Receivership Hamilton County Indiana Superior Court No. 3 Cause Number 29D PL259. Actions Taken Since Last Report to Court Dated May 13, 2009

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1 C.P. Morgan Communities, L.P. C.P. Morgan Communities of Charlotte, LLC C.P. Morgan Communities of the Triad, LLC The C.P. Morgan Company, INC. C.P. Morgan Investment Co., INC. (The Morgan Entities ) Receivership Hamilton County Indiana Superior Court No. 3 Cause Number 29D PL259 Actions Taken Since Last Report to Court Dated May 13, 2009 June 15, 2009 LS Associates, LLC 1

2 Table of Contents Preface 3 Report Summary 4 Detailed Actions and Findings 5 Real Estate Home Owner Associations Employee Issues Joint Ventures and Lot Take Down Agreements Other Assets Performance and Maintenance Bonds Other Liabilities Corporate and Administrative Legal Revenue and Recovery Projections Exhibits 19 Receiver Cash Activity 2

3 Preface This report and its contents have been prepared by LS Associates, LLC ( LS or Receiver ) based on its operating experience since March 6, 2009 and with information and interviews from some of the former management and employees of the Morgan Entities. Additionally, LS has communicated with creditors, counsel, homeowners, homeowner associations, and many other interested parties to further obtain information. While LS believes the information and opinions in this report to be materially correct, LS has not independently verified information provided by outside sources. LS has sought to use reasonable care in compiling this report. However, it is not the policy of LS to make representations or warranties with respect to the material contained in the report, its accuracy, or its completeness. 3

4 Report Summary On March 6, 2009, LS Associates LLC ( LS or the Receiver ) was appointed as Receiver for the CP Morgan entities; including, C.P. Morgan Communities, L.P., C.P. Morgan Communities of Charlotte LLC, C.P. Morgan Communities of the Triad LLC, The C.P. Morgan Company, Inc., and C.P. Morgan Investment Co., Inc., in the Hamilton Superior Court Number 3. The cause number is 29D PL259. An Initial Report to Court was filed April 15, 2009, and the Second Report was filed May 13, Actions taken by Receiver since the submission of the Receiver s Second Report to the Court ( Second Report ) on May 13, 2009 are detailed further in this report. Basic actions include: - Continue to identify, secure, protect, and preserve the assets of the Morgan Entities - Continue to update and maintain revenue projections and budgets - Continue with marketing and sales of real estate assets - Continue to market and close on Finished Homes in Indiana and North Carolina - Negotiated contracts for the sale of all lots in North Carolina and received Court approval - Identify, communicate, and negotiate with multiple potential buyers of developed lots and raw land in Indiana - Continue to work with Homeowner Associations and homeowners, funding commitments and budgets in order to maintain communities and preserve the value of unsold properties - Negotiated agreement with Charles P. Morgan that allowed for the payment of prior employee obligations including salary, commissions, bonus, and expenses - Analyzed Lot Take Down Agreements and Joint Ventures related to land development in order to identify any possible refundable deposits or potential equity in agreements - Consolidated office equipment, furniture, and personal property and completed sale via multiple auctions - Negotiated and settled issue related to an Order of Attachment and Notices of Lis Pendens in North Carolina, thus resulting in the release of approximately $2,369,000 in escrowed funds - Began detailed analysis of recent trial balance in order to identify any additional possible asset with value - Continued to refine potential Creditor Listing and developed plan to issue claims bar procedures for creditors - Negotiated and settled several mechanic liens in North Carolina in order to preserve the ability to close on Finished homes and proceed with sale of lots - Contracted for temporary office space and successfully moved office, staff, files, and computer equipment to new facility - Continue to manage organizational changes as staff departs and as the situation dictates - Initiate communication with insurance companies regarding status of performance and maintenance bonds - Continue to consult with legal counsel in various jurisdictions and respond to legal actions - Continue to communicate with the Lenders and Lenders Counsel as well as with the secured lenders to the Morgan Entities. - Completed and filed motion to distribute 70% of proceeds related to the sale of assets in which the Lenders had a security interest - Maintain cash account for operational expenditures and continue as custodian for net sales proceeds account and earnest money accounts 4

