SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                                   (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, 1998

                                       or

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

                           Commission file no. 1-8846

                                  CALTON, INC.
             (Exact name of registrant as specified in its charter)

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

              500 CRAIG ROAD
           MANALAPAN, NEW JERSEY                                07726-8790
(Addresses of principal executive offices)                       Zip Code

                         Registrant's telephone number,
                       including area code: (732) 780-1800

          Securities registered pursuant to Section 12(b) of the Act:

                                                          Name of each exchange
     Title of Class                                        on which registered
     --------------                                        -------------------

      Common Stock                                       American Stock Exchange
$.01 par value per share

         Rights                                          American Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K |_|.

The aggregate market value (based upon the last sales price reported by the
American Stock Exchange) of voting shares held by non-affiliates of the
registrant as of February 16, 1999 was $37,513,000.

As of February 16, 1999, 27,282,000 shares of Common Stock were outstanding.

Certain items in Parts I and II incorporate information by reference to the 1998
Annual Report to Shareholders and Part III is incorporated by reference to the
Proxy Statement for the annual meeting of shareholders to be held on April 14,
1999. Except for portions which are expressly incorporated by reference herein,
the Annual Report is not deemed filed a part hereof.
<PAGE>

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Disclosure Concerning Forward-Looking Statements

All statements, other than statements of historical fact, included in this Form
10-K, including without limitation the statements incorporated by reference in
Part II, Item 7: "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-K. Such potential risks and uncertainties, include without limitation,
matters related to national and local economic conditions, the effect of
governmental regulation on the Company, the competitive environment in which the
Company operates, 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 as of the date of this Form 10-K 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.
--------------------------------------------------------------------------------

                                     PART I

ITEM 1. BUSINESS

      (A) GENERAL DEVELOPMENT OF BUSINESS

            GENERAL

            Calton, Inc. (the "Company" or "Calton"), through its subsidiary,
            Calton Homes, Inc. ("Calton Homes"), was previously engaged in the
            design, construction and sale of single family detached homes in New
            Jersey. The Company delivered 325 homes in fiscal 1998 with an
            average sales price of $286,000.

            On November 30, 1997, the Company sold its Orlando, Florida
            homebuilding assets for $16.7 million in cash. On December 31, 1998,
            the Company sold Calton Homes for $48.1 million in cash, subject to
            a $5.2 million holdback and certain post closing adjustments. See
            "Sale of Calton Homes." This sale was part of an overall strategy
            designed to enhance shareholder value. See "Strategic Plan."

            Calton was incorporated in 1981 for the purpose of acquiring all of
            the issued and outstanding capital stock of Kaufman and Broad of New
            Jersey, Inc., a New Jersey corporation, from Kaufman and Broad,
            Inc., a Maryland corporation. After the acquisition, the name of
            Kaufman and Broad of New Jersey, Inc. was changed to Calton Homes.
            Calton maintains its executive offices at 500 Craig Road, Manalapan,
            New Jersey 07726 and its telephone number is (732) 780-1800. As used
            herein, the term "Company" refers to Calton, Inc. and its
            subsidiaries, unless the context indicates otherwise.

            SALE OF CALTON HOMES

            On December 31, 1998 (the "Closing Date"), Calton completed the sale
            of Calton Homes, its wholly owned homebuilding subsidiary, to Centex
            Real Estate Corporation ("Braewood"), the homebuilding subsidiary of
            Centex Corporation (NYSE:CTX), one of the nation's largest
            homebuilders (the "Sale Transaction"). The purchase price for the
            stock of Calton Homes, which was paid in cash at closing, was $48.1
            million, subject to a $5.2 million holdback, and is subject to
            certain post closing adjustments. Calton has entered into an
            agreement to provide consulting services to Braewood which will
            entitle the Company to payments of $1.3 million per year over a
            three year period.

            The Company estimates that it will record a pre-tax gain of
            approximately $8.8 million and a net gain of approximately $4.6
            million after recording a non-cash provision in lieu of taxes of
            $4.2 million as a result of the Sale Transaction in the first
            quarter of fiscal 1999.

            Upon completion of the Sale Transaction, substantially all of the
            employees of Calton and Calton Homes continued their employment with
            Calton Homes. The current officers of Calton are Anthony J.
            Caldarone, Chairman, President and Chief Executive Officer, David


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<PAGE>

            J. Coppola, Vice President and Treasurer, and Mary Magee, Secretary.
            Each of the Company's directors continues to serve on the Board of
            Directors.

            STRATEGIC PLAN

            General. The Sale Transaction was effected pursuant to a strategic
            plan designed to enhance shareholder value. Pursuant to this plan,
            the Company has (i) initiated a significant stock repurchase
            program, (ii) intends to shift the Company's business focus to
            providing various services to participants in the homebuilding
            industry and (iii) is seeking to invest in, acquire or combine with
            one or more operating businesses within or outside of the
            homebuilding industry.

            The Company anticipates ongoing general and administrative expenses
            of approximately $100,000 per month during the initial months of
            fiscal 1999. Pending the implementation of the Company's strategic
            plan, the Company's cash will be invested as management of the
            Company deems prudent, which may include, but will not be limited
            to, mutual funds, money market accounts, stocks, bonds or United
            States government or municipal securities; provided, however, that
            the Company will attempt to invest the net proceeds and conduct its
            activities in a manner which will not result in the Company being
            deemed to be an investment company under the Investment Company Act
            of 1940, as amended, or a personal holding company for federal
            income tax purposes. See "Certain Risks."

