<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  FORM 10-KSB/A
                                (AMENDMENT NO. 2)
                                   (MARK ONE)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                   For the fiscal year ended November 30, 2003

                                       or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                           Commission file no. 1-8846

                                  CALTON, INC.
           (Name of small business issuer as specified in its charter)

            NEW JERSEY                                      22-2433361
 (State or other jurisdiction of                         (I.R.S. Employer
  incorporation or organization)                      Identification Number)


       2013 INDIAN RIVER BOULEVARD
            VERO BEACH, FLORIDA                                 32960
(Addresses of principal executive offices)                    (Zip Code)

         Issuer's telephone number, including area code: (772) 794-1414
         Securities registered under Section 12(b) of the Exchange Act:


                                                      Name of each exchange
          Title of Class                               On Which Registered
          --------------                             ----------------------

           Common Stock
     $.05 par value per share                        American Stock Exchange

              Rights                                 American Stock Exchange

       Securities registered under Section 12(g) of the Exchange Act: None

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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 |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ____

Revenues for the fiscal year ended November 30, 2003: $3,133,000.

The aggregate market value (based upon the last sales price of the Issuer's
Common Stock reported by the American Stock Exchange) of voting shares and
non-voting equity held by non-affiliates of the registrant as of February 20,
2004 was $1,741,000.

As of February 20, 2004, 9,240,000 shares of Common Stock were outstanding.

Certain portions of the Company's Proxy Statement for the annual meeting of
shareholders are incorporated by reference into Part III hereof.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>


                                EXPLANATORY NOTE


This Amendment on Form 10-KSB/A amends and restates in its entirety the Annual
Report on Form 10-KSB for the fiscal year ended November 30, 2003 (the "2003
10-KSB") of Calton, Inc. (the "Company") as initially filed with the Securities
and Exchange Commission (the "SEC") on March 1, 2004.

This Amendment is being filed to reflect the restatement of the Company's
results for fiscal 2003, as discussed in Note 1.B. to the Company's consolidated
financial statements filed herewith. The Company has had discussions with the
accounting staff (the "Staff") of the SEC with respect to the recognition of
compensation expense related to the Company's sale of 4,500,000 shares of its
Common Stock to certain officers of the Company in August 2003. After the
Company's discussions with the Staff, and after the Company consulted with its
independent registered public accounting firm, the Company determined the need
to restate its financial statements for fiscal 2003 to record $720,000 of
compensation expense in connection with the sale of the shares.

This Amendment speaks as of the end of the Company's fiscal year ended November
30, 2003 as required by Form 10-KSB or as of the date of the filing of the
original 2003 10-KSB. Except for the restatement of certain historical financial
information as described above, it does not update any of the statements
contained in the original 2003 10-KSB. This Amendment contains forward-looking
statements that were made at the time the original 2003 10-KSB was filed on
March 1, 2004. It must be considered in light of any subsequent statements,
including forward looking statements, in any reports made by the Company
subsequent to the filing of the original 2003 10-KSB, including statements made
in filings on Form 8-K, the Company's Quarterly Reports on Form 10-QSB and the
Annual Report on Form 10-KSB for the fiscal year ended November 30, 2004.




--------------------------------------------------------------------------------

DISCLOSURE CONCERNING FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this Form
10-KSB/A, including in Part II, Item 6: "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the statements under
"Business" are, or may be deemed to be, "Forward-Looking Statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," and variations of such words and
similar phrases are intended to identify such forward-looking statements. Such
forward-looking statements involve assumptions, known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements contained in this Form 10-KSB/A. Such potential risks
and uncertainties, include without limitation, continued operating losses and
their effects on liquidity, the Company's ability to raise capital, matters
related to national and local economic conditions, including conditions in the
residential homebuilding industry, the effect of governmental regulation on the
Company, commercial acceptance of the Company's co-branded customer loyalty
credit card program, the competitive environment in which the Company operates,
the Company's ability to acquire property for development, changes in interest
rates, and other risk factors detailed herein and in other of the Company's
Securities and Exchange Commission filings. The forward-looking statements are
made of the date of this Form 10-KSB/A and the Company assumes no obligation to
update the forward-looking statements or to update the reasons actual results
could differ from those projected in such forward-looking statements.

--------------------------------------------------------------------------------

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                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS

     (A)  BUSINESS DEVELOPMENT

          Calton, Inc. (the "Company" or "Calton") was incorporated in 1981 and
          is a New Jersey corporation.

          During the past three fiscal years, the Company's primary business
          activities have consisted of (i) providing Internet business solutions
          and technical staffing services, (ii) developing a loyalty and
          co-branded credit card program and (iii) providing management and
          consulting services to entrepreneurial and development-stage companies
          through Innovation Growth Partners, LLC ("IGP"), a 51% owned
          subsidiary. The Company sold its interest in IGP in April 2002 and, in
          the fourth quarter of fiscal 2003, wound down its technical staffing
          business. In August 2003, the Company decided to capitalize on
          existing management's experience in the residential homebuilding
          industry and acquired 35 residential lots in a 121 home residential
          community being developed in Vero Beach, Florida. The Company plans to
          complete the development of the Vero Beach project and pursue other
          opportunities in the homebuilding industry in Florida.

          Calton maintains its corporate offices at 2013 Indian River Boulevard,
          Vero Beach, Florida 32960 and its telephone number is (772) 794-1414.

     (B)  BUSINESS OF ISSUER

          GENERAL
          The Company's business activities are primarily focused on (i)
          homebuilding through Homes by Calton, LLC ("Homes by Calton") (ii) the
          development of a loyalty and co-branded credit card program through
          PrivilegeONE Networks, LLC ("PrivilegeONE") and (iii) providing
          Internet business solutions through eCalton.com, Inc. ("eCalton").

          HOMES BY CALTON, LLC
          Homes by Calton, a Florida limited liability company, wholly owned by
          the Company, was formed for the express purpose of capitalizing on
          existing management's experience in the residential homebuilding
          marketplace. The Company's focus is on homebuilding developments
          primarily located in Indian River County, Florida.

          Homes by Calton's initial homebuilding endeavor involved the
          acquisition on August 29, 2003 of 35 residential lots in the Riverside
          at The Island Club, a 121 home residential community being developed
          in Vero Beach, Florida.

          Homes by Calton intends to expand its homebuilding operations
          throughout the Indian River County market area. Currently, management
          is assessing and negotiating with various landowners, brokers and
          agents to expand its operations and to create a more diversified
          product offering. However, there can be no assurances that
          transactions can be entered into on terms reasonably satisfactory to
          management.

          RIVERSIDE AT THE ISLAND CLUB
          At the Riverside at The Island Club community, Homes by Calton offers
          single-family detached homes at prices, excluding customized options,
          which ranged from $395,000 to $491,000 as of November 30, 2003. Home
          by Calton offers four different house floor plans at the community,
          with the size of homes ranging from 2,633 to 3,411 square feet. A wide
          selection of options is available to purchasers for additional
          charges. Major options include built-in entertainment centers, bonus
          rooms and spas. On average, Homes by Calton's homebuyers added
          approximately 12% or $48,000 per home, in options and lot premiums to
          the base price of homes

                                       3
<PAGE>

          delivered from the community in fiscal 2003. At November 30, 2003, 11
          homes were under contract, representing $5,370,000 of sales backlog.

          SALES AND MARKETING
          Homes at the Riverside at The Island Club community are marketed
          primarily to upper-income buyers, emphasizing high-quality
          construction and customer satisfaction. Homes by Calton maintains a
          sales office at this community that is staffed by Homes by Calton
          sales personnel. These personnel are compensated on a commission-only
          basis. Local realtors also introduce customers to Homes by Calton.
          Homes by Calton advertises in newspapers and other local and regional
          publications. In addition, potential homebuyers can obtain detailed
          information regarding Riverside at The Island Club by visiting Homes
          by Calton's website, www.homesbycalton.com. Homes by Calton's homes
          are sold under a limited warranty as to workmanship and materials.

          CONSTRUCTION
          Homes by Calton acts as the general contractor in the construction of
          residences at the Riverside at The Island Club community. Homes by
          Calton employees provide purchasing and quality assurance for, and
          construction management of, the homes it builds, while the material
          and labor components of its homes are provided by subcontractors.
          Homes by Calton generally contracts for most of its materials and
          labor at fixed prices during the construction period of the home. This
          process allows Homes by Calton to mitigate the risks associated with
          increases in building materials and labor costs between the time
          construction begins and the time the home closes. Homes by Calton
          complies with local and state building codes, including Florida's
          stringent hurricane and energy efficiency regulations. Depending upon
          the size and complexity of a home's design, Homes by Calton
          construction time generally ranges from about 120 to 300 calendar
          days.

          COMPETITION
          The homebuilding business is highly competitive and fragmented. Home
          by Calton competes with numerous homebuilders of varying sizes,
          ranging from local to national in scope, some of which have greater
          sales and financial resources than Homes by Calton has. Sales of
          existing homes also provide competition. Homes by Calton competes
          primarily on the basis of price, location, design, quality and
          service.

          REGULATORY AND ENVIRONMENTAL MATTERS
          Homes by Calton's operations are subject to Federal, state and local
          laws and regulations. In particular, development of property in
          Florida is subject to comprehensive Federal and state environmental
          legislation. This regulatory framework, in general, encompasses areas
          like traffic considerations, availability of municipal services, use
          of nature resources, impact of growth, utility services, conformity
          with local and regional plans, together with a number of other safety
          and health regulations. Permits and approvals mandated by regulation
          for development of any magnitude are often numerous, significantly
          time-consuming and onerous to obtain, and not guaranteed. Such
          permits, once expired, may or may not be renewed and development for
          which the permit is required may not be completed if such renewal is
          not granted. These requirements have a direct bearing on Homes by
          Calton's ability to further develop communities in Florida. Although
          the Company believes that Homes by Calton's operations are in full
          compliance in all material respects with applicable Federal, state and
          local requirements, Homes by Calton's growth and development
          opportunities in Florida may be limited and more costly as a result of
          legislative, regulatory or municipal requirements.

          Homes by Calton's operating costs may also be affected by the cost of
          complying with existing or future environmental laws, ordinances and
          regulations, which require a current or previous owner or operator of
          real property to bear the costs of removal or remediation of hazardous
          or toxic substances on, under or in the property.

          PRIVILEGEONE NETWORKS, LLC
          PrivilegeONE was formed to develop and implement the PrivilegeONE
          Loyalty Program. The patent pending Program aggregates disparate
          entities under the PrivilegeONE umbrella to create customer loyalty
          and retention through the issuance of co-branded credit card and
          membership cards. PrivilegeONE is initially focusing on the

                                       4
<PAGE>

          retail automobile industry. Under the terms of this program, customers
          of participating automobile dealers are offered the opportunity to
          apply for the PrivilegeONE VISA credit card. Through PrivilegeONE's
          unique credit card acquisition system technology, qualifying customers
          are granted instant credit approval. By using the PrivilegeONE card,
          customers earn rebate dollars, which can be used when the customer
          purchases or leases a new or used vehicle. In addition, participating
          dealers provide up to a ten percent discount on parts and service when
          the PrivilegeONE card is used at the dealership. To introduce the
          program, PrivilegeONE has shifted its focus toward large third party
          distribution channels with existing dealer relationships in the United
          States and Canada. The Company believes that if the program is proven
          successful in the automotive industry, it will have applicability to
          many other industries that may be the focus of the next generation of
          products.

          AGREEMENT WITH FLEET
          In May 2001, the Company and PrivilegeONE entered into a credit card
          processing agreement with Fleet pursuant to which Fleet agreed to
          issue the PrivilegeONE credit cards. Under the agreement, Fleet was
          required to pay PrivilegeONE a fee for each account established
          through the PrivilegeONE program and a percentage of the revenue
          realized from finance charges. However, in March 2003 Fleet informed
          PrivilegeONE of its desire to exit the credit card program, but
          advised PrivilegeONE that it would assist it in finding a new issuer.
          PrivilegeONE is currently seeking a new issuer for the program.

          AGREEMENT WITH LARGE THIRD PARTY DISTRIBUTOR
          In October 2002, PrivilegeONE, as part of its shift in strategy toward
          third party distribution channels, entered into its first agreement
          with a large third party distributor, which is an exclusive
          distributor of Toyota vehicles to 163 Toyota dealerships. Under the
          terms of the agreement with this third party, the distributor has
          agreed to market and promote the PrivilegeONE program at these 163
          dealerships. For each credit card account established at one of these
          dealerships, PrivilegeONE will be required to pay the distributor a
          new account fee. The implementation of the PrivilegeONE program
          through this distribution channel has been delayed as a result of
          factors outside of the Company's control.

          INSTALLED DEALERSHIPS
          The PrivilegeONE co-branded loyalty and credit card program was
          initially launched at 29 retail automotive dealerships in New York,
          New Jersey and New Hampshire. Approximately 2,200 cards were initially
          issued. No cards have been issued since March 2003 when Fleet informed
          PrivilegeONE of its desire to exit the program.

