-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AGpQmMbqFWslr4hWqrcM9I/jcFCMFbOMpybOzVMa50kfkvYJpFSxY+RweBU8oyHg VH15jt8Pm2KceNU5nZZSNQ== 0001188112-03-000705.txt : 20031015 0001188112-03-000705.hdr.sgml : 20031013 20031015163143 ACCESSION NUMBER: 0001188112-03-000705 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALTON INC CENTRAL INDEX KEY: 0000717216 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 222433361 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-08846 FILM NUMBER: 03942089 BUSINESS ADDRESS: STREET 1: 2013 INDIAN RIVER BOULEVARD CITY: VERO BEACH STATE: FL ZIP: 32960 BUSINESS PHONE: 7727941414 MAIL ADDRESS: STREET 1: 2013 INDIAN RIVER BOULEVARD CITY: VERO BEACH STATE: FL ZIP: 32960 10QSB 1 t10qsb-30512.txt 10QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended August 31, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file no. 1-8846 CALTON, INC. (Exact name of registrant as specified in its charter) NEW JERSEY 22-2433361 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 2013 INDIAN RIVER BLVD. VERO BEACH, FLORIDA 32960 (Addresses of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (772) 794-1414 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of October 14, 2003, 9,223,508 shares of Common Stock were outstanding. Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
CALTON, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements Consolidated Balance Sheets at August 31, 2003 (Unaudited) and November 30, 2002............... 3 Consolidated Statements of Operations (Unaudited) for the Three Months Ended August 31, 2003 and August 31, 2002.......... 4 Consolidated Statements of Operations (Unaudited) for the Nine Months Ended August 31, 2003 and August 31, 2002........... 5 Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended August 31, 2003 and August 31, 2002........... 6 Notes to Consolidated Financial Statements...................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 13 Item 3. Disclosure Controls and Procedures.............................. 17 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................ 18 SIGNATURES ................................................................ 19 - ---------------------------------------------------------------------------------------- Certain information included in this report and other Company filings (collectively, "SEC filings") under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (as well as information communicated orally or in writing between the dates of such SEC filings) contains or may contain forward looking information that is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are continued operating losses and their effect on liquidity, the Company's ability to raise capital, national and local economic conditions, the lack of an established operating history for the Company's current business activities, conditions and trends in the homebuilding, Internet and technology industries in general, changes in interest rates, continued acceptance of the Company's co-branded customer loyalty credit card program, the effect of governmental regulation on the Company and the risks described under the caption "Certain Risks" in the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2002. - ----------------------------------------------------------------------------------------
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ITEM 1: FINANCIAL STATEMENTS CALTON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS August 31, November 30, 2003 2002 --------------- --------------- ASSETS (UNAUDITED) Current Assets Cash and cash equivalents $ 1,361,000 $ 3,286,000 Holdback receivable - 88,000 Accounts receivable, net of allowance for doubtful accounts of $22,000 at August 31, 2003 and $31,000 at November 30, 2002 124,000 281,000 Inventory 4,847,000 - Prepaid expenses and other current assets 127,000 143,000 --------------- --------------- Total current assets 6,459,000 3,798,000 Deferred charges 267,000 - Property and equipment, net 57,000 107,000 --------------- --------------- Total assets $ 6,783,000 $ 3,905,000 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable, accrued expenses and other liabilities $ 898,000 $ 1,118,000 Notes payable 3,529,000 - Deferred taxes 487,000 487,000 --------------- --------------- Total current liabilities 4,914,000 1,605,000 --------------- --------------- Commitments and Contingencies - - SHAREHOLDERS' EQUITY Common stock, $.05 par value, 10,740,000 shares authorized; 9,224,000 and 4,644,000 shares outstanding at August 31, 2003 and November 30, 2002, respectively 459,000 232,000 Additional paid-in capital 13,009,000 12,138,000 Accumulated deficit (2,497,000) (968,000) Less cost of 1,607,000 shares held in treasury (9,102,000) (9,102,000) --------------- --------------- Total shareholders' equity 1,869,000 2,300,000 --------------- --------------- Total liabilities and shareholders' equity $ 6,783,000 $ 3,905,000 =============== =============== See notes to consolidated financial statements. 3
CALTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED AUGUST 31, 2003 AND 2002 (UNAUDITED) 2003 2002 --------------------- --------------------- Revenue Technical staffing services $ 77,000 $ 273,000 Website design and implementation 111,000 159,000 Credit card loyalty program - 9,000 --------------------- --------------------- 188,000 441,000 --------------------- --------------------- Costs and expenses Project personnel and expenses 104,000 282,000 Selling, general and administrative 576,000 958,000 --------------------- --------------------- 680,000 1,240,000 --------------------- --------------------- Loss from operations (492,000) (799,000) Other (expense) income Interest income 3,000 28,000 Litigation settlements 25,000 - Other (expense) income 17,000 12,000 --------------------- --------------------- Loss from continuing operations (447,000) (759,000) Net loss $ (447,000) $ (759,000) ===================== ===================== --------------------- --------------------- Basic and diluted loss per common share $ (0.09) $ (0.17) ===================== ===================== Weighted average number of shares outstanding Basic and diluted 4,846,071 4,507,000 See notes to consolidated financial statements. 4
CALTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS NINE MONTHS ENDED AUGUST 31, 2003 AND 2002 (Unaudited) 2003 2002 --------------------- --------------------- Revenue Technical staffing services $ 440,000 $ 989,000 Homebuilding consulting fees - 108,000 Website design and implementation 361,000 455,000 Credit card loyalty program 13,000 17,000 --------------------- --------------------- 814,000 1,569,000 --------------------- --------------------- Costs and expenses Project personnel and expenses 514,000 992,000 Selling, general and administrative 1,845,000 3,500,000 --------------------- --------------------- 2,359,000 4,492,000 --------------------- --------------------- Loss from operations (1,545,000) (2,923,000) Other (expense) income Interest income 18,000 108,000 Loss on disposal of long-lived assets (13,000) - Impairment of note receivable - (750,000) Litigation settlements (13,000) - Other income 23,000 340,000 --------------------- --------------------- Loss from continuing operations (1,530,000) (3,225,000) Loss from operations of discontinued component - (998,000) Loss from disposal of discontinued component - (541,000) --------------------- --------------------- Net loss $ (1,530,000) $ (4,764,000) ===================== ===================== Basic and diluted loss per common share: Loss from continuing operations $ (0.32) $ (0.72) Loss from discontinued component - (0.34) --------------------- --------------------- Net loss per common share $ (0.32) $ (1.06) ===================== ===================== Weighted average number of shares outstanding Basic and diluted 4,711,617 4,474,000 See notes to consolidated financial statements. 5