            If within 18 months from the Closing Date, the Company has not
            redeployed a substantial portion of the proceeds of the Sale
            Transaction, or developed a plan to redeploy a substantial portion
            of such proceeds within a reasonable time frame, the Company will be
            liquidated and dissolved.

            Stock Repurchase Program. The Company plans to use a portion of the
            proceeds of the Sale Transaction to fund a stock repurchase program
            (the "Stock Repurchase Program") pursuant to which it will seek to
            acquire up to 10,000,000 shares of its Common Stock over a 12 month
            period. The Company expects to purchase shares from time to time in
            privately negotiated transactions or in open market purchases. The
            timing and number of shares purchased will depend on a variety of
            factors, including market price. The Stock Repurchase Program will
            reduce the Company's cash and shareholders equity while increasing
            book value per share to the extent that the average price paid per
            share is less than the book value per share. The Company is
            endeavoring to conduct the Stock Repurchase Program in a manner that
            will not adversely affect the liquidity of the Common Stock. The
            Company anticipates that there will still be a sufficient number of
            shares outstanding and publicly traded following the completion of
            the Stock Repurchase Program to ensure a continued trading market in
            its Common Stock. Since October 31, 1998, the Company has acquired
            approximately 1,230,000 shares of Common Stock at an average price
            of $1.09 per share.

            Consulting, Investment and Advisory Services. The Board of Directors
            intends to shift the Company's primary business focus to providing
            various services to participants in the homebuilding industry,
            including consulting services (including the consulting services
            being provided to Braewood pursuant to a consulting agreement
            entered into in connection with the Sale Transaction (the
            "Consulting Agreement")), equity and debt financing and financial
            advisory services. The Company's management believes that emerging
            growth of small to middle market companies will provide an
            opportunity which may enable the Company to realize returns on its
            equity which exceed those which can currently be achieved through
            direct participation in the homebuilding industry in New Jersey and
            Pennsylvania. Management believes that these objectives can be
            achieved by:


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            o     Providing consulting services to Braewood and other
                  participants in the homebuilding industry as permitted by the
                  Consulting Agreement and the Company's non-competition
                  agreement with Braewood (the "Non-Competition Agreement");

            o     Investing in both equity and debt securities, generally of
                  homebuilders and real estate companies operating in diverse
                  geographic areas;

            o     Underwriting project financing for emerging growth
                  homebuilders with participation from institutional investors
                  to provide for additional leverage;

            o     Providing advisory services and investment capital in
                  connection with workouts, restructurings, recapitalizations
                  and mergers and acquisitions;

            o     Acquiring and selling companies; and

            o     Administering Calton's existing real estate subsidiaries and
                  utilizing, to the extent possible, the Company's net loss
                  carryforwards.

            The Consulting Agreement requires the Company to provide certain
            consulting services to Braewood, including information, advice and
            recommendations with respect to the homebuilding market in New
            Jersey and Pennsylvania. In addition, the Company has agreed to use
            its best efforts to identify corporate acquisition candidates and
            other business opportunities for Braewood and Calton Homes in New
            Jersey and Pennsylvania, and upon Braewood's request, to assist
            Braewood and Calton Homes in (i) obtaining development entitlements
            for land, (ii) marketing and promotional activities, (iii) procuring
            goods and services from third parties and (iv) locating, screening,
            interviewing and recommending compensation levels for prospective
            employees. The Company has agreed that it will not provide similar
            services to others in New Jersey or Pennsylvania during the term of
            the Consulting Agreement and for a four year period after the
            expiration of the three year term of the Consulting Agreement.

            The Consulting Agreement requires Anthony J. Caldarone, the
            Company's Chairman, President and Chief Executive Officer to
            participate in the performance of the consulting services to
            Braewood and for so long as he remains employed by or associated
            with the Company.

            In consideration for the services to be provided by the Company
            under the Consulting Agreement, Braewood will be required to pay the
            Company a consulting fee of $1.3 million per year, payable in equal
            quarterly installments during the three year term of the agreement.
            Other than the Consulting Agreement, the Company has not entered
            into any arrangements to provide consulting, investment or advisory
            services to any third parties.

            The Non-Competition Agreement will limit the scope of the activities
            that can be conducted by the Company in New Jersey and Pennsylvania.
            Pursuant to the Non-Competition Agreement, the Company has agreed
            that until the fourth anniversary of the date on which the
            Consulting Agreement expires, it will not participate in the
            provision of homebuilding services, directly or indirectly, in
            Pennsylvania or New Jersey, either through any form of ownership
            (except the ownership of up to 5% of a publicly held corporation) or
            as a principal, agent, employee, employer, advisor, consultant,
            lender, partner or any other capacity whatsoever. The Company will,
            however, be permitted to provide second or wraparound mortgage
            financing to certain small homebuilding companies on a project by
            project basis. Any such financing may include participating
            mortgages; provided however, that the Company shall be prohibited
            from obtaining as a result of such financings or any foreclosures,
            deeds in lieu of foreclosure or other enforcement proceeding an
            interest in the equity, capital or profits of any homebuilding
            company in excess of ten percent (10%), and from directly or
            indirectly participating in the management of control of any such
            company. The Company may, in order to preserve its investment if a
            borrower defaults, acquire a


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<PAGE>

            project or projects owned by such defaulting borrower, but following
            its acquisition, the Company (i) may not expand any such project
            beyond the investment therein at acquisition (except as necessary to
            prevent further loss or to fulfill contracts to build and deliver
            homes), (ii) must provide Braewood a right of first refusal if the
            Company is presented with an offer to buy and (iii) must fully
            dispose of any such project within 12 months.