          SALES AND MARKETING
          PrivilegeONE has shifted its strategy from an internal sales force to
          large third party distribution networks, such as the Toyota
          arrangement described above. PrivilegeONE, through eCalton's technical
          and marketing development teams, has developed various Internet sites
          and support services which will enable PrivilegeONE to link certain
          large third party distributor consumer websites to PrivilegeONE's
          patent pending online credit card application system ("CCAS").

          COMPETITION
          Although the Company believes that PrivilegeONE's distribution channel
          is unique, the credit card industry is characterized by intense
          competition. PrivilegeONE will compete with numerous co-branded credit
          card programs, including reward-based programs. Most of these programs
          are sponsored by entities with greater resources and name recognition
          than PrivilegeONE. As a result, PrivilegeONE's competitors may be
          better positioned to react in a changing marketplace.

          PATENTS & TRADEMARKS
          PrivilegeONE has applied to the United States Patent and Trademark
          Office for a patent for CCAS, its online credit card acquisition
          system. No assurance can be given that the patent will be issued.
          However, on September 25, 2003, the U.S. Patent Office issued
          PrivilegeONE a Patent Application Publication Number, US 2003/0182247
          A1. Failure to obtain patent protection for CCAS, which the Company
          believes gives PrivilegeONE an advantage over potential competitors,
          could result in other parties duplicating the system.

                                       5
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          PrivilegeONE has received trademark registrations for "PrivilegeONE"
          and the PrivilegeONE stylized logo.

          ECALTON.COM
          eCalton provides innovative web and information technologies that
          empower large and medium-sized businesses to rapidly create, deliver
          and manage e-commerce solutions and web initiatives. eCalton provides
          its clients with proven, cost-effective software solutions supported
          by consulting personnel to assist with implementation and ongoing
          project support. eCalton's service offerings include application
          development, commerce portals, eBusiness integration, wireless
          computing, outsourcing infrastructure and support change management.
          Through its specialized subdivision, the Internet Home Construction
          Group ("iHCG"), the Company has identified and focuses on one prime
          vertical market segment, the homebuilding industry. iHCG assists
          homebuilders in using the Internet to communicate effectively with
          customers, suppliers, trades and employees by developing and
          implementing cost-effective web-based solutions and strategies.

          SALES AND MARKETING
          eCalton markets its services through existing client referrals, its
          website, WWW.ECALTON.COM and co-operative advertising. In addition,
          eCalton has been establishing strategic partnerships with
          complementary organizations such as advertising agencies and
          homebuilding technology suppliers to facilitate cooperative
          advertising and lead generation.

          COMPETITION
          The market for Internet professional services is highly competitive
          and characterized by numerous companies that have introduced or
          developed products and services similar to those offered by eCalton.
          The Company expects competition to persist. Continuous competition may
          result in price reductions, reduced margins and loss of market share.
          Many of eCalton's competitors and potential competitors have longer
          operating histories, larger installed customer bases, greater name
          recognition, longer relationships with their clients, and
          significantly greater financial, marketing and public relations
          resources than eCalton. As a result, many of eCalton's competitors may
          be better positioned to react in the ever-changing market place.
          eCalton expects competition to persist and intensify in the future.

          SEGMENT DATA
          See Note 9 to the Company's Financial Statements for financial data
          about its segments.

          EMPLOYEES
          As of February 20, 2004, the Company and its wholly owned subsidiaries
          employed 19 full time personnel, and two part-time employees. None of
          the Company's employees are subject to collective bargaining
          agreements. The Company believes that its employee relations are
          satisfactory.

ITEM 2.   DESCRIPTION OF PROPERTY

          The Company currently leases approximately 650 square feet of office
          space located in Red Bank, New Jersey, for approximately $1,000 per
          month, for a renewable term of one year. The Company also leases
          approximately 3,800 square feet of office space in Vero Beach, Florida
          at a monthly rate of approximately $6,800 for a term of five years
          ending August 31, 2005.

          Management believes that these arrangements currently provide adequate
          space for all of the Company's business operations.

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ITEM 3.   LEGAL PROCEEDINGS

          The Company is involved from time to time in litigation arising in the
          ordinary course of business, none of which is expected to have a
          material adverse effect on the Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          During the fourth quarter of fiscal 2003, no matter was submitted to a
          vote of security holders through the solicitation of proxies or
          otherwise.







                                       7
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                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS

          Calton, Inc. common stock is traded on the American Stock Exchange
          ("AMEX") under the symbol CN. The following reflects the high and low
          sales prices of the common stock during fiscal 2003 and 2002.

                   FISCAL 2003              High         Low
                                         ----------   ----------

                   1st Quarter               $0.17        $0.11
                   2nd Quarter                0.24         0.09
                   3rd Quarter                0.90         0.19
                   4th Quarter                1.20         0.32


                   FISCAL 2002              High         Low
                                         ----------   ----------

                   1st Quarter               $0.75        $0.52
                   2nd Quarter                0.71         0.29
                   3rd Quarter                0.36         0.17
                   4th Quarter                0.27         0.13

          On February 27, 2004, the Company received notice from the AMEX staff
          indicating that the Company no longer complies with the AMEX's
          continued listing standards due to losses in three of its four most
          recent fiscal years and shareholders' equity below $4,000,000. The
          Company intends to appeal this determination and request a hearing
          before an AMEX committee. There can be no assurance that the Company's
          request for continued listing will be granted. If the Company's
          request for continued listing is not successful, it will seek to have
          its Common Stock become eligible for trading on the NASD's OTC
          Bulletin Board.

          At February 20, 2004, there were approximately 376 shareholders of
          record of the Company's common stock, based on information obtained
          from the Company's transfer agent. On that date, the last sale price
          for the common stock as reported by AMEX was $0.64.

          On August 29, 2003, the Company sold 4,500,000 shares of its common
          stock to four of its officers for an aggregate purchase price of
          $1,080,000, or $0.24 per share, which exceeded both the book value and
          the closing price of the Common Stock on the date that the agreement
          to sell the shares was reached. In effecting this transaction, the
          Company relied upon the exemption provided by Section 4(2) of the
          Securities Act of 1933. The officers who participated in the private
          placement transaction and the number of shares purchased by each
          officer is set forth below:

<TABLE>
<CAPTION>
<S>                                                                           <C>
          NAME                    TITLE                        NUMBER OF SHARES PURCHASED
          ----------------------  --------------------------  ----------------------------

          Anthony J. Caldarone    Chairman and CEO                      2,597,000

          Maria F. Caldarone      Executive Vice President                929,500

          John G. Yates           President                               561,000

          Laura A. Camisa         Senior Vice President                   412,500
</TABLE>

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ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

          RESTATEMENT

          The Company has restated its consolidated balance sheet as of November
          30, 2003, its consolidated statements of operations for the fiscal
          year ended November 30, 2003, its consolidated statements of cash
          flows for the fiscal year ended November 30, 2003 and its consolidated
          statement of shareholders' equity for the fiscal year ended November
          30, 2003. The restatement adjustment for the year ended November 30,
          2003 resulted in an increase of a previously reported net loss of
          approximately $720,000. Basic and diluted loss per share was increased
          by $0.13 per share for fiscal 2003. In addition, paid in capital as of
          November 30, 2003 was increased by $720,000 and retained earnings
          reduced by the same amount as a result of the restatement. See Note 1
          to the Consolidated Financial Statements included in Item 7 of Part II
          of this Form 10-KSB/A. The following management's discussion and
          analysis takes into account the effect of the restatement.

          RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 2003 AND 2002

          REVENUES: Consolidated revenues increased from $1,954,000 for 2002 to
          $3,133,000 for 2003. The majority of this increase was due to the
          Company's decision to capitalize on existing management's experience
          and to focus on the residential homebuilding line of business. On
          August 29, 2003, the Company completed the acquisition of 35
          residential lots in the Riverside at The Island Club development, a
          121-home residential community being developed in Vero Beach, Florida.
          This division generated $2,180,000 in revenue for the three months
          ended November 30, 2003, the quarter in which it commenced operations.
          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.

          Technical staffing revenues decreased from $1,274,000 in 2002 to
          $440,000 in 2003. The primary reason for the decrease was the severe
          downturn in economic conditions in eCalton's Houston regional area
          office that caused a significant reduction in staffing demands. This
          resulted in the Company's strategic decision to exit this line of
          business in the fourth quarter of 2003 and accordingly, no further
          revenues from this operation are currently projected. Website design
          and implementation revenues decreased slightly from $538,000 in 2002
          to $499,000 in 2003. Economic conditions and intense competition
          caused this overall reduction in demand for website development.

          Revenues from the Credit Card Loyalty segment decreased from $34,000
          in 2002 to $14,000 in 2003. This segment has undergone a shift in
          strategy and is now exploring different opportunities for revenue
          generation including, but not limited to, licensing its patent-pending
          software and joint venture prospects. There were no revenues from
          homebuilding consulting services in 2003 and $108,000 was generated
          from these services in 2002. The consulting services revenues were
          derived from a single consulting agreement associated with the sale of
          a business in 1998. The agreement expired on December 31, 2001 and,
          accordingly, no further revenue from this contract is currently
          projected.

          COST OF REVENUES: Cost of revenues consists of cost of goods sold for
          the homebuilding segment, project personnel and expenses associated
          with the technical staffing services and website design and
          implementation segments, and credit card loyalty program direct
          expenses. Homebuilding cost of goods sold were $1,796,000 for the
          quarter ended November 30, 2003, its first quarter of operations.
          Project personnel and expenses decreased from $1,250,000 in 2002 to
          $576,000 in 2003. The decrease is predominantly a result of the lower
          revenues from the technical staffing segment and the wind-down of this
          operation in the fourth quarter of 2003. Gross profits on revenues for
          the homebuilding business were 18% in 2003. Gross profits on revenues
          for the technical staffing/internet development segment increased from
          32% in 2002 to 39% in 2003, principally as a result of cost
          containment efforts, the wind-down of the technical staffing division
          and the operations focusing on more profitable contracts.

                                       9
<PAGE>

          SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and
          administrative expenses decreased from $4,312,000 in 2002 to
          $3,155,000 in 2003. The amount in 2003 includes certain non-cash
          stock-based compensation expense of $720,000 related to the sale of
          common stock to certain of the Company's officers; there was no
          similar charge during 2002. The reduction in expenses is primarily
          attributable to the significant downsizing of operations at both the
          PrivilegeONE and eCalton subsidiaries, the wind-down of the technical
          staffing division, reduced occupancy costs and the continued cost
          containment efforts focused on by management in all of the Company's
          business segments. In addition, the Internet development segment of
          eCalton performs a significant amount of inter-company work for Homes
          by Calton and PrivilegeONE, thereby reducing consolidated selling,
          general and administrative expenses. As the fiscal year 2003 amounts
          only reflect three months worth of expenses incurred by the
          homebuilding operation, selling general and administrative expenses
          are currently projected to increase as this division progresses.

          IMPAIRMENTS OF LONG-LIVED ASSETS: The Company adopted FAS144 in the
          quarter ended February 28, 2002. This pronouncement requires that the
          Company review the carrying value of its long-lived assets at least
          annually, or sooner, if facts and circumstances suggest to management
          that impairments may be present. Impairment charges of $116,000 in
          2002 related to the Company's website design and implementation
          business segment.

          INTEREST INCOME: Interest income is derived principally from interest
          on depository accounts and money-market type accounts. Interest income
          decreased from $124,000 during 2002 to $21,000 during 2003. The
          decrease was a result of lower average deposited balances. Currently,
          cash is being used in operating activities and accordingly, interest
          income is expected to decline during 2004.

          LOSSES ON INVESTMENTS/GAINS AND RECOVERIES: During the year ended
          November 30, 2003, the Company received $190,000 from the sale of
          182,550 shares of CorVu Corporation's common stock. The Company had
          impaired its entire investment in CorVu stock in fiscal 2000.

          The $750,000 loss on investments in the year ended November 30, 2002,
          relates to management's decision to write off the Automated
          Information Management, Inc. ("AIM") Note Receivable. Subsequently,
          the Company received $350,000 in partial recovery of this loss which
          was recorded as a gain on recoveries of investments in fiscal 2002.
          There can be no assurances that any further recoveries will be
          received on this investment.

          LITIGATION SETTLEMENTS: The amount paid by the Company in 2003 to
          settle the Calton Homes and Tetreault/Van Fechtmann 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.

          The Company received an aggregate of $23,000 and $458,000 in
          settlements of certain matters subject to litigation in 2003 and 2002,
          respectively.

          INCOME TAXES: The Company recognized a deferred income tax benefit
          during the year ended November 30, 2003 (none in 2002). The benefit
          arose from the release of certain reserves for income tax matters
          resolved during the period.