CALTON, INC. AND SUBSIDIARIES CONOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED AUGUST 31, 2003 AND 2002 (UNAUDITED) 2003 2002 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (1,530,000) $ (4,764,000) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 36,000 106,000 Loss from discontinued component - 541,000 Impairment of note receivable - 750,000 Loss on disposal of long lived assets 13,000 - Stock based compensation 20,000 16,000 Changes in operating assets and liabilities Accounts receivable 157,000 243,000 Inventory (4,847,000) - Prepaid expenses and other assets (251,000) (3,000) Accounts payable, accrued expenses and other liabilities (220,000) (293,000) --------------- --------------- Net cash used in operating activities (6,622,000) (3,404,000) CASH FLOWS FROM INVESTING ACTIVITIES Assets and liabilities of discontinued component - 2,028,000 Purchases of property and equipment - (6,000) Receipts (payments) from holdback escrow account 88,000 (1,000) --------------- --------------- Net cash (used in) provided by investing activities 88,000 2,021,000 CASH FLOWS FROM FINANCING ACTIVITIES Stock repurchase - (12,000) Proceeds from construction financing 3,529,000 - Proceeds from sale of common stock 1,080,000 - Proceeds from the sale of treasury stock - 62,000 --------------- --------------- Net cash (used in) financing activities 4,609,000 50,000 Net (decrease) in cash and cash equivalents (1,925,000) (1,333,000) Cash and cash equivalents at beginning of period 3,286,000 4,715,000 --------------- --------------- Cash and cash equivalents at end of period $ 1,361,000 $ 3,382,000 =============== =============== See notes to consolidated financial statements. 6
CALTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position as of August 31, 2003, the results of operations for the three and nine months ended August 31, 2003 and August 31, 2002 and the cash flows for the nine months ended August 31, 2003 and August 31, 2002 have been included. These interim financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 17, 2003. Operating results for the three and nine months ended August 31, 2003 are not necessarily indicative of the results that may be expected for the year ended November 30, 2003. 2. LIQUIDITY AND MANAGEMENT'S PLANS The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, Calton has incurred losses from continuing operations of ($1,530,000) during the nine months ended August 31, 2003. However, as of August 31, 2003, the Company had working capital of $1,545,000, and approximately $2,700,000 available on its line of credit. The credit line in combination with anticipated cash flow from the homebuilding operations is currently projected to be sufficient to fund the current operating plan during the remainder of the fiscal year ending on November 30, 2003. In accordance with management's previously stated plans to sustain operations by augmenting revenue opportunities, on August 29, 2003, the Company completed the acquisition of 35 residential lots in the Riverside at The Island Club, a 121 home residential community being developed in Vero Beach, Florida for approximately $4.8 million. This acquisition was financed through bank financing (Note 6) and working capital. The Company plans to complete the development of the Vero Beach project and pursue other opportunities in the homebuilding industry in Florida. In addition to the homebuilding activities, management has continued its cost containment efforts. As a result of these efforts, administrative expenses have been reduced from $3,500,000 for the nine months ended August 31, 2002 to $1,845,000 for the nine months ended August 31, 2003. Management currently believes that these levels of administrative expenses can be maintained through the end of the current fiscal year. However, management currently believes that increases in administrative expenses will occur as the homebuilding operations increase. 7 During 2002, in connection with management's plans to curtail costs and eliminate non-performing operations, Calton sold its non-performing interest in Innovation Growth Partners, LLC ("IGP") which contributed to the Company's net loss in the amounts of ($1,020,000) during the fiscal year ended November 30, 2002 and ($998,000) during the nine-month period ended August 31, 2002. In addition, further savings were realized when the Internet development group of eCalton.com, Inc. ("eCalton") and PrivilegeONE, LLC ("PrivilegeONE") consolidated office space to best cross train and to leverage employee skill sets. However, the Company has made the strategic decision to exit the Technical Staffing market in Houston. Operations for this subdivision of eCalton will be wound down during the fourth quarter of this year. In October 2002, PrivilegeONE entered into an agreement with a large third party distributor, which is an exclusive distributor of Toyota vehicles and parts to 163 Toyota dealerships. Under the terms of the agreement, the distributor had agreed to market and promote the PrivilegeONE program to those 163 dealerships. The distributor has not performed under the contract. The Company is continuing to evaluate alternate avenues of revenue generation for the credit card loyalty business segment. The Company is now discussing the applicability of PrivilegeONE's patent-pending technology on a licensing basis to various corporations within and outside the automotive sector. In addition, management continues to utilize various marketing channels and is seeking to develop strategic partners to support the business. Access to, and maintenance of, credit card services, such as those provided in the Company's agreement with Fleet Credit Card Services, L.P. ("Fleet"), are essential to conduct the credit card loyalty business segment. Fleet has advised the Company that it wishes to terminate its agreement with the Company and withdraw as the issuer of the PrivilegeONE credit card. Although the Company does not believe that Fleet has the right to terminate the agreement and withdraw as issuer, the Company, with the cooperation of Fleet and Kessler Financial Services, a credit card and financial products broker, is endeavoring to identify a potential successor issuer to Fleet. The failure to enter into an agreement with a successor issuer, if the agreement with Fleet is terminated, would have a material adverse effect on the division's viability. The continuation of the Company is currently dependent upon management's ability to successfully develop the homebuilding business and to curtail the costs associated with the aforementioned non-performing businesses. The accompanying financial statements do not include any adjustments that may arise as a result of this uncertainty. 3. SIGNIFICANT ACCOUNTING POLICIES In addition to significant accounting policies reported in our most recent Annual Report on Form 10-K, the Company has the following additional accounting policies associated with the homebuilding business: INVENTORY Homebuilding work in process, spec and model homes and land held for development and sale are stated at the lower of cost (including direct construction costs, capitalized interest 8 and real estate taxes) or net realizable value. The capitalized costs, other than interest, will be included in cost of homebuilding sales in future statements of operations as homes are sold. Such amounts are immaterial in the accompanying financial statements since the inventory was primarily acquired on August 29, 2003. DEFERRED FINANCE CHARGES Deferred finance charges, included in other current assets, are associated with the Company's current revolving credit agreement (Note 6). Deferred finance charges are amortized over the term of the line of credit. Amortization will be reflected in future periods as a component of interest expense. 4. INVENTORY Inventory consists of the following as of August 31, 2003: Work in process $1,797,166 Undeveloped land 1,768,731 Spec homes and models 1,281,103 ---------------------- $4,847,000 ---------------------- 5. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES Accounts payable, accrued expenses and other liabilities consist of the following as of August 31, 2003 and November 30, 2002: 2003 2002 ---------------- ---------------- Accounts payable, trade $69,000 $121,000 Accrued expenses 279,000 287,000 Customer deposits 550,000 0 Accrued contingency reserves 0 710,000 ---------------- ---------------- $898,000 $1,118,000 ================ ================ As further discussed in Note 9 -Commitments and Contingent Liabilities, the Company settled the contingent matters to which the contingency reserve applied in June 2003. The Centex Homes and Tetreault/Van Fechtmann matters were settled for $650,000. The aggregate $650,000 paid by the Company to settle these matters was approximately $60,000 less than the amounts previously reserved for these matters for financial statement purposes. As a result, the settlements did not have an adverse effect on the financial condition or operating results of the Company. In addition to the amounts paid by the Company, the plaintiffs in these matters received payments from insurers in connection with the settlements. 6. NOTES PAYABLE On August 29, 2003, in connection with the purchase of the homebuilding property, the Company entered into a loan agreement with Harbor Federal Savings Bank. The loan agreement provides for $1.2 million of acquisition and construction financing and a $5 million line of credit. Interest on advances, which are secured 9 by a mortgage on the homebuilding production property, accrues at a rate equal to the prime rate plus one percent (1%). The loan agreement has a term of two years expiring in August 2005. 7. SHAREHOLDERS' EQUITY ACTIVITY On August 29, 2003, the Company sold 4,500,000 shares of its common stock to four of its officers at a price of $0.24 per share (the closing market price on the date the original agreement for sale was committed to) for an aggregate $1,080,000. The officers who participated in the private placement transaction and the number of shares purchased by each officer is set forth below:
Name Title Number of Shares Purchased ---------------------- --------------------------- ---------------------------- Anthony J. Caldarone Chairman and CEO 2,597,000 John G. Yates President 561,000 Maria F. Caldarone Executive Vice President 929,500 Laura A. Camisa Senior Vice President 412,500
8. SEGMENT REPORTING The Company operates in three identifiable business segments as specified below. The first business segment is comprised of eCalton Internet Business Development (an end-to-end solutions provider for Internet Business Development) and eCalton Technology Professionals (technology-based consulting and staffing services specializing in network design and management). The Company has made the strategic decision to exit the technical staffing market and the eCalton Technology Professionals subdivision will be wound down during the fourth quarter of fiscal 2003. The second business segment is that of PrivilegeONE, which developed the patent pending PrivilegeONE Loyalty Program that aggregates disparate entities under the PrivilegeONE umbrella to create customer loyalty and retention to the individual entity through the issuance of co-branded credit cards by a financial institution and membership cards. The third business segment is that of Corporate, Homebuilding and Consulting which included IGP, prior to its disposal in April 2002. The Company has returned to residential homebuilding in the quarter ended August 31, 2003. This segment recognized revenues from the purchaser of Calton Homes, Inc. in the amount of $108,000 for the nine months ended August 31, 2002 for homebuilding consulting services. The consulting agreement expired on December 31, 2001. No further revenues from this contract are expected. 10 Operating results, by industry segment, for the nine months ended August 31, 2003 and 2002 are as follows (in thousands):
Nine months ended August 31, 2003 ------------------------------------------------------------------- Corporate, Internet Credit Card Homebuilding Development Loyalty and Consulting Total and Staffing Business Services Company ------------------------------------------------------------------- Total revenues $ 801 $ 13 $ - $ 814 Total cost of revenues 511 3 - 514 Depreciation and amortization - - 36 36 Loss from operations (109) (473) (963) (1,545) Interest income - - 18 18 Net loss (148) (474) (908) (1,530) Total assets $ 155 $ 5 $ 6,623 $ 6,783 Nine months ended August 31, 2002 ------------------------------------------------------------------- Corporate, Internet Credit Card Homebuilding Development Loyalty and Consulting Total and Staffing Business Services Company ------------------------------------------------------------------- Total revenues $ 1,444 $ 17 $ 108 $ 1,569 Total cost of revenues 988 4 - 992 Depreciation and amortization 67 - 39 106 Loss from operations (709) (1,069) (1,145) (2,923) Interest income - - 108 108 Net loss (497) (1,069) (1,659) (3,225) Total assets $ 415 $ 56 $ 3,665 $ 4,136
9. COMMITMENTS AND CONTINGENT LIABILITIES CALTON HOMES In June 2003, the Company and the purchaser of Calton Homes settled the dispute that was the subject of the Demand for Arbitration served against the Company in July 2002. The settlement required that the purchaser fully release the Company from any and all past and future obligations, litigation or claims associated with the sale of Calton Homes, including the requirement that the Company establish a liquidating trust if it elects to liquidate or dissolve prior to December 31, 2003. All amounts held in the General Indemnification Fund established in connection with the sale of Calton Homes (approximately $33,000) were released to the Company. TETREAULT/VAN FECHTMANN In June 2003, the Company also settled the action instituted by S. Raymond Tetreault and Thomas E. Van Fechtmann against the Company in the United States District Court for the State of Rhode Island in April 2002. 11 The aggregate $650,000 paid by the Company to settle this matter, and the dispute with the purchase of Calton Homes described above, was approximately $60,000 less than the amounts previously reserved for these matters for financial statement purposes. As a result, the settlements did not have an adverse effect on the financial condition or operating results of the Company. In addition to the amounts paid by the Company, the plaintiffs in these matters received payments from insurers in connection with the settlements. CREDIT CARD PROCESSING AGREEMENT The Company and PrivilegeONE have entered into a credit card processing agreement (the "Agreement") with Fleet pursuant to which Fleet has agreed to issue and administer the PrivilegeONE credit cards. Under the Agreement, Fleet is required to remit a fee for each account established through the PrivilegeONE program plus a percentage of the revenue realized from finance charges. PrivilegeONE is required to pay Fleet a fee for the development of the credit card for each participating automotive dealer. The Agreement requires the Company to capitalize PrivilegeONE with not less than $500,000 during the original five-year term of the agreement and maintain a contingency reserve fund equal to three and one-half (3.5%) percent of all net revenues received by PrivilegeONE, up to a maximum of $1,500,000. The Credit Card Loyalty business segment continues to be in an early stage of development. Having established technological and market feasibility, management is currently accessing marketing channels and developing strategic partners to support the business. Access to, and maintenance of, credit card services such as those provided in the Agreement are essential to conduct the Credit Card Loyalty business segment. Fleet has advised the Company that it wishes to terminate its agreement with the Company and withdraw as the issuer of the PrivilegeONE credit card. Although the Company does not believe that Fleet has the right to terminate the agreement and withdraw as issuer, the Company, with the cooperation of Fleet and Kessler Financial Services, a credit card and financial products broker, is endeavoring to identify a potential successor issuer to Fleet. The failure to enter into an agreement with a successor issuer, if the agreement with Fleet is terminated, would have a material adverse effect on the division's viability. LITIGATION SETTLEMENTS The Company received $25,000 in settlements for the quarter ended August 31, 2003 with no similar receipts or payments in the prior year's same quarter. The Company paid $60,000 in litigation settlements and received $47,000 in proceeds from settlements for the nine months ended August 31, 2003. 10. DISPOSAL OF INNOVATION GROWTH PARTNERS On April 23, 2002, the Company disposed of its 51% interest in IGP as part of its overall plans to curtail expenditures and preserve cash reserves. The disposal of IGP was treated as a discontinued operation and, accordingly, the financial results for all periods presented prior to the disposal reflect IGP as a discontinued operation. The transaction resulted in a loss of $541,000 that was recorded in the quarter ended May 31, 2002. Revenues and net loss included in discontinued operations for the nine months ended August 31, 2002 amounted to $4,500 and ($998,000), respectively. 