            Acquisitions and Business Combinations. The Company is seeking to
            enhance shareholder value by investing in, acquiring or combining
            with one or more operating businesses within or outside of the
            homebuilding industry. Such activities could include the acquisition
            of an entire company or companies, or divisions thereof, either
            through a merger or a purchase of assets, as well as an investment
            in the securities of a company or companies, or alternatively, a
            combination with another business in which the Company would not be
            the surviving corporation. The Company has not entered into any
            substantive negotiations concerning such acquisitions or
            investments. There can be no assurance that the Company will be
            successful in such efforts, and the redeployment of the Company's
            assets into new investment and businesses entails risk to its
            shareholders. In addition, the scope of the Company's activities
            will be limited by the Non-Competition Agreement, which prohibits
            the Company from engaging in the operating activity which has
            historically represented the Company's primary business in its
            primary market.

            CERTAIN RISKS

            Lack of Operating History in New Business. As part of its strategic
            plan, the Company intends to provide various services to
            participants in the homebuilding industry, including investment,
            advisory and consulting services. In addition, the Company has
            entered into a Consulting Agreement with Braewood; however, the
            Company has not previously engaged in providing such services to
            third parties. In addition, the Company has not entered into any
            agreement to provide such services to any other third party.
            Further, the Company will be subject to the Non-Competition
            Agreement with Braewood which will limit the scope of the activities
            which can be conducted by the Company in New Jersey and
            Pennsylvania. Moreover, the success of the Company will depend on
            the Company's ability to attract and retain qualified personnel. As
            a result, no assurance can be given that the Company will be
            successful in implementing its strategic plan or that the Company
            will be able to generate profits from any such activities.

            Risks Associated with Potential Business Combinations. In addition
            to engaging in the activities described above under the caption
            "Lack of Operating History in New Business," the Company is seeking
            to enhance shareholder value by investing in, acquiring or combining
            with one or more operating businesses either within or outside of
            the homebuilding industry. As the Company has not yet identified a
            prospective business (a "Target Business") with which it is likely
            to effectuate a merger, exchange of capital stock, stock or asset
            acquisition or other similar type of transaction (a "Business
            Combination"), shareholders have no basis on which to evaluate the
            possible merits or risks of a Target Business. Management of the
            Company will endeavor to evaluate the risks inherent in any
            particular Target Business; however, there can be no assurance that
            the Company will properly ascertain all such risks. In many cases,
            shareholder approval will not be required to effect such a Business
            Combination. The fair market value of the Target Business will be
            determined by the Board of Directors of the Company. Therefore, the
            Board of Directors has significant discretion in determining whether
            a Target Business is suitable for a proposed Business Combination.
            Furthermore, the structure of a Business Combination with a Target
            Business, which may take the form of a merger, exchange of capital
            stock or stock or asset acquisition, cannot be determined


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            because, at the present time, no agreements, arrangements or
            understandings exist with respect to any such proposed Business
            Combination.

            Continued Listing on AMEX The Company's Common Stock is currently
            listed for trading on the American Stock Exchange ("AMEX"). Under
            AMEX's suspension and delisting policies, AMEX will normally
            consider suspending dealings in, or removing from listing securities
            of a company, if the company has sold or otherwise disposed of its
            principal operating assets, has ceased to be an operating company or
            has discontinued a substantial portion of its operations or business
            for any reason. AMEX has indicated that the Common Stock may become
            subject to delisting if the Company is not engaged in active
            business operations within a reasonable period of time after the
            closing of the Sale Transaction. If the Common Stock is delisted, it
            would trade on the OTC Bulletin Board or in the "pink sheets"
            maintained by the National Quotation Bureau, Inc., which are
            generally considered to be less efficient markets.

            Investment Company Act Considerations. The Investment Company Act of
            1940, as amended ("1940 Act"), requires the registration of, and
            imposes various substantive restrictions on, certain companies that
            engage primarily, or propose to engage primarily, in the business of
            investing, reinvesting, or trading in securities, or that fail
            certain statistical tests regarding the composition of assets and
            source of income, and are not primarily engaged in a business other
            than investing, holding, owning or trading securities. The Company
            intends to conduct its activities in a manner which will not subject
            the Company to regulation under the 1940 Act; however, there can be
            no assurance that the Company will not be deemed to be an investment
            company under the 1940 Act. If the Company were required to register
            as an investment company under the 1940 Act, it would become subject
            to substantial regulation with respect to its capital structure,
            management, operations, transactions with affiliates, the nature of
            its investments and other matters. In addition, the 1940 Act imposes
            certain requirements on companies deemed to be within its regulatory
            scope, including compliance with burdensome registry, recordkeeping,
            voting, proxy, disclosure and other rules and regulations. In the
            event of the characterization of the Company as an investment
            company, the failure of the Company to satisfy regulatory
            requirements, whether on a timely basis or at all, could have a
            material adverse effect on the Company.