          DISCONTINUED OPERATIONS: On April 23, 2002, the Company disposed of
          its 51% interest in Innovation Growth Partners ("IGP") by transferring
          its ownership interest to IGP in exchange for $1,030,000 of IGP's cash
          reserves. The transaction resulted in a loss of $541,000, which was
          recorded in the quarter ended May 31, 2002. IGP was originally
          established to develop businesses and provide management and
          consulting services to entrepreneurial and development stage
          companies, as well as developing and acquiring controlling interests
          in the businesses with which it consulted. The decision to dispose of
          the Company's interest in IGP resulted from the fact that it had not
          generated significant revenues or profits and had required significant
          cash infusion by the Company.

                                       10
<PAGE>

          Innovation Growth Partners generated a $1,020,000 net loss for the
          fiscal year ended November 30, 2002. No future losses are anticipated
          from the IGP disposal.

          RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 2002 AND 2001

          REVENUES: Consolidated revenues decreased from $5,208,000 for 2001 to
          $1,954,000 for 2002. Technical staffing revenues decreased from
          $2,760,000 for 2001 to $1,274,000 for 2002. The primary reason for the
          decrease in technical staffing revenues was the severe downturn in
          economic conditions in eCalton's Houston regional area office that
          caused a significant reduction in staffing demands. Consulting
          services revenues decreased from $1,300,000 for 2001 to $108,000 for
          2002. The consulting services revenues were derived from a single
          consulting agreement associated with the sale of a business in 1998.
          The agreement expired on December 31, 2001 and accordingly, no further
          revenue from this contract is currently projected. Website design and
          implementation revenues decreased from $1,148,000 in 2001 to $538,000
          for 2002. Economic conditions and intense competition caused this
          overall reduction in demand for website development.

          Finally, during the second quarter of 2002, the Company commenced the
          generation of revenues from the Credit Card Loyalty business segment.
          Revenues were $34,000 from this segment in fiscal 2002.

          COST OF REVENUES: Cost of revenues consists of project personnel and
          expenses associated with the technical staffing services and website
          design and implementation segments, and credit card loyalty program
          direct expenses. Project personnel and expenses decreased from
          $2,420,000 in 2001 to $1,250,000 in 2002. The decrease is
          predominantly a result of the lower revenues from the two contributing
          segments. Gross margins decreased from 34% in 2001 to 32% to 2002,
          principally as a result of lower revenue levels.

          SELLING, GENERAL AND ADMINISTRATIVE: Selling, general and
          administrative expenses decreased from $8,238,000 in 2001 to
          $4,312,000 in 2002. The largest component of this expense category,
          salaries and related expenses, decreased from $4,732,000 in 2001 to
          $2,472,000 in 2002, principally as a result of cost containment
          efforts and activities, including reductions in personnel, in all of
          the Company's business segments. Bad debts expense, which is also a
          component of this expense category, decreased from $376,000 in 2001 to
          a net credit of ($72,000) during 2002. The decrease was a result of
          management's focused effort to address outstanding balances that had
          accumulated in the technical staffing and website design and
          implementation segments. This process resulted in reductions of
          reserves against previous balances from collections, estimate changes
          and other business decisions.

          IMPAIRMENTS OF LONG-LIVED ASSETS: The Company has early adopted FAS144
          in the quarter ended February 28, 2002; the pronouncement would have
          otherwise been effective for the Company's fiscal year ended November
          30, 2003. This pronouncement requires that the Company review the
          carrying value of its long-lived assets at least annually or sooner if
          facts and circumstances suggest to management that impairments may be
          present. Impairment charges of $116,000 in 2002 related to the
          Company's website design and implementation business segment.
          Impairment charges of $478,000 in 2001 related to the Company's credit
          card loyalty program segment.

          INTEREST INCOME: Interest income is derived principally from interest
          on depository accounts and money-market type accounts. Interest income
          decreased from $1,082,000 during 2001 to $124,000 during 2002. The
          decrease was a result of lower average deposited balances; such
          decline followed the Company's distribution of a cash dividend of
          $22,375,000 during 2001.

          LOSSES ON INVESTMENTS/GAINS AND RECOVERIES: The 2002 loss on
          investments relates to management's decision to write off the AIM Note
          Receivable. Subsequently, the Company received $350,000 in partial
          recovery of this loss. There can be no assurances that any further
          recoveries will be received on this investment.

          LITIGATION SETTLEMENTS: The Company received an aggregate of $458,000
          in settlements on certain matters under litigation in 2002.

                                       11
<PAGE>

          INCOME TAXES: The income tax benefit of the Company's 2002 operating
          losses was fully reserved during 2002, compared to a partially
          recognized benefit of $517,000 in 2001, due to the absence of
          sufficient positive evidence to justify carrying deferred tax assets.

          DISCONTINUED OPERATIONS: On April 23, 2002, the Company disposed of
          its 51% interest in Innovation Growth Partners (IGP) by transferring
          its ownership interest to IGP in exchange for $1,030,000 of IGP's cash
          reserves. The transaction resulted in a loss of $541,000, which was
          recorded in the quarter ended May 31, 2002. IGP was originally
          established to develop businesses and provide management and
          consulting services to entrepreneurial and development stage
          companies, as well as developing and acquiring controlling interests
          in the businesses with which it consulted. The decision to dispose of
          the Company's interest in IGP resulted from the fact that it had not
          generated significant revenues or profits and had required significant
          cash infusion by the Company.

          Innovation Growth Partners generated a $1,020,000 net loss for the
          fiscal year ended November 30, 2002. No future losses are anticipated
          from the IGP disposal.

          LIQUIDITY AND CAPITAL RESOURCES

          GENERAL:

          The Company has incurred operating losses in recent fiscal years.
          However, with the Company's strategic decision to capitalize on senior
          management's experience in the homebuilding market and its curtailment
          of operations in the technical staffing business, management believes
          that cash on hand as of November 30, 2003, plus amounts to be
          generated from operations and borrowing availability under the
          Company's revolving credit facility, will be sufficient to support
          consolidated operations during fiscal 2004. Total working capital
          increased from $2,193,000 at November 30, 2002 to $3,281,000 at
          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 4) and working
          capital. The Company plans to complete the development of the
          Riverside at The Island Club project and pursue other opportunities in
          the homebuilding industry in Florida.

          Management has continued its cost containment efforts and as a result,
          administrative expenses have been reduced from $4,312,000 for the year
          ended November 30, 2002 to $3,155,000 for the year ended November 30,
          2003. In addition, the Company made the strategic decision to curtail
          operations in the technical staffing business due to the division's
          diminished performance during the first nine months of fiscal 2003.
          During 2002, the Company sold its non-performing interest in IGP which
          contributed to the Company's net loss in the amount of ($1,020,000)
          during the fiscal year ended November 30, 2002.

          CASH FLOWS FROM OPERATING ACTIVITIES:

          The Company used $2,045,000 in 2003 operating activities, compared to
          $3,497,000 in 2002. The main uses of cash in 2003 were $806,000 for
          the acquisition of inventory attributable to the homebuilding business
          and operating losses sustained during the year.

          CASH FLOWS FROM INVESTING ACTIVITIES:

          The Company generated cash of $88,000 from investing activities during
          the year ended November 30, 2003. This represented cash distributed
          from the Specific Indemnification Fund established in 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.

                                       12
<PAGE>

          CASH FLOWS FROM FINANCING ACTIVITIES:

          The Company generated net cash of $492,000 from financing activities
          for the year ended November 30, 2003. This was comprised of $1,080,000
          of proceeds received from a private placement offering to four of the
          Company's officers who purchased an aggregate 4,500,000 shares of the
          Company's common stock at a price of $0.24 per share that was offset
          by approximately $588,000 which was repaid on the Company's notes
          payable. In addition to the net cash from financing activities, the
          Company entered into financing arrangements to purchase real estate
          inventories with a cost of $3,529,000.

          As a result of the above cash flow activities, cash decreased from
          $3,286,000 at November 30, 2002 to $1,821,000 at November 30, 2003.
          Total working capital increased from $2,193,000 at November 30, 2002
          to $3,281,000 at November 30, 2003.

          COMMITMENTS, GUARANTEES AND CONTINGENCIES

          CREDIT CARD PROCESSING AGREEMENT:

          The Company and PrivilegeONE have entered into a credit card
          processing agreement ( the "Agreement") with Fleet in 2001 pursuant to
          which Fleet 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 a
          developmental stage. 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 through
          the Fleet agreement, is 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, 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. No assurance can be given that PrivilegeONE will be
          successful in reaching an agreement with a successor issuer.

          PROFIT SHARING ARRANGEMENT:

          The Company has entered into an arrangement with John G. Yates, its
          President, and Thomas C. Corley, its Senior Vice President and Chief
          Financial Officer, pursuant to which Mr. Yates and Mr. Corley have
          agreed to serve as unpaid officers of the Company and PrivilegeONE and
          pursue business opportunities on behalf of PrivilegeONE in
          consideration of the Company's agreement to pay them 25% of the net
          profit attributable to business arrangements with parties introduced
          by either of them to PrivilegeONE.

          LOAN AGREEMENT

          The Company entered into a loan agreement with Harbor Federal Savings
          Bank in August of 2003. The loan agreement provides for $1.2 million
          of acquisition and construction financing and a $5 million line of
          credit that is due on demand. Interest on advances, which are secured
          by a mortgage on the Company's homebuilding properties, accrues at a
          rate equal to the prime rate plus one percent (1%) per annum. The loan
          agreement has a

                                       13
<PAGE>

          term of two years expiring in August 2005. As of November 30, 2003,
          $1,098,000 of acquisition and construction borrowings and $1,843,000
          of advances under the line of credit were outstanding.

          OPERATING LEASE COMMITMENTS:

          The Company and its consolidated subsidiaries lease their facilities
          and certain equipment under operating lease agreements with various
          expiration dates through 2005. Future non-cancelable minimum lease
          payments for each of the following years ending November 30 are as
          follows:

                            2004            $    82,000
                            2005                 68,000
                                          ---------------
                            Total           $   150,000
                                          ===============

          GUARANTEES AND OFF BALANCE SHEET ARRANGEMENTS:

          The Company has no guarantees outside of the consolidated organization
          and no off balance sheet arrangements of any nature.

          PARTICULARLY SENSITIVE ACCOUNTING ESTIMATES

          RESERVE FOR BAD DEBTS: The Company provides reserves against
          uncollectible accounts receivable. This process requires significant
          subjective estimates that take into account the credit worthiness of
          the customer, historical collection experience, and the general
          economic environment. The Company continues to perform formal reviews
          on all open accounts receivable, write off balances known to be
          uncollectible against existing reserves, and estimate the appropriate
          levels of reserves on existing balances. As a result of this on-going
          process, reserves were reduced from $31,000 as of November 30, 2002 to
          $22,000 as of November 30, 2003.

          RESERVE FOR WARRANTY: The Company provides a basic limited warranty on
          workmanship and materials for all homes for a period of one year. The
          Company estimates the costs that may be incurred under its basic
          limited warranty and records a liability in the amount of such costs
          at the time the product revenue is recognized. Factors that affect the
          Company's warranty liability include the number of homes sold,
          historical and anticipated rates of warranty claims and average cost
          per claim. Estimated future warranty costs are charged to cost of
          sales in the period when the revenues from home closings are
          recognized. Such estimated costs are 0.5% of total revenue. The
          Company periodically assesses the adequacy of its recorded warranty
          liabilities and adjusts the amount as necessary. The Company's
          warranty liability is included in accrued expenses on its balance
          sheet.

          OTHER RESERVES: The Company resolved the litigation matters in the
          year ended November 30, 2003 for which it had previously reserved
          $710,000 as of November 30, 2002. The accrual required significant
          subjective estimates about then existing and potential future claims.
          Management made its estimates based upon the best available evidence,
          which included historical experience in the homebuilding industry and
          the counsel of outside lawyers engaged in litigating certain other
          matters. Management applied the provisions of SFAS 5 Accounting for
          Contingencies in making its estimates, where amounts that are probable
          and estimable are recorded. As a result of the Company's estimation
          process, reserves for the various litigation claims of $710,000 were
          established as of November 30, 2002. The aggregate $650,000 paid by
          the Company to settle the litigation matters in the year ended
          November 30, 2003, was approximately $60,000 less than the amounts
          reserved for these matters for financial statement purposes.

                                       14
<PAGE>

          RECENT ACCOUNTING PRINCIPLES

          FASB STATEMENT 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
          CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY (STATEMENT 150)

          In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
          Financial Instruments with Characteristics of both Liabilities and
          Equity." This statement establishes standards for classifying and
          measuring as liabilities certain financial instruments that have
          characteristics of both liabilities and equity. It requires that an
          issuer classify a financial instrument within its scope as a
          liability, or asset as appropriate, to represent obligations of the
          issuer. Many of the instruments covered by this statement have
          previously been classified as equity. SFAS No. 150 was effective for
          all financial instruments created or modified after May 31, 2003, and
          to other instruments as of September 1, 2003. This statement did not
          have an impact on the Company's consolidated financial position,
          results of operations or cash flows.