5 Real Estate Detailed Actions and Findings May 13 through June 14, 2009 There are two primary categories of real estate for the Morgan Entities; 1) Finished Homes, and 2) Lots and Raw Ground. Finished Homes As of June 12, 2009, the receiver has closed on 43 completed and 2 incomplete homes that have generated $5,090,018 in net proceeds. This compares to 33 completed homes and $4,056,406 in net proceeds as of the date of the Second Report. As of June 12, 2009 there are negotiated and accepted offers on 12 additional homes which will generate approximately $1,611,379 in additional net proceeds, compared to 14 accepted offers and $1,498,893 in net proceeds as of the date of the Second Report. This reduces the Finished Homes remaining to be sold to 36 as of June 12, 2009 compared to a total of 44 as of the date of the Second Report. CP Morgan Daily Finished Homes Summary Estimated Proceeds After Closing 6/12/2009 Less: Equals: Offer For Beginning Closed Accepted Sale Charlotte Indianapolis Triad Totals Grand Offer For Total Closed Accepted Sale Charlotte $ 5,557,437 $ 3,045,530 $ 1,015,054 $1,496,854 Indianapolis 3,620, , ,251 2,381,375 Triad 1,763,802 1,166, , ,419 Totals $ 10,942,044 $ 5,090,018 $ 1,611,379 $4,240,647 The Offer Accepted amounts shown above are net of all projected closing costs. The For Sale amounts shown are at the projected sales price net of all projected closing costs. 5

6 Net proceeds from the sale of homes have been deposited into the Receivers Sale Proceeds account pending distribution to the Secured Lenders. With the Court s approval, the Receiver has recommended the distribution of 70% of the proceeds received on properties where the Secured Lenders have been determined to be the first lienholder. This is the first distribution to Secured Creditors and would total $4,285, Activity and Marketing Efforts by Market Indianapolis Of the 21 finished homes remaining to be sold, 12 of these are located in areas outside of Indianapolis. These locations include Shelbyville, Acton, Franklin, Monrovia and Lafayette. Charlotte, NC There are 12 finished homes left to sell in the Charlotte area. 7 of these homes are located in communities surrounding Charlotte. Triad, NC Of the 3 finished homes remaining to be sold in Triad, 2 are in good locations and 1 is located further out. One home has had a family squatting in it for approximately three months. Appropriate action has been taken to legally remove the family, but the court has continued the hearings. Once they are gone, there will be a fair amount of work required in order to clean up the house and prepare it for sale. Additionally, it will no longer be considered a new home, thus increasing the difficulty of the sales effort. 6

7 Lots and Raw Ground North and South Carolina Since the Second Report to the Court, the Receiver has received Court approval for a combination of 5 contracts that will sell all of the lots in North Carolina. The status is summarized as follows: C P Morgan Status of North and South Carolina Lots Expected Buyer # Lots Total Close Date Wolfe Construction(*) 25 $ 224,650 Closed Pilot Developers ,000 Closed Pyatt Builders 5 55,000 6/15/2009 Old Carolina 4 64,000 6/30/2009 Wade Jurney 351 2,930,850 6/30/2009 Total 403 $ 3,399,500 (*) Included in this combination are 25 lots used in the settlement of the Wolfe Construction litigation, thus releasing the funds held in escrow (see the discussion under Other Assets Lis Pendens later in this report). The values used for these lots in the settlement were based upon the highest offers received for these various lots from qualified buyers. Indiana Activity with bulk buyers for the lots and land located in the Indiana market has increased significantly since the Second Report to the Court. The Receiver has submitted motions requesting approval on three contracts that would generate approximately $275,500 for the sale of 26 lots, with expected close dates on or around June 30, The Receiver is actively negotiating with multiple qualified buyers for large bulk purchases of the remaining lots and undeveloped land in Indiana. These negotiations will likely result in the sale of between 60% - 100% of the remaining lots and land in Indiana. 7

8 Home Owner Associations As discussed in the Receiver s First and Second Reports, the Company continues to have commitments and responsibilities for certain Homeowner Associations ( HOA ) where control has yet to be turned over to the community. Actions have been taken in order to maintain curb appeal in these communities and thus preserve the value of remaining finished homes and lots the Receiver has left to sell. The Receiver met with the HOA management companies and reviewed all HOA budgets. Attempts have been made to minimize expenses while providing HOA services and amenities. These HOAs are being funded in the ordinary course of business in line with the current HOA budget and these expenses are included in the Receiver s projections. Additional subsidies that have been paid since the Second Report to the Court include Branches HOA - $10,000, Maple Run HOA - $2,000, Parks at Winding Ridge HOA - $3,500, and Sandlewood HOA - $2,900. 8