12 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations for the Three and Nine Months ended August 31, 2003 and 2002 REVENUES: Consolidated revenues for the three months ended August 31, 2003 and 2002 were $188,000 and $441,000, respectively. Revenues for the nine months ended August 31, 2003 and 2002 were $814,000 and $1,569,000, respectively. The decline in revenues in 2003, for both the quarter and nine months, reflected reduced demand for technical staffing in the Houston market as a result of recent mergers and subsequent layoffs of talented professionals. Quarterly revenues from the Company's Internet Development and Staffing segment will decline further as a result of management's decision to exit the Houston-based staffing business in the fourth fiscal quarter of 2003. The decline in revenues for the nine months ended August 31, 2003 compared to the comparable period of the prior year is also attributable to the expiration of the consulting agreement with the purchaser of Calton Homes in December 2001. Management of the Company has placed significant emphasis on the evaluation of alternate avenues of revenue generation. On August 29, 2003, the Company completed the acquisition of 35 residential lots in the Riverside at the Island Club, a 121 home residential community being developed in Vero Beach, Florida for approximately $4.8 million. This acquisition marks the Company's return to the residential homebuilding business. Revenues associated with the Company's homebuilding operations are currently anticipated to outpace revenues from other business operations and are ultimately expected to constitute the most significant component of consolidated revenues. COST OF REVENUES: Cost of revenues consist of project personnel costs and expenses associated with the technical staffing and website design and implementation segment and credit card loyalty program direct expenses. Project personnel and expenses decreased to $104,000 for the quarter ended August 31, 2003 compared to $282,000 for the quarter ended August 31, 2002. Project personnel and expenses decreased to $514,000 for the nine months ended August 31, 2003 compared to $992,000 for the nine months ended August 31, 2002. The decrease in both the quarter and nine months results is primarily attributable to the lower levels of revenues generated in the technical staffing division due to reduced demand. Gross profits on revenues increased from 36% in the quarter ended August 31, 2002 to 45% in the quarter ended August 31, 2003. Quarterly cost of revenues from our Internet Development and Staffing segment will decline further as a result of management's decision to exit the Houtson-based staffing business in the fourth fiscal quarter of 2003. Gross profits on revenues remained at 37% in the nine months ended August 31, 2002 and in the nine months ended August 31, 2003. The increase in gross profits as a percentage of revenues reflects the Company's cost cutting efficiencies and the operations focusing on more profitable contracts. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative costs for the quarter ended August 31, 2003 were $576,000, compared to $958,000 for the quarter ended August 31, 2002. Selling, general and administrative costs for the nine months ended August 31, 2003 were $1,845,000, compared to $3,500,000 for the nine months ended August 31, 2002. The decrease is primarily attributable to significant downsizing of operations at both the PrivilegeONE and the eCalton subsidiaries, coupled with management's focused efforts to curtail administrative expenses. Specifically, these divisions have dramatically reduced occupancy costs and have experienced a reduction in staff compared to the quarter 13 and nine months ended August 31, 2002. Selling, general and administrative costs are currently expected to be stable through the end of fiscal year ended November 30, 2003. However, these expenses are currently projected to increase as the Company's homebuilding business progresses. OTHER (EXPENSE) INCOME: Interest income is principally derived from interest on depository accounts and money market type accounts. Interest income decreased from $28,000 during the quarter ended August 31, 2002 to $3,000 for the quarter ended August 31, 2003. Interest income decreased from $108,000 during the nine months ended August 31, 2002 to $18,000 for the nine months ended August 31, 2003. The decreases were a result of lower average deposited balances. Currently, cash is being used in operating activities and, accordingly, interest income is expected to decline during 2003. LITIGATION SETTLEMENTS: The Company paid $60,000 in litigation settlements for the nine months ended August 31, 2003 and received $43,000 in proceeds from the settlement of a previously written-off account and an insurance settlement. In December 2002, the Company settled the last matter in which cash was withheld in the Specific Indemnification Fund established in connection with the sale of Calton Homes, Inc. in December 1998 and then closed the Fund. IMPAIRMENT OF NOTE RECEIVABLE: The impairment of a note receivable in the amount of $750,000 had been incurred in the nine months ended August 31, 2002 without a similar charge in this year's nine months of operation. Management had performed an assessment of a note issued to the Company by Automated Information Management, Inc. ("AIM") and, based upon a review of AIM's operating results, believed that it may not be recoverable. INVESTMENT INCOME: During the quarter ended August 31, 2003, the Company received $18,000 from the sale of 20,000 shares of CorVu Corporation common stock. The Company had impaired its entire investment in CorVu stock in fiscal 2000. DISCONTINUED OPERATIONS: On April 23, 2002, the Company disposed of its 51% interest in Innovation Growth Partners, LLC ("IGP") as part of its overall plans to curtail expenditures and preserve cash reserves. The disposal of IGP was treated as a discontinued operation and, accordingly, the financial results for all periods presented prior to the disposal were restated to reflect IGP as a discontinued operation. The loss from the IGP operation during the nine months ended August 31, 2002 amounted to ($998,000). LIQUIDITY AND CAPITAL RESOURCES GENERAL As reflected in the financial statements, Calton has incurred losses from continuing operations of ($447,000) and ($1,530,000) during the three and nine months ended August 31, 2003. However, as of August 31, 2003, the Company had working capital of $1,545,000, which in combination with available borrowing capacity on the line of credit and anticipated cash flow from the homebuilding operations are projected to be sufficient to fund the current operating plan during the fiscal year ending on November 30, 2003. 14 The Company is reviewing alternate avenues of revenue generation for the credit card loyalty business segment. The Company is now offering PrivilegeONE's patent-pending technology on a licensing basis to various corporations within and outside the automotive sector. In addition, management continues to utilize various marketing channels and is seeking to develop strategic partners to support the business. Access to and maintenance of credit card services, such as those provided in the Fleet agreement, are essential to conduct the credit card loyalty business segment. Fleet has advised the Company that it wishes to terminate its agreement with the Company and withdraw as the issuer of the PrivilegeONE credit card. Although the Company does not believe that Fleet has the right to terminate the agreement and withdraw as issuer, the Company, with the cooperation of Fleet and Kessler Financial Services, a credit card and financial products broker, is endeavoring to identify a potential successor issuer to Fleet. The failure to enter into an agreement with a successor issuer, if the agreement with Fleet is terminated, would have a material adverse effect on the division's viability. The Company will continue to review potential business opportunities to enhance shareholder value within and outside current operating lines of business. On August 29, 2003, the Company completed the acquisition of 35 residential lots in the Riverside at The Island Club, a 121 home residential community being developed in Vero Beach, Florida for approximately $4.8 million. This acquisition marks the Company's return to the residential homebuilding business. As part of the transaction, the Company acquired a sales backlog of approximately $4.3 million, representing homes subject to contracts of sale with homebuyers. The Company has agreed to administer and