          FASB STATEMENT 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE
          INSTRUMENTS AND HEDGING ACTIVITIES (STATEMENT 149)

          In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
          133 on Derivative Instruments and Hedging Activities." Statement 149,
          which amends and clarifies existing accounting pronouncements,
          addresses financial accounting and reporting for derivative or other
          hybrid instruments to require similar accounting treatment for
          contracts with comparable characteristics. This statement was
          effective for contracts entered into or modified after June 30, 2003
          and for hedging activities designated after June 30, 2003. This
          statement did not have an impact on the Company's consolidated
          financial position, results of operations or cash flows.

          FASB INTERPRETATION NO. 46, CONSOLIDATION OF VARIABLE INTEREST
          ENTITIES (FIN 46)

          In December 2003, the FASB issued FASB Interpretation No. 46, Amended,
          "Consolidation of Variable Interest Entities," ("FIN 46"). FIN 46
          addresses the consolidation requirements of companies that have
          variable interest entities. This Interpretation requires the
          consolidation of any variable interest entities in which a company has
          a controlling financial interest and requires disclosure of those that
          are not consolidated but in which the company has a significant
          variable interest. The requirements of FIN 46 will be effective for
          the Company's first quarter 2004. The Company does not expect this
          Interpretation to have a material impact on its financial position,
          results of operations or cash flows.

ITEM 7.   FINANCIAL STATEMENTS

          The Financial Statements are set forth herein commencing on page F-1
          of this Report.

ITEM 8.   CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
          DISCLOSURE

          None.

ITEM 8A.  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 November 30, 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.

                                       15
<PAGE>

          The conclusions of the Company's Chief Executive Officer and Chief
          Financial Officer with respect to the Company's disclosure controls
          and procedures were not impacted by the restatement of the Company's
          financial statements reflected in this Annual Report on Form 10-KSB/A.
          The restatement resulted from a reexamination by the Company of U.S.
          generally accepted accounting principles as they pertain to accounting
          for stock based compensation after receiving comments from, and having
          discussions with, the Staff of the Securities and Exchange Commission.
          The restatement did not result from any lack of effectiveness of the
          Company's disclosure controls and procedures. Accordingly, the Company
          does not plan to make any changes to its disclosure controls and
          procedures as a result of the restatement.

          Disclosure controls and procedures are controls and other procedures
          that are designed to provide reasonable assurance that information
          required to be disclosed in Company reports filed or submitted under
          the Securities and 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.



                                       16
<PAGE>

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

          EXECUTIVE OFFICERS
          The executive officers of the Company, as of February 20, 2004, are
          listed below and brief summaries of their business experience and
          certain other information with respect to them are set forth in the
          following table and in the information which follows the table:

<TABLE>
<CAPTION>
<S>                                                                           <C>
            Name                    Age     Position
            ----                    ---     --------

            Anthony J. Caldarone    66      Chairman and Chief Executive Officer
                                            Chairman and Chief Executive Officer - Homes by Calton, LLC
                                            President - eCalton.com, Inc.
            John G. Yates           60      President and Chief Operating Officer
                                            President and Chief Executive Officer - PrivilegeONE
            Maria F. Caldarone      40      Executive Vice President of Corporate Development and Asst. Secretary
                                            President - Homes by Calton, LLC
                                            Executive Vice President of Operations - PrivilegeONE
            Thomas C. Corley        42      Senior Vice President, Chief Financial Officer and Treasurer
                                            Senior Vice President and Chief Financial Officer - PrivilegeONE
            Laura A. Camisa         41      Senior Vice President of Strategic Planning
                                            Senior Vice President - Homes by Calton, LLC
                                            Executive Vice President and Secretary - eCalton.com, Inc.
                                            Senior Vice President of Strategic Planning - PrivilegeONE
</TABLE>

          Mr. Caldarone has served as Chairman and Chief Executive Officer of
          the Company since November 1995. From November 1995 through August
          2002, Mr. Caldarone also served as President of the Company. He served
          as director of the Company from June 1993 through October 1995 and as
          Chairman, President and Chief Executive Officer from the inception of
          the Company in 1981 through June 1993.

          Mr. Yates was appointed President and Chief Operating Officer of the
          Company in September 2002. Mr. Yates has served as President and Chief
          Executive Officer of PrivilegeONE since May 2001. From 1993 through
          December 2000, Mr. Yates served as Senior Vice President and General
          Manager of American Express, and in that capacity implemented and
          managed the American Express Corporate Purchasing Card division. Prior
          to American Express, Mr. Yates served in various management capacities
          in numerous businesses during his twenty-four years with General
          Electric (see "Arrangement with Certain Officers").

          Ms. Caldarone served as the Director of Business Development from
          January 1999 until she was appointed as a Vice President of the
          Company in February 2000. In May 2001, Ms. Caldarone was appointed
          Executive Vice President of PrivilegeONE. In September 2002, Ms.
          Caldarone was promoted to Executive Vice President of Calton, Inc. In
          January 2004, Ms. Caldarone was appointed President of Homes by
          Calton, LLC. From 1995 through January 1999, Ms. Caldarone was a
          non-practicing attorney. Prior to 1995, Ms. Caldarone was employed by
          Trafalgar Homes from December 1993 to November 1994, where she served
          as Director of Land Acquisition. Ms. Caldarone is a licensed attorney
          in the state of Florida. Ms. Caldarone is the daughter of Mr.
          Caldarone.

                                       17
<PAGE>

          Mr. Corley was appointed Senior Vice President of Finance, Chief
          Financial Officer and Treasurer of the Company in September 2002. Mr.
          Corley has served as Senior Vice President and Chief Financial Officer
          of PrivilegeONE since January 2000. Mr. Corley has over 17 years
          experience in public accounting, large corporate and international
          tax, financial modeling and financial management, having most recently
          been a founding partner of McGuinness, Corley & Hodavance, CPAs from
          1995 to 2000. Prior to that, he held the positions of Senior Manager
          of Taxation with ESSROC Cement Corp/Italcimenti-Ciment Francais.,
          Senior Tax Accountant with Arthur Andersen and Staff Accountant with
          Bart & Bart, CPAs (see "Arrangement with Certain Officers").

          Ms. Camisa was hired as a Financial Analyst by the Company in February
          2000. In April 2000, she was appointed Vice President of Strategic
          Planning. In June 2001, Ms. Camisa was appointed Executive Vice
          President of eCalton's Internet business development division. In
          September 2002, Ms. Camisa was promoted to Senior Vice President of
          Calton, Inc. In January 2004, Ms. Camisa was appointed Senior Vice
          President of Homes by Calton, LLC. Prior to joining Calton, she held
          the position of Director of Investor Relations and Financial Analyst
          at Hovnanian Enterprises, Inc. from June 1998 through February 2000.
          Ms. Camisa held the position of Financial Analyst - International
          Mergers and Acquisitions at Marsh & McLennan Companies from January
          1995 through May 1998. Ms. Camisa spent five years with Kidder,
          Peabody & Co. as a Financial Analyst specializing in Mergers &
          Acquisitions and High Yield Debt Financing as well as successfully
          completing the company's Investment Banking Analyst Training Program.

          ARRANGEMENT WITH CERTAIN OFFICERS
          John G. Yates and Thomas C. Corley have served as unpaid officers of
          Calton, Inc. and PrivilegeONE since August 31, 2003 and September 30,
          2003, respectively. In consideration of their agreement to continue to
          serve in such capacities and pursue business opportunities on behalf
          of PrivilegeONE, the Company has agreed that Mr. Yates and Mr. Corley
          will be entitled to 25% of the net profit attributable to business
          arrangements with parties introduced by either of them to
          PrivilegeONE. As a result of this arrangement, Mr. Yates and Mr.
          Corley are not required to devote their full time and attention to the
          affairs of the Company; however, the Company does not believe that the
          absence of a full time commitment on the part of Mr. Yates and Mr.
          Corley has had, or will have, a material adverse impact on the
          Company's ability to conduct its business.

          DIRECTORS
          Information regarding Directors of the Company is incorporated herein
          by reference to the Company's proxy statement to be filed with the
          Securities and Exchange Commission pursuant to Regulation 14A, not
          later than 120 days after the end of the fiscal year covered by this
          report.

          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
          Information regarding compliance with Section 16(a) of the Securities
          Exchange Act of 1934 is incorporated herein by reference to the
          Company's proxy statement to be filed with the Securities and Exchange
          Commission pursuant to Regulation 14A, not later than 120 days after
          the end of the fiscal year covered by this report.

          CODE OF CONDUCT
          The Company has adopted a Code of Conduct that applies to all of its
          directors, officers and employees, including its Chief Executive
          Officer, Chief Financial Officer and other senior financial officers.
          The Company's Code of Conduct is posted on its website,
          www.caltoninc.com, under Investor Relations. The Company intends to
          disclose on its website any amendment to, or waiver of, a provision of
          the Code of Conduct that applies to its Chief Executive Officer, Chief
          Financial Officer or other senior financial officers.

ITEM 10.  EXECUTIVE COMPENSATION

          The information required by Item 10 is incorporated herein by
          reference to the Company's proxy statement to be filed with the
          Securities and Exchange Commission pursuant to Regulation 14A, not
          later than 120 days after the end of the fiscal year covered by this
          report.

                                       18
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The information required by Item 11 is incorporated herein by
          reference to the Company's proxy statement to be filed with the
          Securities and Exchange Commission pursuant to Regulation 14A, not
          later than 120 days after the end of the fiscal year covered by this
          report.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The information required by Item 12 is incorporated herein by
          reference to the Company's proxy statement to be filed with the
          Securities and Exchange Commission pursuant to Regulation 14A, not
          later than 120 days after the end of the fiscal year covered by this
          report.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

               Reference is made to the Index of Exhibits hereinafter contained
               on page E-1.

          (b)  Reports on Form 8-K

               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 with certain senior
               officers of the Company.

               On October 15, 2003, the Company filed a Report on Form 8-K to
               report that it had issued a news release to report its financial
               results for the three and nine months ended August 31, 2003.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

          The information required by Item 14 is incorporated herein by
          reference to the Company's proxy statement to be filed with the
          Securities and Exchange Commission pursuant to Regulation 14A, not
          later than 120 days after the end of the fiscal year covered by this
          report.

                                       19
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


                                              CALTON, INC.
                                              --------------------------------
                                              (Registrant)

Dated: April 15, 2005                     By: /s/ Anthony J. Caldarone
                                              --------------------------------
                                              Anthony J. Caldarone, Chairman,
                                              President and Chief Executive
                                              Officer

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
<S>                                                                           <C>

           Signature                                    Title                                  Date
           ---------                                    -----                                  ----

/s/ Anthony J. Caldarone               Chairman, President, Chief Executive                April 15, 2005
--------------------------------       Officer and Director (Principal Executive
Anthony J. Caldarone                   Officer)

/s/ Laura A. Camisa                    Senior Vice President, Chief Financial              April 15, 2005
--------------------------------       Officer & Treasurer (Principal Financial
Laura A. Camisa                        & Accounting Officer)

/s/ *                                  Director                                            April 15, 2005
--------------------------------
J. Ernest Brophy

/s/ *                                  Director                                            April 15, 2005
--------------------------------
Mark N. Fessel

/s/ *                                  Director                                            April 15, 2005
--------------------------------
Kenneth D. Hill

/s/ *                                  Director                                            April 15, 2005
--------------------------------
Frank Cavell Smith, Jr.

/s/ *                                  Director                                            April 15, 2005
--------------------------------
John G. Yates

*By: /s/ Anthony J. Caldarone
--------------------------------
As Attorney in Fact
</TABLE>

                                       20
<PAGE>

                          CALTON, INC. AND SUBSIDIARIES
                          INDEX OF FINANCIAL STATEMENTS


                                                                            PAGE

Report of Independent Registered Public Accounting Firm                      F-2

Consolidated Balance Sheet as of November 30, 2003                           F-3

Consolidated Statements of Operations for the Years
Ended November 30, 2003 and 2002                                             F-4

Consolidated Statements of Cash Flows for the Years
Ended November 30, 2003 and 2002                                             F-5

Consolidated Statements of Shareholders' Equity for the Years
Ended November 30, 2003 and 2002                                             F-6

Notes to Consolidated Financial Statements                                   F-7





                                      F-1

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNING FIRM


To the Board of Directors and Shareholders
Calton, Inc.

We have audited the accompanying consolidated balance sheets of Calton, Inc. and
Subsidiaries ("Calton") as of November 30, 2003, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended November 30, 2003. These financial statements are
the responsibility of Calton's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Calton,
Inc. and Subsidiaries at November 30, 2003, and the consolidated results of
their operations and their cash flows for each of the two years in the period
ended November 30, 2003, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 1.B. to the Consolidated Financial Statements, Calton
restated its consolidated financial statements for the fiscal year ended
November 30, 2003 to reflect stock-based compensation expense amounting to
$720,000 that was incurred in connection with the sale of 4,500,000 shares of
Calton's common stock to certain officers.