9 Employee Issues As noted in the Receiver s First and Second Reports, the employee s paychecks for their last two weeks of work prior to the Receiver s appointment were not funded by the company. In addition there are other potential claims due to employees related to the time prior to the Receiver s appointment. Charles P. Morgan, individually, has agreed to loan the Receiver $418,829 in order to settle some of the employee claims. The loan agreement was approved by the Court and funded by Mr. Morgan on June 11, As of June 15 th, the Receiver was in the process of distributing the proceeds of the loan to the former employees in accordance with the Court s Orders as summarized below: CP Morgan - Employee Claims Paid with Loan to Receiver June 12, 2009 Payroll $ 239,014 Commission 50,859 Bonus 54,581 Estimated Employer Tax on Above 34,445 Expense Reports Submitted 11,587 American Express Settlement Payment - EE Cards 18,370 Flexible Spending Account Claims - Estimate 2, K Employer Matching Contribution 7,972 Amounts paid with loan to Receiver from Charles P. Morgan $ 418,829 Since the 401-K Plan has been terminated, the $7,972 in Employer Matching Contribution is being distributed directly to the employees. The American Express claim listed above is an amount equal to 60% of the outstanding balance, as American Express has agreed to take this amount as full settlement of the balance outstanding. This settlement is expected to be funded on June 17, The $2,000 in Flexible Spending A/C proceeds are being processed per past business practices. 9

10 Joint Ventures and Lot Take Down Agreements CP Morgan was a partner in several Joint Ventures for land development. In addition the Company had entered into many lot take down agreements for commitments to purchase lots for a pre-set value, many requiring a large deposit in earnest money. These agreements and joint ventures have been reviewed for potential value and it has been determined there remained no value in buying additional lots as outlined in these contracts. The Receiver did discover several older land-related contracts where earnest money was still being held by escrow agents, and believes recovery of approximately $88,000 is possible. Actions have been initiated to recover these funds. Other Assets Vehicles The Receiver contracted with N.J. Gallivan, Inc. to auction the automobiles and recreational vehicles of the Company. The company owned 10 Nissan Xterra s, 1 Jeep Cherokee, and 4 recreational vehicles. The vehicles were sold in advertised public auctions. The net proceeds from the sale of the vehicles, after recovery and selling expenses, were $79,737 in May and an anticipated additional $ 10,350 in June. Construction Equipment The Receiver contracted with N.J. Gallivan, Inc. to auction construction related equipment that was stored at an off-site location. The equipment consisted of 13 ground heaters, 6 45 over-the-road trailers, 6 48 over-the-road trailers, and a large assortment of old ground blankets, erosion control logs, and steel plates. In general, the equipment was in poor condition. Most of the ground heaters needed repairs to function properly, the over-the-road trailers were used only for storage, and many miscellaneous items had to be disposed. An auction was held at the off-site location on May 19, The net proceeds from the sale of the equipment, after storage fees, recovery, selling expenses, and disposal costs were $25,006. Sales Office Modules At the time of the receivership, the Company had 9 sales office modules located in Indiana, 4 located in North Carolina, and 1 located in South Carolina. These sales office modules are mobile trailers that are on a frame with wheels, and which were set in place with finished sidewalks and landscaping leading to the entrances. Some of these modules are on lots owned by the Company, and some are on lots not owned by the Company. The modules located in Indiana were placed on top of the lots with stairs leading to the entrances. In North and South Carolina, dirt was removed from the lots in order to place the modules flush to the ground (with the trailer frame and wheels located below the ground surface). The modules vary in size from 40 x26 to 62 x28. 10