supervise certain warranty work on homes previously delivered by Beazer Homes Corp., the seller, in the development prior to the transaction, but all of such warranty work, if any, remains the financial obligation of Beazer. The Company plans to complete the development of the Vero Beach project and pursue other opportunities in the homebuilding industry in Florida. The Company used approximately $1.3 million of working capital and borrowings of approximately $3.5 million under its $6.2 million loan agreement with Harbor Federal Savings Bank to fund the acquisition of the lots. The Company has made the strategic decision to exit the technical staffing market in Houston. This subdivision of eCalton will be wound down during the fourth quarter of fiscal 2003. Revenues from technical staffing services were $77,000 and $440,000 in the three and nine months ended August 31, 2003. Net losses from these activities were ($36,000) and ($149,000) during the three and nine months ended August 31, 2003. CASH FLOWS FROM OPERATING ACTIVITIES The Company used cash of $6,622,000 in its operating activities during the nine months ended August 31, 2003 compared to $3,404,000 during the same period of the prior year. The current year cash usages reflect the acquisition of assets (principally inventories) to launch the homebuilding business and the continuing losses of the technical staffing and credit card loyalty segments. CASH FLOWS FROM INVESTING ACTIVITIES The Company received cash of $88,000 in its investing activities during the nine months ended August 31, 2003 which was from the Specific Indemnification Fund established in 15 connection with the sale of Calton Homes in December 1998. In December 2002, the Company settled the last matter in which cash was withheld in the Specific Indemnification Fund and then closed the Fund. CASH FLOWS FROM FINANCING ACTIVITIES The Company received cash from a private placement offering to four of its officers who purchased an aggregate 4,500,000 shares of the Company's common stock at a price of $0.24 per share in August 2003. The total investment equaled $1,080,000. In addition, the Company entered into a loan agreement with Harbor Federal Savings Bank. The loan agreement provides for $1.2 million of acquisition and construction financing and a $5.0 million revolving line of credit. As of August 31, 2003, the Company received $3,529,000 of the available financing from the bank. During the nine months ended August 31, 2002, the Company repurchased 19,000 shares of its Common Stock for $12,000. There have been no repurchases during the nine months ended August 31, 2003. In addition, during the nine months ended August 31, 2002, the Company received $62,000 in connection with the issuance of shares of the Company's Common Stock from treasury under the Company's Employee Stock Purchase Plan. There was no similar occurrence in the nine months ended August 31, 2003. COMMITMENTS, GUARANTEES AND OFF BALANCE SHEET ITEMS CREDIT CARD PROCESSING AGREEMENT The Company and PrivilegeONE have entered into a credit card processing agreement with Fleet Credit Card Services, L.P. pursuant to which Fleet has agreed to issue and administer the PrivilegeONE credit cards. Under the agreement, Fleet is required to remit a fee for each account established through the PrivilegeONE program plus a percentage of the revenue realized from finance charges. PrivilegeONE is required to pay Fleet a fee for the development of the credit card for each participating automotive dealer. The agreement requires the Company to capitalize PrivilegeONE with not less than $500,000 during the original five-year term of the agreement and maintain a contingency reserve fund equal to three and one-half (3.5%) percent of all net revenues received by PrivilegeONE, up to a maximum of $1,500,000. The Credit Card Loyalty business segment is in an early stage of development. Having established technological and market feasibility, management is currently accessing marketing channels and developing strategic partners to support the business. Access to, and maintenance of, credit card services such as those provided in the Agreement are essential to conduct the Credit Card Loyalty business segment. Fleet has advised the Company that it wishes to terminate its agreement with the Company and withdraw as the issuer of the PrivilegeONE credit card. Although the Company does not believe that Fleet has the right to terminate the agreement and withdraw as issuer, the Company, with the cooperation of Fleet and Kessler Financial Services, a credit card and financial products broker, is endeavoring to identify a potential successor issuer to Fleet. The failure to enter into an agreement with a successor issuer, if the agreement with Fleet is terminated, would have a material adverse affect on the division's viability. 16 SENSITIVE ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes. Significant estimates include management's estimate of the carrying value of accounts receivable, homebuilding inventories and the establishment of reserves for contingencies. Actual results could differ from those estimates. The Company's critical accounting policies relating to certain of these items are described in the Company's Annual Report on Form 10-K for the year ended November 30, 2002. As of August 31, 2003, there have been certain material additions to our critical accounting policies that have been disclosed in the financial statements although there have been no changes in the application of existing accounting principles. ITEM 3. DISCLOSURE CONTROLS AND PROCEDURES As of the end of the period covered by this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chairman and Chief Executive Officer, along with the Company's Chief Financial Officer, who concluded that the Company's disclosure controls and procedures were effective as of the date of the evaluation. There were no significant changes in the Company's internal controls during the quarter ended August 31, 2003 that have materially affected, or are reasonably likely to have materially affected, the Company's internal controls subsequent to the date the Company carried out its evaluation. Disclosure controls and procedures are controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed in the Company reports filed or submitted under the Securities Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. 17 PART II: OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A) Exhibits 10.1 - Registration Rights Agreement 31.1 - Certification by Chief Executive Officer pursuant to Section 302 of Sarbanes- Oxley Act of 2002 31.2 - Certification by Chief Financial Officer pursuant to Section 302 of Sarbanes- Oxley Act of 2002 32.1 - Certification by Chief Executive Officer pursuant to Section 906 of Sarbanes- Oxley Act of 2002 32.2 - Certification by Chief Financial Officer pursuant to Section 906 of Sarbanes- Oxley Act of 2002 B) Reports on Form 8-K On July 14, 2003 the Company filed a report on Form 8-K to report that it had issued a news release which disclosed its financial results for the quarter and six months ended May 31, 2003. On September 11, 2003 the Company filed a report on Form 8-K to report that it had (a) completed the acquisition of 35 residential lots in the Riverside at the Island Club, a 121-home residential community being developed in Vero Beach, Florida for approximately $4.8 million, (b) entered into a loan agreement with Harbor Federal Savings Bank and (c) completed a private offering of 4,500,000 shares of common stock. 18 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Calton, Inc. ------------------------------------------------ (Registrant) By: /s/ Thomas C. Corley ------------------------------------------------ Thomas C. Corley Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Date: October 14, 2003 19 EX-10.1 3 tex10_1-30512.txt EX-10.1 REGISTRATION RIGHTS AGREEMENT August 29, 2003 To: Anthony J. Caldarone John G. Yates Maria F. Caldarone Laura A. Camisa Ladies and Gentlemen: This will confirm that in consideration of your agreement on the date hereof to purchase an aggregate of Four Million Five Hundred Thousand (4,500,000) shares (the "Shares") of Common Stock, $.05 par value per share (the "Common Stock"), of Calton, Inc., a New Jersey corporation (the "Company"), pursuant to the Stock Purchase Agreement dated of June 26, 2003, as amended through the date hereof (the "Purchase Agreement") between the Company and you, as purchasers (the "Purchasers"), and as an inducement to the Purchasers to consummate the transactions contemplated by the Purchase Agreement, the Company covenants and agrees with each of the Purchasers as follows: 1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings: "COMMISSION" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "REGISTRATION EXPENSES" shall mean the expenses so described in Section 8. "RESTRICTED STOCK" shall mean the Shares, excluding Shares which (a) have been registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with the registration statement covering them, (b) are eligible for sale without restrictions pursuant to Rule 144(k) under the Securities Act or (c) have been acquired by any person or entity which, by virtue of Section 13(a) hereof, are not entitled to the benefits of and rights conferred by this Agreement. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "SELLING EXPENSES" shall mean the expenses so described in Section 8. 2. RESTRICTIVE LEGEND. Each certificate representing the Shares shall, except as otherwise provided in this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend substantially in the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE." A certificate shall not bear such legend if in the written opinion of counsel satisfactory to the Company the securities represented thereby may be publicly sold without registration under the Securities Act and any applicable state securities laws. 3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any Shares (other than under the circumstances described in Sections 4, 5 or 6), the holder thereof shall give written notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by a written opinion of counsel satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act and any applicable state securities laws, whereupon the holder of such stock shall be entitled to transfer such stock in accordance with the terms of its notice. Each certificate for Shares transferred as above provided shall bear the legend set forth in Section 2, except that such certificate shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. The restrictions provided for in this Section 3 shall not apply to securities which are not required to bear the legend prescribed by Section 2 in accordance with the provisions of that Section. 4. DEMAND REGISTRATION. (a) At any time after the issuance of the Shares, the holders of Restricted Stock constituting at least sixty-six and two-thirds percent (66 2/3%) of the total shares of Restricted Stock then outstanding may request the Company to register under the Securities Act not less than twenty-five percent (25%) of the shares of Restricted Stock held by such requesting holder or holders for sale in the manner specified in such notice. Notwithstanding anything to the contrary contained herein, no request may be made under this Section 4 within one hundred eighty (180) days after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering in which the holders of Restricted Stock shall have been entitled to join pursuant to Sections 5 or 6 and in which there shall have been effectively registered all shares of Restricted Stock as to which registration shall have been requested. 2 (b) Following receipt of any notice under this Section 4, the Company shall immediately notify all holders of Restricted Stock from whom notice has not been received and shall use its best efforts to register under the Securities Act, for public sale in accordance with the method of disposition specified in such notice from requesting holders, the number of shares of Restricted Stock specified in such notice (and in all notices received by the Company from other holders within thirty (30) days after the giving of such notice by the Company). If such method of disposition shall be an underwritten public offering, the holders of a majority of the shares of Restricted Stock to be sold in such offering may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing sentence, if the Company elects to include shares of Common Stock in such offering pursuant to Section 4(d) hereof such that the number of shares requested for inclusion by the Company (prior to any cut back by an underwriter) is equal to or greater than the number of shares of included Restricted Stock pursuant to this Section 4, then the Company may, in its sole discretion, designate the managing underwriter of such offering. The Company shall be obligated to register Restricted Stock pursuant to this Section 4 on two (2) occasions only, PROVIDED, HOWEVER, that such obligation shall be deemed satisfied only when a registration statement covering all shares of Restricted Stock specified in notices received as aforesaid, for sale in accordance with the method of disposition specified by the requesting holders, shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto. (c) Notwithstanding the foregoing, the Company shall not be obligated to effect any demand registration: (i) unless such registration would have a net aggregate offering price exceeding $500,000; or (ii) if such demand is made within 12 months of a previous demand registration. In addition, if the President or Chief Executive Officer of the Company executes a certificate giving notice of the Company's intention to file a registration statement or stating that in the good faith judgment of the Board of Directors of the Company the offering would be detrimental to the Company or its shareholders, the Company may delay such request one or more times (but only once in any 12 month period) for a period not to exceed 180 days after receipt of the request pursuant to Section 4(a) above. (d) The Company shall be entitled to include in any registration statement referred to in this Section 4, for sale in accordance with the method of disposition specified by the requesting holders, shares of Common Stock to be sold by the Company for its own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Stock to be sold. In such event, the number of shares of Common Stock to be registered on behalf of the Company, if any, shall be computed as set forth in Section 4(e) below. (e) Whenever a registration requested pursuant to this Section 4 is for an underwritten public offering, only shares of Common Stock which are to be included in the 3 underwriting may be included in the registration. Notwithstanding the provisions of Sections 4(b) and 4(c), if the underwriter determines that marketing factors require a limitation of the total number of shares of Common Stock to be underwritten or a limitation of the total number of shares of Common Stock to be sold by the Company, then the number of shares to be included in the registration and the underwriting shall first be allocated among all holders who indicated to the Company their decision to distribute any of their Restricted Stock through such underwriting, in proportion, as nearly as practicable, to the respective number of shares of Restricted Stock requested for inclusion in the registration by such holders , then the remainder, if any, to the Company. No stock excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. If the Company determines not to participate in any such underwriting, it may elect to withdraw therefrom by written notice, within five (5) days of notice to the Company of such underwriter's marketing limitation, to the holders of Restricted Stock and the underwriter. The securities so withdrawn from such underwriting shall also be withdrawn from such registration. 5. PIGGYBACK REGISTRATION. If the Company, at any time (other than pursuant to Section 4 or Section 6) proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or their respective successors or another form not available for registering the Restricted Stock for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Stock of its intention so to do. Upon the written request of any such holder, received by the Company within fifteen (15) days after the giving of any such notice by the Company, to register any of its Restricted Stock (which request shall state the intended method of disposition thereof), the Company will use its best efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Restricted Stock so registered. In the event that any registration pursuant to this Section 5 shall be, in whole or in part, an underwritten public offering of Common Stock, the number of shares of Restricted Stock to be included in such an underwriting may be reduced (pro rata among the requesting holders of Restricted Stock as well as requesting holders of any other registrable securities of the Company with piggyback registration rights based upon the number of shares of Restricted Stock and such other securities requested for inclusion by such holders) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 5 without thereby incurring any liability to the holders of Restricted Stock. 