                                          /s/ AIDMAN, PISER & COMPANY, P.A.


Tampa, Florida
February 6, 2004, except for Note 1.B. as to
   which date is February 4, 2005

                                      F-2

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC.  AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 2003

                                                                                     AS RESTATED
                                                                                   ----------------
<S>                                                                                 <C>
ASSETS
     Current Assets
         Cash and cash equivalents                                                  $    1,821,000
         Accounts receivable, net of allowance for doubtful accounts of $22,000            101,000
         Inventory                                                                       4,335,000
         Prepaid expenses and other current assets                                          95,000
                                                                                   ----------------
            Total current assets                                                         6,352,000
                                                                                   ----------------

         Deferred charges                                                                  233,000
         Property and equipment, net                                                        52,000
                                                                                   ----------------
            Total assets                                                            $    6,637,000
                                                                                   ================

LIABILITIES AND SHAREHOLDERS' EQUITY
     Current Liabilities
         Accounts payable, accrued expenses and other liabilities                   $    1,228,000
         Notes payable                                                                   1,843,000
                                                                                   ----------------
            Total current liabilities                                                    3,071,000
                                                                                   ----------------

     Noncurrent portion of notes payable                                                 1,098,000
     Commitments and contingent liabilities (Note 10)                                            -

     Shareholders' Equity
         Common stock, $.05 par value, 10,740,000 shares authorized;
            9,240,000 shares outstanding                                                   462,000
         Additional paid-in capital                                                     12,905,000
         Retained earnings (deficit)                                                    (2,633,000)
         Less cost of shares held in treasury 1,457,000 shares                          (8,266,000)
                                                                                   ----------------
            Total shareholders' equity                                                   2,468,000
                                                                                   ----------------
            Total liabilities and shareholders' equity                              $    6,637,000
                                                                                   ================

                          See notes to consolidated financial statements.

                                                F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 2003 AND 2002

                                                                             2003             2002
                                                                       ----------------  ----------------
REVENUE                                                                 (AS RESTATED)
<S>                                                                     <C>               <C>
    Homebuilding and consulting                                         $    2,180,000    $      108,000
    Technical staffing services                                                440,000         1,274,000
    Website design and implementation                                          499,000           538,000
    Credit card loyalty program revenue                                         14,000            34,000
                                                                       ----------------  ----------------
                                                                             3,133,000         1,954,000
                                                                       ----------------  ----------------
COSTS AND EXPENSES
    Cost of sales
      Homebuilding                                                           1,796,000                 -
      Internet development/technical staffing                                  572,000         1,238,000
      Credit card loyalty program                                                4,000            12,000
    Selling, general and administrative                                      3,155,000         4,312,000
    Impairment of assets                                                             -           116,000
                                                                       ----------------------------------
                                                                             5,527,000         5,678,000
                                                                       ----------------------------------
      Loss from operations                                                  (2,394,000)       (3,724,000)

OTHER (EXPENSE) INCOME
    Interest income                                                             21,000           124,000
    Interest expense                                                           (49,000)                -
    Loss on investments                                                              -          (750,000)
    Gains on recoveries on investments                                         190,000           350,000
    Litigation settlements                                                      23,000           458,000
    Other income                                                                57,000           119,000
                                                                       ----------------  ----------------
      Loss from continuing operations before income taxes
        and discontinued operations                                         (2,152,000)       (3,423,000)

INCOME TAX BENEFIT                                                             487,000                 -
                                                                       ----------------  ----------------
      Loss from continuing operations                                       (1,665,000)       (3,423,000)
                                                                       ----------------  ----------------

DISCONTINUED OPERATIONS:
    Loss from operations of discontinued subsidiary                                  -        (1,020,000)
    Loss from disposals of discontinued subsidiaries                                 -          (541,000)
                                                                       ----------------  ----------------
      Loss from discontinued operations                                              -        (1,561,000)
                                                                       ----------------  ----------------
NET LOSS                                                                $   (1,665,000)   $   (4,984,000)
                                                                       ================  ================

LOSS PER SHARE:
    Basic and Diluted:
      Loss from continuing operations                                   $        (0.29)   $        (0.76)
      Loss from discontinued operations                                              -             (0.35)
                                                                       ----------------  ----------------
      Net loss per common share                                         $        (0.29)   $        (1.11)
                                                                       ================  ================

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
      Basic                                                                  5,840,000         4,509,000
                                                                       ================  ================
      Diluted                                                                5,840,000         4,509,000
                                                                       ================  ================

                              See notes to consolidated financial statements.

                                                   F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 2003 AND 2002

                                                                                2003              2002
                                                                           ----------------  ----------------
CASH FLOWS FROM OPERATING ACTIVITIES                                        (AS RESTATED)
<S>                                                                         <C>               <C>
Net loss                                                                    $   (1,665,000)   $   (4,984,000)
     Adjustments to reconcile net loss to net cash used in
         operating activities:
     Deferred income taxes                                                        (487,000)                -
     Impairment of investments                                                           -           750,000
     Losses from disposals of discontinued component                                     -           541,000
     Impairments of long lived assets                                                    -           116,000
     Loss on disposal of long lived assets                                          13,000                 -
     Provision for uncollectible receivables                                             -           (72,000)
     Depreciation and amortization                                                  43,000           139,000
     Stock-based compensation for directors                                         33,000            19,000
     Stock-based compensation for officers                                         720,000                 -
     Changes in operating assets and liabilities:
         Accounts receivable                                                       180,000           269,000
         Inventory                                                                (806,000)                -
         Prepaid expenses and other assets                                        (185,000)           30,000
         Accounts payable, accrued expenses and other liabilities                  109,000          (305,000)
                                                                           ----------------  ----------------
Net cash flows from operating activities                                        (2,045,000)       (3,497,000)
                                                                           ----------------  ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Assets and liabilities of discontinued subsidiaries                                 -         2,028,000
     Purchases of property and equipment                                                 -            (6,000)
     Receipts from (payments to) holdback escrow account                            88,000            (2,000)
                                                                           ----------------  ----------------
Net cash flows from investing activities                                            88,000         2,020,000
                                                                           ----------------  ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Purchase of treasury stock                                                          -           (12,000)
     Payments on notes payable                                                    (588,000)                -
     Proceeds from sale of common stock and treasury stock to officers           1,080,000                 -
     Proceeds from the sale of treasury stock and
         exercise of stock options                                                       -         60,000.00
                                                                           ----------------  ----------------
Net cash flows from financing activities                                           492,000            48,000
                                                                           ----------------  ----------------

Net (decrease)  in cash and cash equivalents                                    (1,465,000)       (1,429,000)
Cash and cash equivalents at beginning of period                                 3,286,000         4,715,000
                                                                           ----------------  ----------------
Cash and cash equivalents at end of period                                  $    1,821,000    $    3,286,000
                                                                           ================  ================

SUPPLEMENTAL CASH FLOW INFORMATION
     Non-cash investing and financing activities
         Acquisition of inventory assets through financing                       3,529,000


                                See notes to consolidated financial statements.

                                                     F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 2003 AND 2002
(AMOUNTS IN THOUSANDS)


                                                Common Stock        Additional     Retained                      Total
                                           ----------------------     Paid In      Earnings      Treasury    Shareholders'
                                            Shares      Amount        Capital      (Deficit)      Stock         Equity
                                           ---------  -----------  -------------  -----------  ------------  -------------
<S>                                           <C>      <C>          <C>            <C>          <C>           <C>
Balances December 1, 2001                     4,417    $     221    $    13,134    $   4,016    $  (10,154)   $    7,217

  Net Loss                                        -            -              -       (4,984)            -        (4,984)
  Stock issued to Directors                      52            3             16            -             -            19
  Purchases of treasury stock                   (19)          (1)             1            -           (12)          (12)
  Stock issued under employee stock
     ownership plan                             194            9         (1,013)           -         1,064            60
                                           ---------  -----------  -------------  -----------  ------------  -------------
Balances November 30, 2002                    4,644    $     232    $    12,138    $    (968)   $   (9,102)   $    2,300

  Net Loss (As Restated)                          -            -              -       (1,665)            -        (1,665)
  Stock issued to Directors                      96            5             28            -             -            33
  Common stock and treasury stock
     sold to officers (As Restated)           4,500          225            739            -           836         1,800
                                           ---------  -----------  -------------  -----------  ------------  -------------
Balances November 30, 2003 (As Restated)      9,240    $     462    $    12,905    $  (2,633)   $   (8,266)   $    2,468
                                           =========  ===========  =============  ===========  ============  =============




                                      See notes to consolidated financial statements.

                                                            F-6
</TABLE>

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A.   NATURE OF BUSINESSES

     Calton, Inc. ("Calton" or the "Company") was incorporated in the State of
     New Jersey in 1981. The Company is engaged in (i) constructing single
     family homes through Homes by Calton, LLC ("Homes by Calton"), (ii)
     providing Internet business solutions and consulting services through
     eCalton.com, Inc. ("eCalton") and (iii) the development of a loyalty and
     co-branded credit card program through PrivilegeONE Networks, LLC,
     ("PrivilegeONE").

     B.   RESTATEMENT OF FINANCIAL STATEMENTS

     In February 2005, the Company, after discussion with the Staff of the
     Securities and Exchange Commission and the Company's independent registered
     public accounting firm, determined that its previously issued financial
     statements for the year ended November 30, 2003 required restatement to
     reflect the recognition of $720,000 of compensation expense in connection
     with the Company's sale of 4,500,000 shares of common stock to certain of
     its officers in fiscal 2003. While the sale of the shares of common stock
     was intended to serve as a financing activity, necessary to engage in the
     homebuilding operations, the measurement date for compensation purposes
     occurred at a date subsequent to execution of the agreement, at a time when
     the stock price was higher than the sale price. The following table
     reflects the impact of the restatement on the relevant items of the
     Company's financial statements as of, and for the year ended, November 30,
     2003.

<TABLE>
<CAPTION>

     CHANGES TO CONSOLIDATED BALANCE SHEET
                                                                        As of November 30, 2003
                                                           -------------------------------------------------
                                                             As Reported      Adjustments      As Restated
                                                           ---------------  ---------------  ---------------
<S>                                                         <C>              <C>              <C>
     Additional paid-in-capital                             $  12,185,000    $     720,000    $  12,905,000
     Retained earnings/(deficit)                               (1,913,000)        (720,000)      (2,633,000)

     CHANGES TO CONSOLIDATED STATEMENT OF OPERATIONS
                                                                  Fiscal year ended November 30, 2003
                                                           -------------------------------------------------
                                                             As Reported      Adjustments      As Restated
                                                           ---------------  ---------------  ---------------

     Selling, general and administrative                    $   2,435,000    $     720,000    $   3,155,000
     Loss from operations                                      (1,674,000)        (720,000)      (2,394,000)
     Loss from continuing operations before
          income taxes and discontinued operations             (1,432,000)        (720,000)      (2,152,000)
     Loss from continuing operations                             (945,000)        (720,000)      (1,665,000)
     Net loss                                                    (945,000)        (720,000)      (1,665,000)

     Loss per share
          Basic and diluted
            Loss from continuing operations                         (0.16)           (0.13)           (0.29)
            Net loss per common share                               (0.16)           (0.13)           (0.29)
</TABLE>

                                      F-7

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>
     CHANGES TO CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                  Fiscal year ended November 30, 2003
                                                           -------------------------------------------------
                                                             As Reported      Adjustments      As Restated
                                                           ---------------  ---------------  ---------------
<S>                                                             <C>              <C>            <C>
     Net loss                                                   ($945,000)       ($720,000)     ($1,665,000)
     Stock-based compensation for officers                              0          720,000          720,000
</TABLE>

     C.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make estimates and assumptions that affect the amounts
     reported in the financial statements and accompanying notes. Actual results
     could differ from those estimates.

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
     and its wholly owned subsidiaries. All significant inter-company accounts
     and transactions have been eliminated in the accompanying consolidated
     financial statements.

     REVENUE RECOGNITION

     Revenues from homebuilding operations are recognized when title and
     possession of the home have been passed to the buyer and there are no
     further material obligations of the Company.

     Revenues from website design and implementation are derived under
     short-term time-and-material and, to a lesser extent, fixed price contracts
     with principally commercial business customers. Website design and
     implementation revenues under time-and-material contracts are recognized
     upon acceptance by the customer of the website. Website design and
     implementation revenues under fixed-price contracts are recognized as the
     contract progresses, using the cost-to-cost method to determine percentage
     of completion. There were no material incomplete fixed price website design
     and implementation contracts as of November 30, 2003.

     CASH AND CASH EQUIVALENTS

     Cash equivalents consist of demand deposits and highly liquid money market
     funds. The Company places its temporary cash investments with high credit
     quality financial institutions. At times, such investments may be in excess
     of the FDIC insurance limits. The Company has not experienced any loss to
     date on these investments.

