
EXHIBITS
The following Exhibits are filed as part of this Report.
11 Statement re: computation of per share earnings
27 Financial Data Schedule
b) REPORTS ON FORM 8-K
None
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 11, 2000 By: /s/ Michael G. Todd
Michael G. Todd, Chairman,
President and Chief Executive Officer
Date: February 11, 2000 By: /s/ David Paes
David Paes
Treasurer and Vice President
14
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Exhibit 11
Capitol Communities Corporation
Computation of Earnings Per Share
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
------------------ -----------------
<S> <C> <C>
Shares Outstanding Beginning of Period 4,090,361 6,924,500
Shares Issued During Period:
October 1, 1998 60,000
October 15, 1998 (32,305)
December 15, 1998 20,000
------------------ -----------------
Total Outstanding 4,090,361 6,972,195
Weighted average number of shares outstanding 4,090,361 6,960,288
Shares deemed outstanding from assumed
exercise of stock options - -
------------------ -----------------
Total 4,090,361 6,960,288
================== =================
Earnings (loss) applicable to common shares $ (873,685) $(1,033,309)
================== =================
Earnings (loss) per share of common stock $ (0.214) $ (0.148)
================== =================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1999 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 178,333
<SECURITIES> 0
<RECEIVABLES> 231,851
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 279,767
<PP&E> 5,574,755
<DEPRECIATION> 19,813
<TOTAL-ASSETS> 9,239,055
<CURRENT-LIABILITIES> 13,405,006
<BONDS> 0
0
0
<COMMON> 76,300
<OTHER-SE> (4,242,251)
<TOTAL-LIABILITY-AND-EQUITY> 9,239,055
<SALES> 0
<TOTAL-REVENUES> 7,711
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 528,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300,144
<INCOME-PRETAX> (873,685)
<INCOME-TAX> 0
<INCOME-CONTINUING> (873,685)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (873,685)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