6. REGISTRATION ON FORM S-3. If at any time (i) a holder or holders of Shares or Restricted Stock request that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or any portion of the shares of Restricted Stock held by such requesting holder or holders, the reasonably anticipated aggregate price to the public of which would exceed $500,000, and (ii) the Company is a registrant 4 entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of shares of Restricted Stock specified in such notice. Whenever the Company is required by this Section 6 to use its best efforts to effect the registration of Restricted Stock, each of the procedures and requirements of Section 4 (including but not limited to the requirement that the Company notify all holders of Restricted Stock from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration, PROVIDED, HOWEVER, that the number of registrations on Form S-3 which may be requested and obtained under this Section 6 shall be limited to three (3). Notwithstanding anything to the contrary contained herein, no request may be made under this Section 6 within one hundred eighty (180) days after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering in which the holders of Restricted Stock shall have been entitled to join pursuant to Sections 4 or 5 and in which there shall have been effectively registered all shares of Restricted Stock as to which registration shall have been requested. Notwithstanding the foregoing, the Company shall not be obligated to effect any S-3 registration: (i) unless such request would have a net aggregate offering price exceeding $500,000; or (ii) if such request is made within 12 months of a previous S-3 registration. In addition, if the President or Chief Executive Officer of the Company executes a certificate giving notice of the Company's intention to file a registration statement or stating that in the good faith judgment of the Board of Directors of the Company the offering would be detrimental to the Company or its shareholders, the Company may delay such request one or more times (but only once in any 12 month period) for a period not to exceed 180 days after receipt of the request pursuant to this Section 6. 7. REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions of Sections 4, 5 or 6 to use its best efforts to effect the registration of any shares of Restricted Stock under the Securities Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided); (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such registration statement in accordance with the sellers' intended method of disposition set forth in such registration statement for such period; (c) furnish to each seller of Restricted Stock and to each underwriter such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such registration statement; 5 (d) use its best efforts to register or qualify the Restricted Stock covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in the case of an underwritten public offering, the managing underwriter, reasonably shall request, PROVIDED, HOWEVER, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction; (e) use its best efforts to list the Restricted Stock covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; (f) immediately notify each seller of Restricted Stock and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (g) if the offering is underwritten and at the request of any seller of Restricted Stock, use its best efforts to furnish on the date that Restricted Stock is delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller, stating that such registration statement has become effective under the Securities Act and that (A) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements contained therein) and (C) to such other effects as reasonably may be requested by counsel for the underwriters or by such seller or its counsel and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters and to such seller, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request; (h) make available for inspection by each seller of Restricted Stock, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, all 6 financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (i) make available to each seller of Restricted Stock, as soon as reasonably practicable, an earnings statement covering a period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first month after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; (j) furnish to each seller of Restricted Stock copies of all documents filed with the Commission and all correspondence between the Company and the Commission with respect to a registration in accordance with Sections 4, 5 or 6; and (k) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission. For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of distribution of Restricted Stock in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Restricted Stock in any other registration shall be deemed to extend until the earlier of the sale of all Restricted Stock covered thereby and thirty (30) days after the effective date thereof. In connection with each registration hereunder, the sellers of Restricted Stock will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws. In connection with each registration pursuant to Sections 4, 5 or 6 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature. Notwithstanding any other provisions of this Agreement, the Company's obligation to file a registration statement, or cause such registration statement to become and remain effective, shall be suspended for a period not to exceed ninety (90) days in any twelve (12) month period if there exists at the time material non-public information relating to the Company which, in the reasonable opinion of the Company, should not be disclosed or if at the time of any request to register Restricted Stock pursuant to Section 4 or 6, the Company is engaged or has fixed plans to engage within thirty (30) days of the time of the request in a registered public offering as to which holders of Restricted Stock may include such Restricted Stock pursuant to Section 5. The Company may not exercise its rights pursuant to this paragraph more than once in any 12-month period. 7 8. EXPENSES. All expenses incurred by the Company in complying with Sections 4, 5 and 6, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs of insurance but excluding any Selling Expenses, are called "Registration Expenses". All fees and disbursements of counsel for the Sellers of Restricted Stock and all underwriting discounts and selling commissions applicable to the sale of Restricted Stock are called "Selling Expenses". The Company will pay all Registration Expenses in connection with each registration statement under Sections 4, 5 or 6. All Selling Expenses in connection with each registration statement under Sections 4, 5 or 6 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree. Notwithstanding the foregoing, if a registration statement pursuant to Section 4 or 6 is withdrawn at the request of the shareholders requesting such registration (other than as a result of material adverse information concerning the business or financial condition of the Company which is made known to such shareholders after the date on which such registration was requested) and, in the case of a registration pursuant to Section 4, if such requesting shareholders elect not to have such registration counted as a registration requested under Section 4, the requesting shareholders shall pay the Registration Expenses of such registration pro rata in accordance with the number of shares of Restricted Stock owned by them included in such registration statement. 9. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, the Company will indemnify and hold harmless each seller of such Restricted Stock thereunder, each underwriter of such Restricted Stock thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that (i) the foregoing indemnity shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld) 8 and (ii) the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person in writing specifically for use in such registration statement or prospectus. (b) In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such Restricted Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus, and PROVIDED, FURTHER, HOWEVER, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the net proceeds received by such seller from the sale of Restricted Stock covered by such registration statement. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission to so notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 9 and shall only relieve it from any liability which it may have to such indemnified party under this 9 Section 9 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 9 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, PROVIDED, HOWEVER, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution in any case in which either (i) any holder of Restricted Stock exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 9 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 9 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 9; then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as shall be fair and equitable based upon the relative benefits received by each party, the parties relative knowledge and access to information concerning the matter and the opportunity to correct and prevent the untrue misstatement; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the public offering price of all such Restricted Stock offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 10. CHANGES IN COMMON STOCK. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, 10 appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock as so changed. 11. RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Stock to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (b) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to each holder of Restricted Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Stock without registration. 12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you as follows: (a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Charter or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company. (b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms (subject to equitable principles and to applicable bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforceability of creditors' rights generally and to applicable restrictions on the enforceability of indemnification and contribution). 13. MARKET STAND-OFF AGREEMENT. If requested in writing by the underwriters for the initial underwritten public offering of securities of the Company, each holder of Restricted Stock who is a party to this Agreement shall agree not to sell publicly any shares of Restricted Stock or any other shares of Common Stock (other than shares of Restricted Stock or other shares of Common Stock being registered in such offering), without the consent of such underwriters, for a period of not more than one hundred eighty (180) days 11 following the effective date of the registration statement relating to such offering; provided, however, that no Purchaser shall be subject to the restriction set forth in this Section 13 unless all executive officers and directors are subject to a similar restriction. 14. TERMINATION OF RIGHTS. Except as otherwise provided herein, all rights and obligations under this Agreement shall terminate upon the earliest of : (a) with respect to a particular holder of Restricted Stock, whenever such holder is eligible to sell all of its restricted stock under Rule 144 of the Securities Act or otherwise during any ninety (90) day period. 15. BENEFITS OF AGREEMENT. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of the Restricted Stock), whether so expressed or not, PROVIDED, HOWEVER, that registration rights conferred herein on the holders of Restricted Stock shall only inure to the benefit of a transferee of Restricted Stock if (i) such transfer is effected in accordance with all applicable securities laws, (ii) written notice of the transfer is promptly given to the Company and (iii) such transferee agrees in writing to be bound by all of the terms and conditions of this Agreement. 16. MISCELLANEOUS. (a) NOTICES. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by telecopier or telex, addressed as follows: if to the Company or any other party hereto, at the address of such party set forth on the signature page of this Agreement; if to any subsequent holder of Restricted Stock, to it at such address as may have been furnished to the Company in writing by such holder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Restricted Stock) or to the holders of Restricted Stock (in the case of the Company) in accordance with the provisions of this paragraph. (b) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey. (c) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the holders of at least two-thirds of the outstanding shares of Restricted Stock. 12 (d) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (e) SEVERABILITY If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. (f) CAPTIONS. The captions herein are inserted for convenience only and shall not define, limit, extend or describe the scope of the Agreement or affect the construction hereof. Please indicate your acceptance of the foregoing by signing and returning the enclosed counterpart of this letter, whereupon this Agreement shall be a binding agreement between the Company and you. Very truly yours, CALTON, INC. By: /s/ Thomas C. Corley -------------------- Name: Thomas C. Corley Title: Chief Financial Officer Calton, Inc. 43 W. Front Street, Suite 15 Red Bank, NJ 07701 Fax: (732) 212-1290 PURCHASERS: /s/ Anthony J. Caldarone ------------------------ Anthony J. Caldarone Calton, Inc. 2013 Indian River Boulevard Vero Beach, FL 32960 Fax: (772) 794-2828 /s/ John G. Yates ----------------- John G. Yates Calton, Inc. 2013 Indian River Boulevard Vero Beach, FL 32960 Fax: (772) 794-2828 13 /s/ Maria F. Caldarone ---------------------- Maria F. Caldarone Calton, Inc. 2013 Indian River Boulevard Vero Beach, FL 32960 Fax: (772) 794-2828 /s/ Laura A. Camisa ------------------- Laura A. Camisa Calton, Inc. 2013 Indian River Boulevard Vero Beach, FL 32960 Fax: (772) 794-2828 14 EX-31.1 4 tex31_1-30512.txt EX-31.1 EXHIBIT 31.1 CERTIFICATION I, Anthony J. Caldarone, certify that: 1. I have reviewed this quarterly report on Form 10-QSB for the quarterly period ended August 31, 2003 of Calton, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such internal control over financial reporting to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting. 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: October 14, 2003 /s/Anthony J. Caldarone Anthony J. Caldarone Chairman and Chief Executive Officer EX-31.2 5 tex31_2-30512.txt EX-31.2 EXHIBIT 31.2 CERTIFICATION I, Thomas C. Corley, certify that: 1. I have reviewed this quarterly report on Form 10-QSB for the quarterly period ended August 31, 2003 of Calton, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such internal control over financial reporting to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting. 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: October 14, 2003 /s/Thomas C. Corley Thomas C. Corley Treasurer and Chief Financial Officer EX-32.1 6 tex32_1-30512.txt EX-32.1 Exhibit 32.1 CALTON, INC. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows: 1. Anthony J. Caldarone is the Chief Executive Officer of Calton, Inc. (the "Company"). 2. To the best of my knowledge: (A) The Company's Quarterly Report on Form 10-QSB for the quarterly period ended August 31, 2003 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (B) The information in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Dated: October 14, 2003 /s/ Anthony J. Caldarone ------------------------ Anthony J. Caldarone Chief Executive Officer EX-32.2 7 tex32_2-30512.txt EX-32.2 Exhibit 32.2 CALTON, INC. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows: 1. Thomas C. Corley is the Chief Financial Officer of Calton, Inc. (the "Company"). 2. To the best of my knowledge: (A) The Company's Quarterly Report on Form 10-QSB for the quarterly period ended August 31, 2003 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (B) The information in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. Dated: October 14, 2003 /s/ Thomas C. Corley -------------------- Thomas C. Corley Senior Vice President, Chief Financial Officer and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----