                                      F-8

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     ACCOUNTS RECEIVABLE AND CREDIT RISK

     The Company provides reserves against uncollectible accounts receivable.
     This process requires significant subjective estimates that take into
     account the credit worthiness of the customer, historical collection
     experience, and the general economic environment. The Company continues to
     perform formal reviews on all open accounts receivable, write off balances
     known to be uncollectible against existing reserves, and estimate the
     appropriate levels of reserves on existing balances.

     INVENTORY

     Homebuilding work in process, speculative and model homes and land held for
     development and sale are stated at the lower of cost (including direct
     construction costs, capitalized interest, and real estate taxes) or net
     realizable value. The capitalized costs will be included in cost of
     homebuilding revenues as homes are sold and customers take title to the
     home and real estate.

     In accordance with SFAS 34, CAPITALIZATION OF INTEREST COSTS, the Company
     capitalizes interest incurred on lots under development and homes under
     construction. During the year ended November 30, 2003, approximately
     $18,000 of interest was capitalized. Capitalization begins when the
     construction of a home commences, whether it is under contract or being
     built on a speculative basis. Capitalized interest costs are charged to
     cost of sales in the period when the revenues from home closings are
     recognized. Interest costs are expensed on developed, vacant lots and
     completed speculative homes.

     PROPERTY AND EQUIPMENT

     Property and equipment are carried at cost. Computer equipment is being
     depreciated using the straight-line method over a useful life of three to
     four years, office furniture is being depreciated using the straight-line
     method over five years, and leasehold improvements are being depreciated
     using the straight-line method over the terms of the respective leases,
     which range from one to five years. Maintenance and repairs are expensed as
     incurred, while renewals and betterments are capitalized.

     IMPAIRMENTS OF LONG-LIVED ASSETS

     The Company performs an assessment of the carrying values of fixed assets
     and other long-lived assets to be held and used when indications that the
     carrying value of such assets may not be recoverable are present. This
     review consists of a comparison of the carrying value of the assets with
     expected undiscounted cash flows. If the respective carrying values exceed
     undiscounted cash flows, the impairment is measured using fair value
     measures to the extent available, or discounted cash flows. During the year
     ended November 30, 2002, the Company recognized impairment charges
     amounting to $116,000 related to property and equipment associated with the
     Company's Internet and Staffing segment. Such impairment arose when the
     segment failed to meet its revenue projections and management determined
     that the market conditions were not supportive of the segment's ongoing
     revenue projections.

     DEFERRED FINANCING COSTS

     Deferred finance charges included in other current assets are associated
     with the Company's current revolving credit agreement (Note 4). Deferred
     finance charges are amortized over the term of the line of credit.
     Amortization is reflected as a component of interest expense.

                                      F-9

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     INCOME TAXES

     The Company records deferred taxes based on temporary taxable and
     deductible differences between the tax bases of the Company's assets and
     liabilities and their financial reporting bases. A valuation allowance is
     established when it is more likely than not that some or all of the
     deferred tax assets will not be realized. Income tax expense is the tax
     payable for the period and the change during the period in deferred tax
     assets and liabilities.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's financial instruments consist of cash and cash equivalents,
     accounts receivable, investments, account payable, accrued expenses and
     other liabilities and notes payable. At November 30, 2003, the fair value
     of these instruments approximated their carrying value.

     ADVERTISING EXPENSE

     The costs of advertising are expensed as incurred. Included in selling,
     general and administrative expenses are advertising costs of approximately
     $54,000 and $61,000 for the years ended November 30, 2003 and 2002,
     respectively.

     PER SHARE COMPUTATIONS

     Basic net income/(loss) per common share is computed by dividing net
     income/(loss) by the weighted average number of common shares outstanding
     during the period. Diluted income/(loss) per share is computed by dividing
     the net income/(loss) by the weighted average number of common shares
     outstanding, increased by the assumed conversion of other potentially
     dilutive securities during the period.

     The effect of 735,000 and 731,000 stock options and warrants outstanding at
     November 30, 2003 and 2002, respectively, were not included in the
     calculation of diluted loss per share for each of those years, as they were
     anti-dilutive.

     STOCK-BASED COMPENSATION

     The Company accounts for employee stock-based compensation using the
     intrinsic method in accordance with Accounting Principles Board Opinion No.
     25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations.
     Accordingly, in cases where exercise prices for stock option grants equal
     or exceed the trading market value of the stock at the date of grant, the
     Company recognizes no compensation expense. In cases where exercise prices
     are less than the fair value of the stock at the date of grant,
     compensation is recognized over the period of performance or the vesting
     period. The Company accounts for non-employee stock-based compensation
     using the fair market value approach for stock options and warrants, in
     accordance with SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION
     ARRANGEMENTS.

                                      F-10

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     The following table reflects supplemental financial information related to
     stock-based employee compensation, as required by SFAS 148 (See "Recent
     Accounting Pronouncements," below.):

<TABLE>
<CAPTION>
        Year ended November 30:                                           2003            2002
                                                                     --------------- ---------------
                                                                       (AS RESTATED)
<S>                                                                    <C>             <C>
        Net loss, as reported                                          $(1,665,000)    $(4,984,000)
                                                                     =============== ===============
        Loss per share, as reported                                    $     (0.29)    $     (1.11)
                                                                     =============== ===============

        Stock-based employee compensation costs used in the            $  (720,000)    $         -
                                                                     =============== ===============
        determination of net loss, as reported

        Stock-based employee compensation costs that would
        have been included in the determination of net loss if
        the fair value method (Statement 123) had been
        applied to all awards                                          $  (727,200)    $    (4,000)
                                                                     =============== ===============

        Unaudited pro forma net loss, as if the fair value
        method had been applied to all awards                          $(1,672,200)    $(4,988,000)
                                                                     =============== ===============

        Unaudited pro forma loss per share, as if the fair
        value method had been applied to all awards                    $     (0.29)    $     (1.11)
                                                                     =============== ===============
</TABLE>

     Stock based compensation costs that would have been included in the
     determination of net loss if the fair value method had been applied is
     calculated using the Black-Scholes option-pricing model, with the following
     assumptions: dividend yield - none, volatility of .8, risk-free interest
     rate of 4.34% in 2003 and 2.64% in 2002, assumed forfeiture rate as they
     occur, and an expected life of 4.5 and 7.9 years at November 30, 2003 and
     2002, respectively.

     RECENT ACCOUNTING PRONOUNCEMENTS

     FASB STATEMENT 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
     CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY (STATEMENT 150)

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
     Financial Instruments with Characteristics of both Liabilities and Equity."
     This statement establishes standards for classifying and measuring as
     liabilities certain financial instruments that have characteristics of both
     liabilities and equity. It requires that an issuer classify a financial
     instrument within its scope as a liability, or asset as appropriate, to
     represent obligations of the issuer. Many of the instruments covered by
     this statement have previously been classified as equity. SFAS No. 150 was
     effective for all financial instruments created or modified after May 31,
     2003, and to other instruments as of September 1, 2003. This statement did
     not have an impact on the Company's consolidated financial position,
     results of operations or cash flows.

                                      F-11

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     FASB STATEMENT 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS
     AND HEDGING ACTIVITIES (STATEMENT 149)

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
     Derivative Instruments and Hedging Activities." Statement 149, which amends
     and clarifies existing accounting pronouncements, addresses financial
     accounting and reporting for derivative or other hybrid instruments to
     require similar accounting treatment for contracts with comparable
     characteristics. This statement was effective for contracts entered into or
     modified after June 30, 2003 and for hedging activities designated after
     June 30, 2003. This statement did not have an impact on the Company's
     consolidated financial position, results of operations or cash flows.

     FASB INTERPRETATION NO. 46, CONSOLIDATION OF VARIABLE INTEREST ENTITIES
     (FIN 46)

     In December 2003, the FASB issued FASB Interpretation No. 46, Amended,
     "Consolidation of Variable Interest Entities," ("FIN 46"). FIN 46 addresses
     the consolidation requirements of companies that have variable interest
     entities. This Interpretation requires the consolidation of any variable
     interest entities in which a company has a controlling financial interest
     and requires disclosure of those that are not consolidated but in which the
     company has a significant variable interest. The requirements of FIN 46
     will be effective for the first quarter of 2004. The Company does not
     expect this Interpretation to have a material impact on its financial
     position, results of operations or cash flows.

2.   INVENTORY

     Inventory consists of the following as of November 30, 2003:

                Developed land                       $1,829,000
                Work in process                       1,593,000
                Speculative and model homes             913,000
                                                   -------------
                                                     $4,335,000
                                                   =============

3.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following as of November 30, 2003:

                Computer equipment and furniture    $   132,000
                Leasehold improvements                   65,000
                Other                                     3,000
                                                   -------------
                                                        200,000
                  Less: Accumulated Depreciation       (148,000)
                                                   -------------
                                                    $    52,000
                                                   =============

4.   NOTES PAYABLE

     Notes payable consists of borrowing under a combined $1.2 million
     acquisition and construction financing line and a $5.0 million demand
     revolving line of credit with Harbor Federal Savings Bank. The credit
     facilities are secured by inventories and related homebuilding assets and
     expire in August 2005. The annual interest rate is the bank's prime rate
     plus 1% (5.25% at November 30, 2003).

                                      F-12

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


5.   ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABIILITIES

     Accounts payable, accrued expenses and other liabilities consist of the
     following as of November 30, 2003:


            Accounts payable, trade                 $   125,000
            Accrued expenses                          1,103,000
                                                   -------------
                                                    $ 1,228,000
                                                   =============

6.   DIVESTITURE ACTIVITIES

     INNOVATION GROWTH PARTNERS: On April 23, 2002, the Company disposed of its
     51% interest in IGP by delivering its ownership interests to the IGP
     management in exchange for $1,030,000 of Innovation Growth Partner's
     ("IGP") cash reserves and warrants to acquire 25,000 shares of Miresco
     Investment Services, Inc., a privately held company which designs, imports
     and sells high quality area rugs throughout the United States. The
     transaction resulted in a loss of $541,000, which was recorded in the
     quarter ended May 31, 2002. IGP was originally established to develop
     businesses and provide management and consulting services to
     entrepreneurial and development stage companies, as well as developing and
     acquiring controlling interests in the businesses with which they consult.
     However, from its inception, IGP did not generate significant revenues or
     profits and required significant cash infusion. The consolidated financial
     statements and related notes for all periods prior to the disposal have
     been restated, where applicable, to reflect the disposal of IGP as a
     discontinued operation as provided in SFAS No. 144 ACCOUNTING FOR THE
     IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which was early adopted in the
     first fiscal quarter of the Company's year ended November 30, 2002.

     Results of operations from IGP are as follows:

                                                      2003            2002
                                                 -------------   -------------

      Revenues of discontinued subsidiary         $         -     $         -
                                                 =============   =============
      Net loss from discontinued subsidiary       $         -     $(1,020,000)
                                                 =============   =============

7.   SHAREHOLDERS' EQUITY ACTIVITY

     The Company's Certificate of Incorporation, as amended, provides for
     10,740,000 authorized shares of Common Stock (par value $.05 per share),
     520,000 shares of Redeemable Convertible Preferred Stock (par value $.10
     per share) and 2,000,000 shares of Class A Preferred Stock (par value $.10
     per share), 1,000,000 shares of which have been designated as Class A
     Series One Preferred Stock. None of the Preferred Stock is issued or
     outstanding.

     PRIVATE PLACEMENT

     On August 29, 2003, the Company sold 4,500,000 shares of its common stock
     to four of its officers for an aggregate purchase price of $1,080,000, or
     $0.24 per share, which exceeded both the book value and the closing price
     of the Common Stock on the date that the agreement to sell the shares was
     reached. A portion of the stock issued to the officers was issued out of
     Treasury shares. The 150,000 shares issued from Treasury were recorded
     using the first-in first-out method of accounting with the difference being
     recorded in paid-in-capital. Also see Note 1.B.

                                      F-13

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     STOCK REPURCHASE PROGRAM

     During 1998, the Company commenced a stock repurchase program covering up
     to 2,000,000 shares of Common Stock in open market repurchases and
     privately negotiated transactions. Treasury stock is recorded at cost as a
     reduction of shareholders' equity. During the fiscal year ended November
     30, 2003, there were no treasury stock purchases. During the fiscal year
     ended November 30, 2002, the Company purchased 19,000 shares of Common
     Stock for $12,000.