            Certain Tax Matters. Section 541 of the Internal Revenue Code of
            1986, as amended (the "IRC"), subjects a corporation which is a
            "personal holding company," as defined in the IRC, to a 39.6%
            penalty tax on undistributed personal holding company income in
            addition to the corporation's normal income tax. The Company could
            become subject to the penalty tax if (i) 60% or more of its adjusted
            ordinary gross income is personal holding company income and (ii)
            50% or more of its outstanding Common Stock is owned, directly or
            indirectly, by five or fewer individuals. Personal holding company
            income is comprised primarily of passive investment income plus,
            under certain circumstances, personal service income.

            Indemnity Obligations. The stock purchase agreement pursuant to
            which the Company sold Calton Homes requires the Company to
            indemnify the purchaser for, among other things, breaches of the
            agreement and certain liabilities that arise out of events occurring
            prior to the closing of the sale. The Company has deposited an
            aggregate of approximately $5.2 million in escrow, $3 million of
            which provide security for the Company's indemnity obligations and
            approximately $2.2 million of which were deposited to fund costs
            associated with certain specified litigation involving Calton Homes.
            Under certain circumstances, the Company may be required to deposit


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            additional funds into escrow. In addition, the Company's indemnity
            obligations are not limited to the amount deposited in escrow. No
            assurance can be given that the purchaser of Calton Homes will not
            make claims for indemnity or that a significant portion of the
            escrowed funds will not be utilized to resolve litigation. See
            "Legal Proceedings."

      (B)   FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

            Substantially all revenues and equity in earnings, operating profits
            and assets of the Company and its subsidiaries in fiscal 1998 were
            attributable to one line of business, the development and sale of
            residential housing and the acquisition and sale of real property.

      (C)   DESCRIPTION OF BUSINESS

            GENERAL

            During fiscal 1998, the Company designed, constructed and sold
            single family detached homes in New Jersey. The Company marketed
            primarily to second and third time move-up homebuyers with its
            conventional housing product line and active adult homebuyers. In
            fiscal 1998, the Company delivered 325 homes with an average sales
            price of approximately $286,000. In addition, the Company sold land
            and options to acquire land to other builders from time to time
            after adding value by obtaining entitlements. The Company completed
            the sale of its homebuilding operations on December 31, 1998. See
            "Sale of Calton Homes."

            GEOGRAPHIC MARKETS

            In fiscal 1998, the Company's homebuilding operations were located
            in New Jersey. Generally, the Company conducted its homebuilding
            operations in markets that demonstrated a strong growth profile. In
            1997, the Company decided to exit from the Florida market by selling
            its Orlando, Florida homebuilding assets based on the Company's
            determination that the Company's resources would be better invested
            in the New Jersey market. The Company selected locations for its
            residential housing communities that had ready access to major
            arterial highways and which experienced increased housing demand.
            During 1998, the Company conducted homebuilding activities in
            Burlington, Hunterdon, Mercer, Middlesex, Monmouth and Ocean
            counties in New Jersey.

            PRODUCTS

            The Company offered a variety of single-family detached homestyles
            tailored to meet the specific needs of the particular geographic and
            demographic markets served, including the second and third time
            move-up homebuyer, the active adult homebuyer and, to a lesser
            extent, the first time and first time move-up homebuyer. From time
            to time, the Company also offered townhomes. Homestyles, prices and
            sizes were tailored to each community based upon the Company's
            assessment of specific market conditions and the restrictions
            imposed by local jurisdictions. In certain projects, recreational
            amenities such as tennis courts and playground areas were
            constructed by the Company.

            During 1998, base prices in the Company's conventional housing
            communities that offered various styles of two-story colonial homes
            ranged from $229,000 to $611,000 for homes ranging in size from
            approximately 2,700 square feet to 4,500 square feet. The Company
            offered nine different single-family primarily one story detached
            home types in its active adult community, Renaissance, ranging from
            $140,000 to $235,000. These homes ranged in size from approximately
            1,500 square feet to 2,200 square feet.


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            LAND ACQUISITION, PLANNING AND DEVELOPMENT

            Substantially all of the land acquired by the Company was purchased
            only after necessary entitlements were obtained so that the Company
            had certain rights to begin development or construction as market
            conditions dictated. The term "entitlements" refers to developmental
            approvals, tentative maps or recorded plats, depending on the
            jurisdiction within which the land was located. Entitlements
            generally give a developer the right to obtain building permits upon
            compliance with certain conditions that are usually within the
            developer's control. Although entitlements were ordinarily obtained
            prior to the Company's purchase of the land, the Company was still
            required to obtain a variety of other governmental approvals and
            permits during the development process.

            The Company's general policy was to control land for future
            development or sale through the use of purchase options or
            contingent purchase contracts whenever practicable and where market
            conditions permitted. The Company generally endeavored to acquire
            property for development on an installment method, with closings on
            a portion of a project on a periodic basis. From time to time, the
            Company acquired property through the use of purchase money
            mortgages. In certain cases, when available, the Company acquired
            finished lots on a rolling option basis. These policies enabled the
            Company to limit its financial commitments, including cash
            expenditures and interest and other carrying costs, and avoid large
            land inventories exceeding the Company's near term development
            needs. At the same time, the Company retained any appreciation in
            the value of the parcel prior to exercising the option or closing
            the contingent purchase contract. During the option or contingency
            period, the Company performed feasibility studies, technical,
            engineering and environmental surveys and obtained the entitlements.