11 A tentative offer had been received by the Company for one module located in Indiana prior to the receivership. This offer was accepted by the Receiver on April 21, 2009 and the net proceeds from the sale of the module were $7,500. Another module in Indiana was located on a lot that the Company did not own. The owner of the lot made an offer to the Receiver for the module and some office furnishings inside the module. The Receiver accepted the offer on May 18, 2009 and the net proceeds from the sale of the module were $8,000. N.J. Gallivan, Inc. has the remaining sales office modules located in Indiana and North and South Carolina advertised for sale. Currently, there are offers pending for the sale of the remaining modules in Indiana. The one module in South Carolina and two of the four modules in North Carolina are being sold as a part of a larger offer for lots on which some modules are located. The remaining two modules located in North Carolina are on lots not owned by the Company and the resolution of these modules is pending. Furniture and Office Equipment The Receiver had some of the excess furniture and office equipment located in the Charlotte offices relocated to Indianapolis in order to be combined with excess office equipment including computers from the main leased office space in Indianapolis. The combined furniture and equipment was sold at an auction conducted by N.J. Gallivan Inc., on May 28, The items included in the auction were computers, phone systems, video equipment, electronics, printers, plotters, scanners, cell phones, PDA s, and furniture. The auction was well advertised by N.J. Gallivan, Inc., and was attended by over 200 potential buyers either in person or on-line. The net proceeds from the auction, after recovery and selling expenses, were $127,590 and have not been received as of the date of this report. As of the date of this report, a quantity of furniture remains in the Charlotte office. This furniture consists of office modules and partitions. The cost to remove and relocate these items to Indianapolis for the auction was deemed too expensive to make it financially worthwhile. Currently there is an offer pending for the bulk sale of the furniture in-place. The Receiver has contracted with Earl s Auction Co., to sell other various items including some furniture and office equipment removed from sales office modules and model homes, and excess office supplies removed from the main leased office space in Indianapolis. Earl s Auction Co. has had, and continues to hold auctions at various times for the sale of these items. Net proceeds related to these items are estimated to be $47,657. Other Personal Property and Equipment There is an unknown quantity of ground blankets and erosion control logs which remain in the various neighborhood communities where construction activity was occurring. The recovery and disposal of these items represents a potential liability to the Company. Arrangements have been made for the sale of these items. The sale requires the purchaser to remove the items from the 11

12 communities at their own expense. Proceeds from this sale are not certain, but they are not expected to exceed $10,000. Vendor Rebates The Receiver continues to identify and pursue collection efforts on any rebates due. Lis Pendens Triad, North Carolina As described in detail in the Second Report to the Court, Morgan was sued by Wolfe Construction, Inc. and they obtained an Order of Attachment and Notices of Lis Pendens which resulted in an Escrow Agreement whereby the proceeds of certain real estate sold in North Carolina were to be held by Wells Jenkins Lucas & Jenkins, LLC. Wolfe s claim amounted to $535,650. In order to settle this claim and release the monies held in escrow, the Receiver negotiated an arrangement whereby Wolfe would accept the following as settlement of their claim: Wolfe Construction, Inc. Settlement June 3, 2009 Value 25 Lots in North Carolina $ 224,650 Finished Home - Summit Pointe 2 116,000 Finished Home - Summit Pointe 4 90,000 Cash 105,000 Total $ 535,650 In addition to minimizing the amount of cash required to settle this claim, the above settlement allowed the Receiver to sell two finished homes and 25 lots. The escrow agent then released net proceeds of $2,369,311 to the Receiver on June 2, These escrow monies included $ 1,322,725 from properties sold prior to the appointment of the Receiver and $ 1,046,586 of proceeds from monies held related to property sold by the Receiver. A/R Other The Receiver is actively researching for all receivables due to the company, both on and off the balance sheet. The Receiver continues to identify and collect various utility deposits, refundable fees, monies held in escrow for services that have been provided, and other receivables. The Receiver has initiated a comprehensive Trial Balance Analysis in order to systematically review all accounts in detail. Escrow Amounts Receivable As discussed in the Second Report to the Court, as Finished Homes are closed in North Carolina, an escrow balance is established to cover any potential future liens related to work that was performed prior to Receivership. These escrow balances, currently held by the title companies, are scheduled to be released 120 days from the date the last work was potentially performed, therefore the Receiver 12