     STOCK COMPENSATION PROGRAMS AND TRANSACTIONS

     As of November 30, 2003 there were 353,347 options exercisable under all
     plans in the aggregate with a weighted average exercise price of $3.75.
     Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
                                                    2003                              2002
                                       -------------------------------   -------------------------------
                                                           Weighted                          Weighted
                                                            Average                           Average
                                                           Exercise                           Exercise
                                          Options           Price             Options          Price
                                       -------------------------------   -------------------------------
<S>                                          <C>          <C>                    <C>         <C>
     Outstanding
           Beginning of year                 731,200      $     3.24             292,200     $     5.89
           Granted at market price            40,000            0.21             467,000           0.45
           Exercised                               -               -                   -              -
           Expired or cancelled              (35,800)           0.69             (28,000)          0.79
                                       -------------------------------   -------------------------------
     Outstanding end of year                 735,400      $     2.48             731,200     $     3.24
                                       ===============================   ===============================

                                       -------------------------------   -------------------------------
     Exercisable as of November 30           353,347      $     3.75             271,000     $     5.53
                                       ===============================   ===============================
</TABLE>


                                      F-14

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     The weighted average exercise price of the options granted during fiscal
     years ended 2003 and 2002 is $0.21 and $0.45, respectively. The range of
     exercise prices for exercisable options and the weighted average remaining
     lives are reflected in the following table.

<TABLE>
<CAPTION>
                        Options and Warrants Outstanding                             Exercisable
     ---------------------------------------------------------------------  -----------------------------
         Range of                         Weighted Avg.      Weighted Avg.                Weighted Avg.
          Prices            Number        Remaining Life   Exercise Price     Number      Exercise Price
     ------------------  -------------  -----------------  ---------------  -----------  ----------------
<S>  <C>                      <C>             <C>           <C>               <C>         <C>
     $   0.01 - 1.00          513,400         7.70 yrs.     $       0.46      155,347     $        0.47
         1.01 - 5.00           50,000         2.42 yrs.             4.12       50,000              4.12
         5.01 - 6.00            4,000         0.42 yrs.             5.45        4,000              5.45
         6.01 - 7.00          120,000         0.17 yrs.             6.10      120,000              6.10
         7.01 - 9.00            8,000         1.42 yrs.             8.75        8,000              8.75
       13.01 - 14.00           40,000         1.17 yrs.            13.90       16,000             13.90
                         -------------  -----------------  ---------------  -----------  ----------------

      $ 0.01 - 14.00          735,400         5.65 yrs.     $       2.48      353,347     $        3.75
                         =============  =================  ===============  ===========  ================
</TABLE>

     During 2003, 150,000 shares of treasury stock were issued to management as
     part of the private placement. During 2002, the Company sold 194,000 shares
     of treasury stock to employees participating in the Employee Stock Purchase
     plan for $60,000. Treasury stock was relieved using the first-in first-out
     method of accounting with the difference being recorded as a reduction of
     paid-in capital.

     As of November 30, 2003, there were 396,228 shares of Common Stock reserved
     for possible future issuances under the Company's stock option plans.

     PREFERRED STOCK RIGHTS AGREEMENTS

     In February 1999, the Company's Board of Directors adopted a shareholder
     rights plan (the "Rights Plan") and declared a dividend of one preferred
     stock purchase right (a "Right") for each outstanding share of Common
     Stock. Under the Rights Plan, each Right represents the right to purchase
     from the Company one one-hundredth (1/100th) of a share of Class A
     Preferred Stock Series One (the "Preferred Stock") at a price of $5.50 per
     one one-hundredth (1/100th) of a share. Each one one-hundredth (1/100th) of
     a share of Preferred Stock has economic and voting terms equivalent to
     those of one share of the Company's Common Stock.

     The Rights will not become exercisable unless and until, among other
     things, a person or group acquires or commences a tender offer for 15% or
     more of the Company's outstanding Common Stock. In the event that a person
     or group, without Board approval, acquires 15% or more of the outstanding
     Common Stock, each Right would entitle its holder (other than the person or
     group) to purchase shares of Preferred Stock having a value equal to twice
     the exercise price. Also, if the Company is involved in a merger or sells
     more than 50% of its assets or earning power, each Right will entitle its
     holder (other than the acquiring person or group) to purchase shares of
     common stock of the acquiring company having a market value equal to twice
     the exercise price. If any person or group acquires at least 15%, but less
     than 50%, of the Company's Common Stock, the Board may, at its option,
     exchange one share of Common Stock for each Right (other than Rights held
     by such person or group). The Rights Plan may cause substantial dilution to
     a person or group that, without prior Board approval, acquires 15% or more
     of the Company's Common Stock unless the Rights are first redeemed by the
     Board. The Rights expire on February 1, 2009 and may be redeemed by the
     Company at a price of $.01 per Right.

                                      F-15

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


8.   INCOME TAXES

     The income tax benefit for the year ended November 30, 2003 arose from the
     release of certain reserves for income tax matters resolved during the
     period.

     The federal net operating loss carryforward for tax purposes is
     approximately $31,442,000 at November 30, 2003. The Company's ability to
     utilize its deferred tax assets, including the federal net operating loss
     carryforwards created prior to November 21, 1995 to offset future income,
     is limited to approximately $1,000,000 per year under Section 382 of the
     Internal Revenue Code as a result of the change in control of the Company
     in November 1995. These federal carryforwards will expire between 2007 and
     2023.

     The following schedule reconciles the income tax benefit at the federal
     statutory rate (35%) to the effective rate:

<TABLE>
<CAPTION>
                                                                2003             2002
                                                          ---------------------------------
<S>                                                        <C>              <C>
        Benefit using statutory rate                       $      753,000   $    1,743,000
        Change in valuation allowance                            (753,000)      (1,743,000)
        Reduction in Federal deferred tax liability               487,000                -
                                                          ---------------------------------
                                                           $      487,000   $            -
                                                          =================================
</TABLE>

     Temporary differences and carryforwards that give rise to deferred tax
     assets as of November 30, 2003 are as follows:

<TABLE>
<CAPTION>
                                                    Deferred Tax Assets (Liabilities)
                                                  ------------------------------------
                                                         2003               2002
                                                  ------------------------------------
<S>                                                <C>                <C>
        Net operating losses                       $    12,825,000    $    10,751,000
        Asset impairment charges                           321,000            321,000
        Capital loss carryforwards                      11,807,000            189,000
        Investment impairment charges                      263,000            140,000
        Unamortized start up costs                         904,000
        Bad debt and other allowances                        8,000             11,000
        Other                                               62,000             47,000
                                                  ------------------------------------
            Deferred tax assets                         26,190,000         11,720,000
        Less: Valuation allowances                     (26,190,000)       (11,720,000)
                                                  ------------------------------------
        Net deferred taxes                         $             -    $      (487,000)
                                                  ====================================
</TABLE>

                                      F-16

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


9.   INDUSTRY SEGMENTS AND MAJOR CUSTOMERS

     The Company accounts for reportable segments using the "management
     approach". The management approach focuses on disclosing financial
     information that the Company's management uses to make decisions about the
     Company's operating matters. During the operating periods presented in the
     accompanying financial statements, the Company operated in four business
     segments, as follows:

     HOMEBUILDING AND CONSULTING

     Homes by Calton, which commenced operations in the fourth quarter of fiscal
     2003, constructs single-family residential homes in the state of Florida.
     Revenues from homebuilding and consulting services in the year ended
     November 30, 2002 were derived solely from the purchaser of Calton Homes
     under a homebuilding consulting contract that expired on December 31, 2001.
     In addition, this division incurred a loss of approximately $1,196,000 due
     to the disposal of Innovation Growth Partners in the year ended November
     30, 2002.

     INTERNET DEVELOPMENT

     eCalton provides Internet strategy consulting services and develops
     comprehensive Internet-based solutions for its clients. eCalton's mission
     is to help businesses and organizations optimize their competitive business
     advantages through strategic use of the Internet and related technologies.
     The division provides its services to medium and large size companies in
     various industries, as well as one prime vertical market - the homebuilding
     industry.

     CORPORATE

     The corporate division provides senior management, accounting, human
     resources and investor relations services to all wholly-owned subsidiaries
     of Calton, Inc.

     CREDIT CARD LOYALTY BUSINESS

     PrivilegeONE was formed to develop and implement the PrivilegeONE Loyalty
     Program. The patent pending program aggregates disparate entities under the
     PrivilegeONE umbrella to create customer loyalty and retention to the
     individual entity through the issuance of co-branded credit card and
     membership cards. To introduce the program, PrivilegeONE elected the
     initial target customer base of automobile dealers throughout the United
     States.

                                      F-17

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     Operating results, by segment, for the years ended November 30, 2003 and
     2002 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              Fiscal year ended November 30, 2003
                                          -------------------------------------------------------------------------
                                              eCalton          P-ONE
                                             Internet       Credit Card
                                            Development       Loyalty      Homebuilding                   Total
                                           and Staffing      Business      & Consulting    Corporate     Company
                                          -------------------------------------------------------------------------
                                            AS RESTATED
<S>                                        <C>               <C>           <C>             <C>          <C>
     Segment revenues                      $        939      $       14    $      2,180    $       -    $    3,133
     Cost of revenues                               572               4           1,796            -         2,372
     Depreciation and amortization                    -               -               -           43            43
     Interest income                                  -               -               -           21            21
     Profit/(loss) from operations                 (165)           (489)            185       (1,196)       (1,665)
     Net loss                                      (165)           (489)            185       (1,196)       (1,665)
     Total assets                          $        136      $        3    $      5,309    $   1,189    $    6,637


                                                       Fiscal year ended November 30, 2002 - Reclassified
                                          -------------------------------------------------------------------------
                                              eCalton          P-ONE
                                             Internet       Credit Card
                                            Development       Loyalty      Homebuilding                   Total
                                           and Staffing      Business      & Consulting    Corporate     Company
                                          -------------------------------------------------------------------------

     Segment revenues                      $      1,812      $       34    $        108    $       -    $    1,954
     Cost of revenues                             1,238              12               -            -         1,250
     Depreciation and amortization                   86               -               -           53           139
     Interest income                                  -               -               -          124           124
     Loss from operations                          (881)         (1,346)              -       (1,196)       (3,423)
     Net loss                                      (881)         (1,346)         (1,561)      (1,196)       (4,984)
     Total assets                          $        321      $       22    $          -    $   3,562    $    3,905
</TABLE>

10.  COMMITMENTS AND CONTINGENT LIABILITIES

     WARRANTY COMMITMENTS ON HOMES BY CALTON The Company provides a basic
     limited warranty on workmanship and materials for all homes for a period of
     one year. The Company estimates the costs that may be incurred under its
     basic limited warranty and records a liability in the amount of such costs
     at the time the product revenue is recognized. Factors that affect the
     Company's warranty liability include the number of homes sold, historical
     and anticipated rates of warranty claims and average cost per claim.
     Estimated future warranty costs are charged to cost of sales in the period
     when the revenues from home closings are recognized. Such estimated
     warranty costs are 0.5% of total revenue. The Company periodically assesses
     the adequacy of its recorded warranty liabilities and adjusts the amount as
     necessary.

                                      F-18

<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


     Following is the Company's warranty reserve activity for the years ended
     November 30, 2003 and 2002:

                                                 2003              2002
                                            ---------------  ---------------

        Balance at beginning of period        $          -     $         -
        Reserves                                    11,000               -
        Payments                                         -               -
                                            ---------------  ---------------
        Balance at end of period              $     11,000     $         -
                                            ===============  ===============

     CREDIT CARD PROCESSING AGREEMENT
     The Company and PrivilegeONE have entered into a credit card processing
     agreement with Fleet Credit Card Services, L.P. ("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 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 Fleet agreement, is
     essential to conduct the Credit Card Loyalty Business Segment. Failure to
     maintain such agreements would have a material adverse affect on the Credit
     Card Loyalty Business Segment and, possibly the Company. Fleet informed
     PrivilegeONE in March 2003 of its desire to exit the PrivilegeONE Loyalty
     Credit Card business.

     OPERATING LEASE COMMITMENTS
     The Company and its consolidated subsidiaries lease their facilities and
     certain equipment under operating lease agreements with various expiration
     dates through 2005. Future non-cancelable minimum lease payments for each
     of the following years ending November 30 are as follows:

                              2004      $    82,000
                              2005           68,000
                                      --------------
                             Total      $   150,000
                                      ==============

     Rent expense for the years ended November 30, 2003 and 2002 amounted to
     $131,000 and $193,000, respectively.

     LITIGATION SETTLEMENTS
     During the fiscal year ended November 30, 2002, the Company received
     $458,000 in final and complete settlement of principally two litigation
     matters, which closed the matters in their entirety.