            In making land acquisitions, the Company considered such factors as:
            (i) current market conditions; (ii) internal and external
            demographic and marketing studies; (iii) environmental conditions;
            (iv) proximity to developed and recreational areas; (v) availability
            of mass transportation and major arterial highways and ready access
            to metropolitan areas and other employment centers; (vi) industrial
            and commercial growth patterns; (vii) financial review as to the
            feasibility of the proposed community, including projected profit
            margins, returns on capital employed and payback periods; (viii) the
            ability to secure governmental approvals and entitlements; (ix)
            customer preferences; (x) access to materials and subcontractors;
            and (xi) management's judgement as to the real estate market,
            economic trends and the Company's experience in a particular market.
            The Company's development activities included land planning and
            securing entitlements. These activities were performed by the
            Company's employees, together with independent engineers, architects
            and other consultants.

            CONSTRUCTION

            The Company employed production managers responsible for
            coordinating all functions pertaining to the construction process.
            All construction work for the Company was performed by
            subcontractors on a fixed price basis, with the Company acting as
            general contractor. In order to maintain control over costs, quality
            and work schedules, the Company employed an on-site superintendent
            who was responsible for supervising subcontractor work at each
            community.

            The Company's housing was constructed according to standardized
            design plans that were then customized to each individual contract
            preference. Generally, the Company sought to develop communities
            having a number of lots to absorb deliveries over a minimum one year
            period in order to reduce the per home cost of the housing products
            which it sold.


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            Advantages achieved by volume building included lower costs paid to
            subcontractors and reduced material costs per home.

            Generally, the Company's policy was to commence construction of a
            detached home beyond the foundation after a sales contract for that
            home had been signed. The Company, however, ordinarily attempted to
            maintain a predetermined inventory of homes in process in order to
            match the construction times of homes with the mortgage application
            process and to accommodate customers who required immediate
            occupancy, such as relocation homebuyers.

            MATERIALS AND SUBCONTRACTORS

            The Company attempted to maintain efficient operations by utilizing
            standardized material available from a variety of sources. Prices
            for materials fluctuated due to various factors, including demand
            levels or supply shortages.

            The Company entered into contracts with numerous subcontractors
            representing all building trades in connection with the construction
            of its homes, and established long-term relationships with a number
            of subcontractors. These subcontractors bid competitively for each
            phase of the work at each project and were selected based on
            quality, price and reliability. Subcontractor bids were solicited
            after an internal job cost budget estimate was prepared based on
            estimated material quantities. These internal estimates served as
            the formal baseline budget against which the cost of each trade was
            measured. The Company was responsible for contracting all trades in
            each of its communities. The Company monitored subcontractor
            performance and expenditures for each community to assess
            profitability. Additionally, the Company was generally able to
            obtain reduced prices from many of its subcontractors due to the
            volume of work it provided to its subcontractors. Agreements with
            subcontractors and suppliers generally spanned three to twelve
            months, and provided a fixed price for labor and materials.

            SALES AND MARKETING

            The Company typically constructed, furnished and landscaped a model
            home for each community and maintained an on-site sales office
            staffed with its own sales personnel. At Renaissance, six different
            home types were presented in the model park in addition to a decor
            center. The Company made use of newspaper, billboard and direct mail
            advertising, special promotional events and illustrated brochures in
            a comprehensive marketing program. The Company established a web
            site on the Internet (http://www.caltonhomes.com) to provide
            customers with additional information on the Company's communities
            and homes. In marketing its products, the Company emphasized
            quality, features and value and provided a 15-year limited warranty
            on its homes. In addition, the Company offered a customization
            program, "Your Home Your Way(R)," in order to make the products the
            Company built more attractive to homebuyers by tailoring them to
            individual customer needs.

            Sales of the Company's homes were made pursuant to standard sales
            contracts that were customary in the markets served by the Company.
            Such contracts required a customer deposit (generally up to 10% of
            the base selling price and $5,000 for the active adult community,
            Renaissance) at time of contract signing and provided the customer
            with a mortgage contingency, if necessary. The contingency period
            typically was sixty (60) days following execution of the contract.
            In certain instances, contracts were contingent on the sale of a
            purchaser's existing home. In such cases, the Company retained the
            right to sell the lot to a


                                      -8-
<PAGE>

            different homebuyer during the period in which the "house-to-sell"
            condition was not satisfied. The cancellation rate for new contracts
            signed was approximately 15% in fiscal 1998.

            CUSTOMER FINANCING

            The Company sold its homes to customers who generally financed their
            purchase through conventional and government insured mortgages. The
            Company provided its customers with information on a wide selection
            of conventional mortgage products and various mortgage lenders to
            assist the homebuyer through the mortgage process. Mortgages
            arranged by mortgage providers in recent years were mortgage loans
            underwritten and made directly by a lending institution to the
            customer. The Company is not liable for repayment of any mortgage
            loans.

            COMMERCIAL LAND

            The Company has continued to focus on selling its commercial land.
            During fiscal 1998, the Company closed on the sale of two parcels of
            commercial land, including its largest remaining parcel located in
            eastern Pennsylvania, for an aggregate of $4.9 million in proceeds
            that resulted in an aggregate gain of approximately $200,000. The
            Company's remaining two commercial properties consist of land
            located in Florida and Pennsylvania, one of which is under contract
            for sale. These properties have a book value of $252,000.