13 expects these funds to be released sometime in July, The amount currently held in escrow is approximately $200,000. Performance and Maintenance Bonds At the time the company went into receivership, there were $16,523,472 worth of bonds outstanding. There are approximately 375 identified bonds outstanding and they are summarized as follows: CP Morgan Bonds Outstanding As of March 6,2009 Indianapolis $ 12,083,828 Charlotte 2,328,760 Triad 292,980 Joint Venture 1,817,904 Total : $ 16,523,472 A detailed listing of the bond creditors has been included in the creditor listing filed with the Court. The six insurance companies who have issued these bonds are as follows: CP Morgan Bonds Outstanding by Issuer As of March 6,2009 Bond Safeguard Insurance Company $ 10,206,135 Fidelity and Deposit Company of Maryland 2,999,794 Lexon Insurance Company 2,435,145 Gulf Insurance Company 701,936 Frontier Insurance Company 160,360 Lyndon Property Insurance Company 20,102 $ 16,523,472 As noted in the Second Report to the court, CP Morgan Communities, LP and The CP Morgan Company, Inc., have entered into General Agreement of Indemnity with all of the aforementioned insurance companies. In short, the company had agreed to indemnify these insurance companies in the event the insurance companies should have to pay any amounts related to performance of work covered by the bonds. No new notices have been received since the second report to the Court. Research is being performed in order to determine the exposure related to these bonds. In many cases, much of the work has been completed; therefore the exposure is less than the total bond amount. 13

14 Other Liabilities The Receiver has attempted to identify amounts claimed by third parties, including job-related payables, non-job related payables, and former employees. A detailed Creditor Listing has been developed and filed with the Court and continues to be updated and refined. The most current summary of identified potential creditors is as follows: C P Morgan Potential Creditors and Interested Parties Estimated # Parties $ Claimed Job Related: Construction/Subcontractors $520,305 Utilities 196,249 Other 317,638 Total Job Related 1,248 1,034,193 Non-Job Related: Joint Venture 547,021 Leases 293,698 Insurance 142,364 HOA 80,190 Other 1,510,320 Total Non-Job Related 410 2,573,593 Employee Related Performance Bond Related (375 Bonds) , ,523,472 Secured Creditors: Principal 72,978,954 Estimated Interest 3,000,000 Fees unknown Total Secured Creditors Total 4 75,978,954 1,840 96,638,470 The Receiver, with assistance from legal counsel, has developed a process by which all known potential creditors will be notified and asked to file a specific claim. Once all claims have been received, the Receiver will reconcile these amounts with the books and records of the CP Morgan entities. 14

15 Mechanics Lien Settlements In accordance with the court order dated May 22, 2009, the Receiver has negotiated and funded several settlements related to mechanics liens on properties in Charlotte, North Carolina. Corporate and Administrative Office Space As of May 31, 2009, the Receiver exited the leased office space used by the Company as its main corporate office. All appropriate items were removed from the building. Excess items were sold at auctions. The remaining items were relocated to a new leased space located in Indianapolis. The new leased space consists of 2,500 sq ft and is leased through December 31, Items relocated to the new space include the Company s main computer system with all applicable software applications and data, accounting records necessary for the receivership, and documents necessary for the sale of houses, lots and raw land. Company records stemming primarily from activity prior to the receivership were maintained but were shipped to an off-site storage location under an agreement with Charles P. Morgan. Records not stored at the offsite location and not needed for the receivership were shredded. 401-K Plan The company s 401-K Plan has been terminated effective February 27, The plan administrator has sent communication to all plan participants informing them of the termination and explaining their options regarding their election to either have their single sum distribution paid to them or to an Eligible Retirement Plan in a Direct Rollover. Personnel The Receiver continues to employ former CP Morgan employees to assist with the sale of homes, lots and raw land, as well as to help recover and relocate assets, and to maintain accounting records and computer equipment/data. Since the Receiver has completed the relocation from the main leased office space in Indianapolis, and as homes, lots and raw land are sold, the amount of time required from these employees is gradually diminishing. While the number of employees currently utilized is 12, 5 of them are compensated on a commission basis. In addition, there are 6 other former employees that are occasionally used to meet specific needs. Insurance Insurance coverage continues to be maintained for workers compensation, property, casualty and general liability coverage on all property including homes, lots, raw ground, furniture, fixtures, and other assets under the control of the Receiver. 15