                                      F-19
<PAGE>

CALTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 2003 AND 2002


11.  QUARTERLY FINANCIAL RESULTS (UNAUDITED)

     Quarterly financial results for the years ended November 30, 2003 and 2002
     are as follows (amounts in thousands except per share items):

<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                    ----------------------------------------------------------
                                                       Feb. 28,        May 31,      Aug. 31,       Nov. 30,
                                                         2003           2003          2003           2003
                                                    -------------  -------------  -------------  -------------
                                                                                   AS RESTATED
<S>                                                  <C>            <C>            <C>            <C>
     Revenue                                         $       373    $       253    $       188    $     2,319
                                                    =============  =============  =============  =============
     Gross profit                                    $       126    $        90    $        84    $       461
                                                    =============  =============  =============  =============
     Income/(loss) from continuing operations        $      (646)   $      (437)   $    (1,167)   $       585
                                                    =============  =============  =============  =============
     Net income/(loss)                               $      (646)   $      (437)   $    (1,167)   $       585
                                                    =============  =============  =============  =============

     Basic and diluted income/(loss) per share:
          Income/(loss) from continuing operations   $     (0.14)   $     (0.09)   $     (0.24)   $      0.06
          Net income/(loss)                          $     (0.14)   $     (0.09)   $     (0.24)   $      0.06


                                                                       Three Months Ended
                                                    ----------------------------------------------------------
                                                       Feb. 28,        May 31,      Aug. 31,       Nov. 30,
                                                         2002           2002          2002           2002
                                                    -------------  -------------  -------------  -------------

     Revenue                                         $       629    $       499    $       441    $       385
                                                    =============  =============  =============  =============
     Gross profit                                    $       217    $       159    $       159    $       169
                                                    =============  =============  =============  =============
     Loss from continuing operations                 $    (1,706)   $      (760)   $      (759)   $      (198)
                                                    =============  =============  =============  =============
     Net loss                                        $    (2,148)   $    (1,857)   $      (759)   $      (220)
                                                    =============  =============  =============  =============

     Basic and diluted loss per share:
          Loss from continuing operations            $     (0.38)   $     (0.17)   $     (0.17)   $     (0.05)
          Net loss                                   $     (0.48)   $     (0.42)   $     (0.17)   $     (0.05)
</TABLE>

     As more fully discussed in Note 6, the Company has accounted for the
     disposal of IGP during the second quarter of fiscal year ended November 30,
     2002 as a discontinued operation. The quarterly financial information in
     the table above for the quarter ended February 28, 2002 differs from the
     Company's quarterly filing for that period since it has been restated to
     reflect IGP as a discontinued operation.

     The Company's investment in AIM in the amount of $750,000 was written off
     during the first quarter of 2002. Subsequent recoveries of $150,000 and
     $200,000 were received and recorded in the second and third quarters,
     respectively, of 2002. The Company received and recorded litigation
     settlements of $148,000 and $310,000 in the second and third quarters,
     respectively, of 2002. The Company performs its annual impairment review
     during the fourth quarter of each year, or sooner if circumstances
     indicate. As a result of these reviews charges of $116,000 were recorded
     during the fourth quarters of fiscal 2002.

                                      F-20

<PAGE>

                          CALTON, INC. AND SUBSIDIARIES
                                INDEX TO EXHIBITS

2.1     Amended and Restated Stock Purchase Agreement effective September 2,
        1998 among Calton, Inc., Calton Homes, Inc. and Centex Real Estate
        Corp., incorporated by reference to Exhibit 2 to Form 8-K of Registrant
        dated December 31, 1998.

2.2     Amendment No. 1 to Amended and Restated Stock Purchase Agreement dated
        as of December 28, 1998 among Calton, Inc., Calton Homes, Inc. and
        Braewood Development Corp. (assignee of Centex Real Estate Corp.),
        incorporated by reference to Exhibit 2.1 to Form 8-K of Registrant dated
        December 31, 1998.

2.3     Assignment of Interest in Innovative Growth Partners, LLC and Agreement
        as to Other Matters dated as of April 18, 2002 among Calton, Inc.,
        Innovation Growth Partners, LLC and, Richard Dole, Frederick Huttner and
        James West, incorporated by reference to Exhibit 2 to Form 8-K of
        Registrant dated May 8, 2002.

2.4     Amended and Restated Agreement for Sale and Purchase of Assets effective
        June 13, 2003 between Homes by Calton, LLC, the Registrant and Beazer
        Homes Corp., incorporated by reference to Exhibit 2.1 to Form 10-QSB of
        Registrant for the fiscal quarter ended May 31, 2003.

2.5     First Amendment to Amended and Restated Agreement for Sale and Purchase
        of Assets effective June 13, 2003 between Homes by Calton, LLC, the
        Registrant and Beazer Homes Corp., incorporated by reference to Exhibit
        2.2 to Form 10-QSB for the fiscal quarter ended May 31, 2003.

2.6     LLC Purchase Agreement dated as of July 10, 2003 among the Registrant,
        Anthony J. Caldarone, John G. Yates, Maria F. Caldarone and Laura A.
        Camisa, incorporated by reference to Exhibit 2.3 to Form 10-QSB of
        Registrant for the fiscal quarter ended May 31, 2003.

3.1     Amended and Restated Certificate of Incorporation of the Registrant
        filed with the Secretary of State, State of New Jersey on May 28, 1993,
        incorporated by reference to Exhibit 3.2 to Amendment No. 1 to Form S-1
        Registration Statement under the Securities Act of 1933, Registration
        No. 33-60022, Certificate of Amendment to Amended and Restated
        Certificate of Incorporation of Registrant filed with the Secretary of
        State, State of New Jersey on April 27, 1994, incorporated by reference
        to Exhibit 3(b) to Form S-1 Registration Statement under the Securities
        Act of 1933, Registration No. 33-76312, and Certificate of Amendment to
        Amended and Restated Certificate of Incorporation of Registrant filed
        with the Secretary of State, State of New Jersey on May 29, 1997,
        incorporated by reference to Exhibit 3.1 to Form 10-K of Registrant for
        the fiscal year ended November 30, 1997, Certificate of Amendment to
        Amended and Restated Certificate of Incorporation of Registrant filed
        with the Secretary of State, State of New Jersey on February 2, 1999,
        incorporated by reference to Exhibit 3.1 to Form 10-K of Registrant for
        the fiscal year ended November 30, 1998, and Certificate of Amendment to
        Amended and Restated Certificate of Incorporation filed with the
        Secretary of State, State of New Jersey on May 30, 2000, incorporated by
        reference to Exhibit 3.1 to Form 10-K of Registrant for the fiscal year
        ended November 30, 2000.

3.2     By Laws of Registrant, incorporated by reference to Exhibit 3.2 to Form
        10-KSB of Registrant for the fiscal year ended November 30, 2002.

4.1     Option to Purchase Common Stock dated May 10, 2002 issued to Steven R.
        Tetreault, incorporated by reference to similarly numbered exhibit filed
        with Registrant's Report on Form 10-Q for the fiscal quarter ended May
        31, 2001.

4.2     Option to Purchase Common Stock dated May 10, 2002 issued to Thomas E.
        Van Fechtmann, incorporated by reference to similarly numbered exhibit
        filed with Registrant's Report on Form 10-Q for the fiscal quarter ended
        May 31, 2001.

                                      E-1
<PAGE>

4.3     Option to Purchase Common Stock dated May 10, 2002 issued to Thomas
        Corley, incorporated by reference to similarly numbered exhibit filed
        with Registrant's Report on Form 10-Q for the fiscal quarter ended May
        31, 2001.

4.4     Rights Agreement dated February 1, 1999 by and between the Registrant
        and First City Transfer Company as Rights Agent, including forms of
        Rights Certificate and Election to Purchase included as Exhibit B
        thereto, incorporated by reference to Exhibit 1 to Form 8-A Registration
        Statement of Registrant filed with the Securities and Exchange
        Commission on February 2, 1999.

10.1    1996 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to
        Form 10-K of Registrant for the fiscal year ended November 30, 1996.(*)

10.3    Registrant's Amended and Restated 1993 Non-Qualified Stock Option Plan,
        incorporated by reference to Exhibit 10.3 to Form 10-K of Registrant for
        the fiscal year ended November 30, 1995. (*)

10.4    Incentive Compensation Plan of Registrant, incorporated by reference to
        Exhibit 10.4 of Form 10-KSB of Registrant for the fiscal year ended
        November 30, 2002.(*)

10.7    Executive Employment Agreement dated as of November 21, 1995 between
        Registrant and Anthony J. Caldarone, incorporated by reference to
        Exhibit 10.7 to Form 10-K of Registrant for the fiscal year ended
        November 30, 1995, Amendment to Executive Employment Agreement dated as
        of April 14, 1999, incorporated by reference to Exhibit 10.7 to Form
        10-K of Registrant for the fiscal year ended November 30, 1999 and
        Second Amendment to Executive Employment Agreement dated as of October
        17, 2002, incorporated by reference to Exhibit 10.7 to Form 10-K of
        Registrant for fiscal year ended November 30, 2001, Third Amendment to
        Executive Employment Agreement dated as of October 30, 2002 incorporated
        by reference to Exhibit 10.7 to Form 10-K of Registrant for fiscal year
        ended November 2002 and Fourth Amendment to Executive Employment
        Agreement dated as of November 10, 2003, incorporated by reference to
        Exhibit 10.7 to Form 10-KSB of Registrant for fiscal year ended November
        30, 2003 which is being amended by this Form 10-KSB/A.(**).

10.9    2000 Equity Incentive Plan, as amended, incorporated by reference to
        Exhibit 10.9 to Form 10-KSB of Registrant for fiscal year ended November
        30, 2003 which is being amended by this Form 10-KSB/A. (*)

10.10   Option Agreement dated July 19, 1999 between the Company and Kenneth D.
        Hill, incorporated by reference to Exhibit 10.11 to Form 10-K of
        Registrant for the fiscal year ended November 30, 1999.

10.12   Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.12
        to Form 10-K of Registrant for the fiscal year ended November 30, 2000.

10.21   Profit Sharing Arrangement among the Registrant, John G. Yates and Tomas
        C Corley, incorporated by reference to Exhibit 10.21 to Form 10-KSB of
        Registrant for fiscal year ended November 30, 2003 which is being
        amended by this Form 10-KSB/A. (**)

10.23   Mandatory Redeemable, Convertible, Subordinated Note issued by Automated
        Information Management, Inc., incorporated by reference to similarly
        numbered exhibit to Form 10-K of Registrant for fiscal year ended
        November 30, 2001.

10.24   Co-Brand Credit Card Program Agreement dated as of May 8, 2001 between
        Fleet Credit Card Services, L.P. and PrivilegeONE Networks, LLC,
        incorporated by reference to similarly numbered exhibit to Form 10-K of
        Registrant for the fiscal year ended November 30, 2002. Information has
        been omitted from this exhibit and is subject to an order granting
        confidential treatment.

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<PAGE>

10.25   Amendment No. 1 to Co-Brand Credit Card Agreement dated as of August 15,
        2002 between Fleet Credit Card Services, L.P. and PrivilegeONE Networks,
        LLC, incorporated by reference to similarly numbered exhibit to Form
        10-K of Registrant for the fiscal year ended November 30, 2002.
        Information has been omitted from this exhibit and is subject to an
        order granting confidential treatment.

10.26   Services Agreement dated as of October 2002 between PrivilegeONE
        Networks, LLC and World Omni Financial Corp., incorporated by reference
        to similarly numbered exhibit to Form 10-K of Registrant for the fiscal
        year ended November 30, 2002. Information has been omitted from this
        exhibit and is subject to an order granting confidential treatment.

10.27   Stock Purchase Agreement dated as of June 26, 2003 among the Registrant,
        Anthony J. Caldarone, John G. Yates, Maria F. Caldarone and Laura A.
        Camisa, incorporated by reference to Exhibit 10 to Form 10-QSB of
        Registrant for the fiscal quarter ended May 31, 2003.

10.28   Amendment to Stock Purchase Agreement dated as of June 26, 2003 among
        the Registrant, Anthony J. Caldarone, John G. Yates, Maria F. Caldarone
        and Laura A. Camisa, incorporated by reference to Exhibit 10.28 to Form
        10-KSB of Registrant for fiscal year ended November 30, 2003 which is
        being amended by this Form 10-KSB/A.

10.29   Registration Rights Agreement dated as of April 29, 2003 among the
        Registrant, Anthony J. Caldarone, John G. Yates, Maria F. Caldarone and
        Laura A. Camisa, incorporated by reference to Exhibit 10.1 to Form
        10-QSB of Registrant for the fiscal quarter ended August 31, 2003.

10.30   Commitment Letter dated as of August 13, 2003 and Promissory Notes dated
        as of August 27, 2003, between Harbor Federal Savings Bank and Homes by
        Calton, LLC, incorporated by reference to Exhibit 10.30 to Form 10-KSB
        of Registrant for fiscal year ended November 30, 2003 which is being
        amended by this Form 10-KSB/A.

21.     Subsidiaries of the Registrant, incorporated by reference to Exhibit 21
        to Form 10-KSB of Registrant for fiscal year ended November 30, 2003
        which is being amended by this Form 10-KSB/A.

23.     Consent of Aidman, Piser & Company, P.A.

24.     Power of Attorney (located on signature page of Form 10-KSB of
        Registrant for fiscal year ended November 30, 2003 which is being
        amended by this Form 10-KSB/A).

31.1    Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of
        2002

31.2    Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of
        2002

32.1    Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of
        2002

32.2    Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of
        2002

        (*)     Constitutes a compensatory plan required to be filed pursuant to
                Item 13(a) of Form 10-KSB.

        (**)    Constitutes a management contract required to be filed pursuant
                to Item 13(a) of Form 10-KSB.

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