            COMPETITION

            The homebuilding industry is highly competitive. Homebuilders
            compete for desirable properties, financing, raw materials and
            skilled labor among other things. The Company competed in each of
            the geographic areas in which it operated with numerous real estate
            developers, ranging from small local to larger regional and national
            builders and developers, some of which had greater sales and
            financial resources than the Company. Resale homes provided
            additional competition. The Company competed primarily on the basis
            of quality, features, value, reputation, price, location, design and
            amenities.

            REGULATION AND ENVIRONMENTAL MATTERS

            The Company was subject to various local, state and federal
            statutes, ordinances, rules and regulations concerning zoning,
            building design, construction and similar matters, including local
            regulation which imposes restrictive zoning and density requirements
            in order to limit the number of homes that can eventually be built
            within the boundaries of a particular locality. In addition, the
            Company was subject to registration and filing requirements in
            connection with the construction, advertisement and sale of its
            communities in certain states and localities in which it operated
            even if any or all necessary government approvals were obtained.
            Certain governmental authorities imposed fees as a means of
            defraying the cost of providing certain governmental services to
            developing areas, or required developers to donate land to the
            municipality or make certain off-site land improvements.

            The Company was also subject to a variety of local, state and
            federal statutes, ordinances, rules and regulations concerning
            protection of health and the environment ("environmental laws"). The
            particular environmental laws applicable to any given community
            varied greatly according to the community site, the site's
            environmental conditions and the present and former uses of the
            site. These environmental laws sometimes resulted in delays, caused
            the Company to incur substantial compliance and other costs, and
            prohibited or severely restricted development in certain
            environmentally sensitive regions or areas. For example, in July
            1987, New Jersey adopted the Fresh Water Wetlands Protection Act
            which restricts


                                      -9-
<PAGE>

            building in or near certain protected geographic areas designated as
            fresh water wetlands. The preservation of wetlands located within a
            project sometimes lessened the number of units that could be built
            in a particular project.

            In July 1985, New Jersey adopted the Fair Housing Act which
            established an administrative agency to adopt criteria by which
            municipalities will determine and provide for their fair share of
            low and moderate income housing ("Mt. Laurel" housing). This agency
            promulgated regulations with respect to such criteria effective
            August 1986.

            The Company was sometimes required to set aside Mt. Laurel housing
            in certain municipalities in which it owned or had the right to
            acquire land. In order to comply with such requirements, the Company
            was required to (i) sell some homes at prices which would result in
            no gain or loss and an operating margin less than would have
            resulted otherwise, or (ii) contribute to public funding of
            affordable housing, which contribution increaseed the costs of homes
            to be developed in a community. The Company attempted to recover
            some of these potential losses or reduced margins through increased
            density, certain cost saving construction and land development
            measures and reduced land prices for the sellers of property.

            The foregoing does not purport to be a full description of all of
            the legislation and regulations impacting the business of the
            Company. The Company may be subject to numerous other governmental
            rules and regulations in each jurisdiction in which it does
            business.

            EMPLOYEES

            As of February 16, 1999, the Company employed 3 full-time personnel.
            The Company also employed 2 part-time employees. The Company
            believes its employee relations are satisfactory.

ITEM 2. COMPANY FACILITIES

            In connection with the Sale Transaction, the Company sublet its
            interest as a tenant in its corporate offices to Calton Homes.
            Calton Homes has resublet to the Company approximately 1,620 square
            feet until May 31, 1999 for approximately $2,600 per month.
            Management believes that this arrangement currently provides
            adequate space for the Company's operations. The Company will seek
            to lease office space upon the expiration of its current sublease.

ITEM 3. LEGAL PROCEEDINGS

            The stock purchase agreement pursuant to which the Company sold
            Calton Homes on December 31, 1998 requires the Company to indemnify
            the purchaser for, among other things, breaches of the agreement and
            certain liabilities that arise out of events occurring prior to the
            closing of the sale, including the cost of warranty work on homes
            delivered if such costs exceed $600,000. On December 31, 1998, as a
            condition to the sale of Calton Homes, the Company entered into a
            holdback escrow agreement with the purchaser pursuant to which
            approximately $5.2 million of the closing proceeds were deposited
            into escrow. Of this amount, $3 million (the "General
            Indemnification Funds") were deposited to provide security for the
            Company's indemnity obligations and approximately $2.2 million (the
            "Specific Indemnification Funds") were deposited to fund costs
            associated with certain specified litigation involving Calton Homes.
            Subject to claims for indemnification, one-half of the General
            Indemnification Funds will be disbursed to the Company on December
            31, 1999. The remaining General Indemnification Funds will be
            disbursed to the Company, subject to claims for indemnification, on
            December 31, 2000. The Specific Indemnification Funds will be
            disbursed, to the extent not otherwise utilized in the


                                      -10-
<PAGE>

            resolution of litigation, on a case by case basis as the litigation
            is resolved. If all of the specified litigation is not resolved by
            December 31, 2000, a portion of the General Indemnification Funds
            will not be disbursed to the Company until the resolution of the
            litigation. The Company may, under certain circumstances, be
            required to deposit additional funds in the holdback if all of the
            specified litigation is not resolved by December 31, 2000. In
            addition, the Company's indemnity obligations are not limited to the
            amounts deposited in escrow. In the event that the Company elects to
            liquidate and dissolve prior to December 31, 2003, it will be
            required to organize a liquidating trust to secure its obligations
            to the purchaser. The liquidating trust will be funded with the
            Specific Indemnification Funds plus $4 million if created before
            December 31, 1999, $3 million if created between December 31, 1999
            and December 31, 2000 and $2 million if created after December 31,
            2000. If the liquidation occurs prior to December 31, 2000, the
            Company may be required to deposit additional amounts in the
            Liquidating Trust if the specified litigation is not resolved by
            such date. Any General Indemnification Funds remaining in the
            holdback escrow fund will be applied as a credit against amounts
            required to be deposited in the liquidating trust.