16 Legal The current status of the various pending legal matters is as follows: 1. Coleman Floor Company v. CP Morgan Communities of Charlotte, LLC, et al., action filed May 7, 2009 in York County, South Carolina, demanding approx. $12,000 for unpaid contractual services, plus damages, fees and costs. South Carolina counsel hired and extension of time obtained within which to respond to Complaint to July 17, Case remains pending. 2. Evergreen Landscaping & Maintenance, Inc. No action filed. $60,000+ in contractual amounts demanded. This matter recently settled for $40, Speedway Plumbing, Inc. v. CP Morgan Communities of Charlotte, LLC, action filed in Mecklenberg County, North Carolina, demanding approx. $13,000 for work and goods provided. This matter was settled June 15, 2009 for $3,000. The settlement documents have not been prepared nor executed as of the date of this Report. 4. Employee Liens Eleven former CP Morgan employees recorded Notices of Intention to Hold Employee s Lien with the Marion County Recorder on May 7, It is anticipated that, once payments have been made pursuant to the Court s June 1, 2009 Order Approving Loan Agreement, these liens will be canceled by the employee-claimants. 5. Wolfe Construction, Inc. v. CP Morgan Communities of the Triad, LLC. This matter was settled on May 21, 2009 via the sale of certain lots (as more fully described hereinabove). An Order dismissing further proceedings has been received in the NC litigation action. Notice has been received by the Arbitration association that the arbitration action has been dismissed. 6. Craven v. CP Morgan Communities, L.P. This matter remains pending as filed in Guilford County, North Carolina. There has been no action in this matter since CP Morgan s Answer was filed with the Court on April 19, Baire v. CP Morgan Communities, et al. Action filed in Mecklenburg County, North Carolina. In May, A Motion to Dismiss or Stay of action was filed by CP Morgan s North Carolina counsel. Communication is being made directly to Plaintiff by Charles Morgan s counsel to determine the appropriate amount, if any, which may be paid to Plaintiff pursuant to this Court s June 1, 2009 Order Approving Loan Agreement. 8. HSBC Bank, USA v. Meredith Schaub, CP Morgan Communities of Charlotte, LLC, et al. The real estate in this action has been foreclosed upon and has been advertised for sale at public auction which was held on June 1, CP Morgan was named in this action due solely to a 16

17 clerical error in the legal description of the original Deed. The Deed was reformed to designate the correct lot number. No judgment was entered against CP Morgan as a result of this foreclosure action. 9. Locke v. CP Morgan Communities, L.P. This case remains pending. There has been no activity by Plaintiff in this matter since January, Morgan s counsel has notified the Court and Plaintiff s counsel of the existence of the Receivership. 10. Olympus Media, LLC v. CP Morgan, Inc. The Court vacated the trial setting in this matter without resetting the trial date. No further action has been taken in this matter. 11. Salvatierra v. CP Morgan Co., Inc. Morgan s insurance defense counsel has filed on behalf of CP Morgan entities for summary judgment, and Plaintiff requested and obtained an extension of time within which to respond to CP Morgan s summary judgment Motion. Plaintiff s Motion to File Second Amended Complaint is set for hearing on August 5, JPMorgan Chase Bank v. Snyder and CP Morgan Communities CP Morgan was listed as a defendant creditor in this foreclosure action due to a judgment previously entered against Defendant Snyder. No action has been taken by CP Morgan due to the Judgment being deemed vacated after being discharged in previous bankruptcy action by Defendant Snyder. 13. City Wide Insulation of Madison, Inc. d/b/a Builders Insulation v. CP Morgan Communities of the Triad, LLC, et al First action filed June 5, 2009 in Forsyth County, North Carolina for payment of 6 mechanic s liens in the aggregate amount of approx. $6,000. North Carolina counsel will be hired and appropriate response to the Complaint will be filed. Second Action filed June 8, 2009 by same Plaintiff against CP Morgan Communities of the Triad, LLC, et al. in Guilford County, North Carolina for payment of mechanic s liens in the aggregate amount of $2,357. North Carolina counsel will be hired and appropriate response to the Complaint will be filed. 17