            Calton's by-laws contain provisions which provide indemnification
            rights to officers, directors and employees under certain
            circumstances with respect to liabilities and damages incurred in
            connection with any proceedings brought against such persons by
            reason of their being officers, directors or employees of Calton.

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

            During the fourth quarter of 1998, no matter was submitted to a vote
            of security holders through the solicitation of proxies or
            otherwise. On December 30, 1998, the Company held a special meeting
            of shareholders (the "Special Meeting") at which the Company's
            shareholders were asked to approve the sale by the Company of Calton
            Homes. Of the votes cast in person or by proxy at the Special
            Meeting, 14,313,274 shares voted in favor of the Sale Transaction,
            382,281 shares voted against the Sale Transaction and 25,942 shares
            abstained from voting.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

            The executive officers of the Company as of February 16, 1999 are
            listed below and brief summaries of their business experience and
            certain other information with respect to them is set forth in the
            following table and in the information which follows the table.

Name                     Age     Position
----                     ---     --------

Anthony J. Caldarone     61      Chairman, President and Chief Executive Officer

David J. Coppola         39      Vice President and Treasurer

            Mr. Caldarone was reappointed as Chairman, President and Chief
            Executive Officer of Calton in November 1995, having previously
            served in such capacities from the inception of the Company in 1981
            through May 1993. From June 1993 through October 1995, Mr.


                                      -11-
<PAGE>

            Caldarone served as a Director of the Company.

            Mr. Coppola was appointed Treasurer of the Company in January 1999.
            He served as the Company's Controller from 1992 until 1999 and was
            appointed as a Vice President of the Company in 1993. Mr. Coppola is
            a Certified Public Accountant.


                                      -12-
<PAGE>

                                     PART II

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

            Information pertaining to the market for the Registrant's Common
            Stock, high and low sales prices of the Common Stock in 1998 and
            1997 and the number of holders of Common Stock is presented on page
            24 of the 1998 Annual Report to Shareholders, which information is
            incorporated herein by reference.

            The Company has not paid dividends on its capital stock in the past.

ITEM 6. SELECTED FINANCIAL DATA

            The financial highlights data is presented on page one of the 1998
            Annual Report to Shareholders, which information is incorporated
            herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

            The information required by this item is presented on pages 4
            through 10 of the 1998 Annual Report to Shareholders, which
            information is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            The information required by this item is presented under the caption
            "Financial Instrument Market Risk" on page 10 of the 1998 Annual
            Report to Shareholders, which information is incorporated herein by
            reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            The consolidated financial statements, including the Report of
            Independent Accountants thereon and the unaudited Quarterly
            Financial Results, are presented on pages 11 through 24 of the 1998
            Annual Report to Shareholders, which information is incorporated
            herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

            None.


                                      -13-
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

            Information relating to Directors is incorporated herein by
            reference to "Election of Directors" and "Compliance with Section
            16(a) of the Exchange Act" contained in the Registrant's definitive
            proxy statement for the annual meeting of shareholders to be held on
            April 14, 1999. Certain information relating to executive officers
            of the Company is set forth in Item 4A of Part I of this Form 10-K
            under the caption "Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

            Information pertaining to executive compensation is incorporated
            herein by reference to "Executive Compensation" contained in the
            Registrant's definitive proxy statement for the annual meeting of
            shareholders to be held on April 14, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            Information pertaining to security ownership of certain beneficial
            owners and management is incorporated herein by reference to
            "Principal Shareholders" and "Security Ownership of Management" from
            the Registrant's definitive proxy statement for the annual meeting
            of shareholders to be held on April 14, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

            None.


                                      -14-
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

                                                                            Page
                                                                            ----

            (a) 1. and 2.     Financial statements and financial
                              statement schedules

                              Reference is made to the Index of
                              Financial Statements and Financial
                              Statement Schedules hereinafter
                              contained                                      F-1

                3.            Exhibits

                              Reference is made to the Index of
                              Exhibits hereinafter contained                 F-5

            (b)               Reports on Form 8-K

                              In January 1999, the Company
                              filed a report on Form 8-K,
                              dated December 31, 1998,
                              announcing that it had completed
                              the sale of Calton Homes.


                                      -15-
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

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


Date: February 26, 1999                     By:
                                                -----------------------
                                                David J. Coppola
                                                Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.

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


-------------------------
Anthony J. Caldarone         Chairman, Chief Executive         February 26, 1999
                             Officer and President
                             (Principal Executive Officer)


-------------------------
David J. Coppola             Vice President                    February 26, 1999
                             (Principal Financial &
                             Accounting Officer)


-------------------------
J. Ernest Brophy             Director                          February 26, 1999


-------------------------
Mark N. Fessel               Director                          February 26, 1999


-------------------------
Frank Cavell Smith, Jr.      Director                          February 26, 1999


                                      -16-
<PAGE>

                          CALTON, INC. AND SUBSIDIARIES
                        INDEX OF FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULES

                                                                            Page

Consolidated Balance Sheet as of November 30, 1998 and 1997                  *

Consolidated Statements of Operations for the Years Ended
  November 30, 1998, 1997 and 1996                                           *

Consolidated Statements of Cash Flows for the Years
 Ended November 30, 1998, 1997 and 1996                                      *

Consolidated Statements of Shareholders' Equity for
 the Years Ended November 30, 1998, 1997 and 1996                            *

Notes to Consolidated Financial Statements                                   *

Report of Independent Accountants                                          *,F-2

Consent of Independent Accountants                                           F-3

Schedules                                                                    **

II-Valuation and Qualifying Accounts                                         F-4

----------

      *     The financial statements and notes thereto together with the Report
            of Independent Accountants on pages 11 through 24 of the 1998 Annual
            Report to Shareholders are incorporated herein by reference.

      **    Schedules other than the schedule listed above have been omitted
            because of the absence of the conditions under which they are
            required or because the required information is presented in the
            financial statements or the notes thereto.


                                       F-1
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of Calton, Inc.

      Our audits of the consolidated financial statements referred to in our
report dated January 13, 1999 appearing in the November 30, 1998 Annual Report
to Shareholders of Calton, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.


                                                      PricewaterhouseCoopers LLP

Florham Park, New Jersey
January 13, 1999


                                      F-2
<PAGE>

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements of Calton, Inc. and Subsidiaries on Form S-8 (Nos. 33-70628, 33-75184
and 333-28135) of our report, dated January 13, 1999 appearing in the Annual
Report to Shareholders which is incorporated in this Annual Report on Form 10-K.
We also consent to true incorporation by reference of our report on the
Financial Statement Schedule, which appears on page F-4 of this Form 10-K.


                                                      PricewaterhouseCoopers LLP

Florham Park, New Jersey
February 25, 1999


                                      F-3
<PAGE>

                                   SCHEDULE II

                          CALTON, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        Additions
                                                               ---------------------------
                                                Balance at     Charged to                                       Balance
                                                Beginning      Costs and       Charge to                        At End
                Description                      of Year        Expenses    Other Accounts   Deductions         of Year
-------------------------------------------     ----------     ----------   --------------   ----------        ----------
<S>                                             <C>            <C>          <C>              <C>               <C>
Year ended November 30, 1996:

Net realizable value reserves for inventory     $    1,993     $       --   $           --   $      880(A)     $    1,113
                                                ==========     ==========   ==============   ==========        ==========
Valuation allowance for net deferred tax
asset                                           $   18,647     $       --   $          981   $       --        $   19,628
                                                ==========     ==========   ==============   ==========        ==========

Year ended November 30, 1997:

Net realizable value reserves for inventory     $    1,113     $      750   $           --   $      882(A)     $      981
                                                ==========     ==========   ==============   ==========        ==========
Valuation allowance for net deferred tax
asset                                           $   19,628     $       --   $           --   $    3,538(B)     $   16,090
                                                ==========     ==========   ==============   ==========        ==========

Year ended November 30, 1998:

Net realizable value reserves for inventory     $      981     $       --   $           --   $      726        $      255
                                                ==========     ==========   ==============   ==========        ==========
Valuation allowance for net deferred tax
asset                                           $   16,090     $       --   $           --   $    2,549        $   13,541
                                                ==========     ==========   ==============   ==========        ==========
</TABLE>

(A)   Represents the utilization of reserves recorded when affected homes are
      delivered and land is sold.
(B)   Represents the change in the valuation allowance due to the changes in the
      deferred tax assets and the impact of the IRS Code Section 382 limitation
      on those assets.


                                      F-4
<PAGE>

                                INDEX TO EXHIBITS

      2.1   Agreement for Sale and Purchase of Assets dated as of November 26,
            1997 between Beazer Homes Corp., Beazer Homes USA, Inc., Calton
            Homes of Florida, Inc. and Calton Homes, Inc., incorporated by
            reference to Exhibit 2 to Form 8-K of Registrant dated December 1,
            1997.

      2.2   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.

      2.3   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.

      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, and 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.

      3.2   By Laws of Registrant, as amended.

      4.1   Warrant to Purchase Common Stock of Calton, Inc. dated June 12, 1997
            issued to BankBoston, N.A., incorporated by reference to Exhibit
            10.2 to Form 8-K of Registrant dated June 12, 1997.

      4.2   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 to Form 10-K of Registrant for the fiscal year ended
            November 30, 1996.

(*)  10.6  Severance Policy for Senior Executives of Registrant, incorporated
            by reference to Exhibit 10.6 of Form 10-K of Registrant for the
            fiscal year ended November 30, 1994.


                                      F-5
<PAGE>

(**)  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.

      10.8  Senior Secured Credit Agreement dated as of June 12, 1997, among
            Calton Homes, Inc., Calton Homes of Florida, Inc. and BankBoston,
            N.A., incorporated by reference to Exhibit 10.1 to Form 8-K of
            Registrant dated June 12, 1997.

      10.9  Consulting Agreement between Registrant and Braewood Development
            Corp. dated December 31, 1998.

      13.   Certain pages of Registrant's 1998 Annual Report to Shareholders
            which, except for those portions expressly incorporated herein by
            reference, are not deemed filed as part hereof.

      21.   Subsidiaries of the Registrant.

      27.   Financial Data Schedule.

----------

(*)   Constitutes a compensatory plan required to be filed as an exhibit
      pursuant to Item 14(c) of Form 10-K.
(**)  Constitutes a management contract required to be filed pursuant to Item
      14(c) of Form 10-K.