18 Revenue and Recovery Projections The Receiver prepared an initial projection for revenue, expenses and net recoveries and has updated the same with more current information and estimates as of June 12,2009. A summary of the projection is below: CP Morgan Projected Sources/Uses of Funds As of 6/12/09 Initial Projection 06/12 04/15 Delta Sales/Collections 1) Real Estate (gross) 27,994,747 26,633,780 1,360,967 2) Equipment, Vehicles, and Miscellaneous Assets 327, ,438 43,261 3) Collections of Pre-Receiver Escrow 256,491 97, ,991 4) Cash Trans. from oth. Bank Accts 31,666 31,666-5) Cash Returned from Bank Group 30,311 30,311-6) Receivable Collections (including officer A/R and Loans from C. Morgan) 418, ,829 7) Rebates & Refunds 160,126 46, ,257 8) Earnest Moneys Earned(not previously withdrawn from escrow account) 115, ,326 (39,675) 9) Other 81,862 60,558 21,304 10) Lis Pendens Proceeds(only for homes sold prior to Receivership) - see Notes below 1,528,726 1,757,849 (229,123) Total Proceeds 30,946,108 29,098,297 1,847,811 Items Paid at Closing 1) Liens to be Paid 346, , ,087 2) Warranty 37,833 38,670 (837) 3) Escrows for/pm't of non-lien Trades 90, ,524 (108,885) 4) HOA fees 13,160 17,108 (3,948) 5) Property Tax 207, ,806 (328,351) 6) Commissions 1,074,935 1,144,247 (69,312) 7) Closing Costs 988,464 1,097,019 (108,555) 8) Closing funds floating from one period to another - - 9) Lis Pendens (Wolfe Lawsuit Settlement) 430, ,000 (119,350) Net Recoveries 27,756,620 25,276,659 2,479,962 Operating Expenses 2,524,684 2,524,684 (0) Expenses to Improve/Protect Property & Convert Models (from sales offices to 323, ,439 (338,842) HOA Development Fees & Subsidies 259, ,886 (64,209) Funds to Disburse to Employees 418, ,828 Funds to Disburse to Secured Creditors/Others - 24,229,835 21,765,651 2,464,184 Note #1: Lis Pendens Settlement includes Receiver giving to Wolfe Construction 2 homes and 25 lots valued at a total of $430,650 Note #2: Lis Pendens Settlement does not include the release of $840, for homes sold post Receivership. 18

19 CP Morgan Receivership Cash Rollforward CP Morgan LS Associates LLC dba Receiver for CP Morgan Account Name Operating Operating Sale Proceeds Indy Earnest Charlotte Earnest Triad Earnest Employee Pymt Employee Security Total Cash BOP 03/06/09 1, ,266 Account Credits Net Sale Proceeds 5,208,555 5,208,555 Net Proceeds - Liquidation Other Assets 7, , ,555 Earnest Monies New Offers 4,750 7,550 1,500 13,800 Prior Earnest Monies Earned 110,000 1,322,725 Wolfe 1,432,725 Receipts of Funds Closing Pre Receiver 95,500 95,500 Utility Refunds 41,077 41,077 Vendor Refunds/ Miscellaneous Refunds and Rebates 326, ,780 Loan from Chuck Morgan 418, ,829 Total Deposits /Sales 7, ,412 6,531,280 4,750 7,550 1, ,829-7,655,822 Account Debits Pre-Receiver Debt Employee Related (30,311) (18,370) Am Ex Settlement (48,681) Operating Expenses Bank Service Charges (271) - (13) (174) (459) Commissions (23,144) (23,144) HOA Subsidies (30,576) (47,620) (78,196) Home Completion/Maintenance Expenses (7,262) (4,490) (11,752) Insurance Expenses (10,083) (62,660) (72,743) Landscaping Expenses (103,880) (19,596) (123,476) Lien Settlements - NC (88,000) (88,000) Payroll Taxes and Expenses (11,352) (323,601) (334,953) Refund Earnest Monies (1,506) (6,650) (8,156) Rent Expense (47,217) (47,217) Sales and Marketing Expenses (3,325) (5,558) (8,883) Taxes (126) (126) Travel /Employee Expense Reports (7,497) (7,497) Utilities, Telephone and Internet (16,718) (36,786) (53,504) Warranty Expense (2,725) (2,725) Miscellaneous (628) (1,120) (1,748) Professional Fees - Includes Retainers of $ 166,000 Receiver Fees (367,324) (367,324) Legal Fees (159,999) (159,999) Post Receiver Debits (214,591) (1,166,967) - (1,519) (6,650) (174) - - (1,389,902) Total Account Debits (214,591) (1,197,278) - (1,519) (6,650) (174) (18,370) - (1,438,582) Other Transfer Between Current Accounts 205, ,855 (1,040,713) 15,537 (37,865) (3,700) - 90,000 (0) Transfer Balances from Closed Accounts 36,635 66,620 5, ,583 Replenish from Chase - $ Taken prior to Receivership 30,311 30,311 Total Other 205, ,801 (1,040,713) 15,537 28,756 1,627-90, ,894 Cash EOP 06/15/ ,935 5,490,568 18,767 29,656 2, ,459 90,000 6,357,