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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  FORM 10-KSB/A
                                (AMENDMENT NO. 1)
                                   (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                       American Stock Exchange
          $.05 par value per share

                   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|

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                                EXPLANATORY NOTE


This Amendment on Form 10-KSB/A amends and restates in its entirety the
following items of 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:

        Part II - Item 6.  Management's Discussion and Analysis of Financial
                           Condition and Results of Operations

        Part II - Item 7.  Financial Statements

        Part IV - Item 13. Exhibits and Reports on Form 8-K

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 and the Company's Quarterly Reports on Form 10-QSB.







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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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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.

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        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.

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        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.

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        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.

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        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

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        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.

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        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 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.

                                       9
<PAGE>

                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.


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)

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

Dated:  February 24, 2005                 By:    /s/ Anthony J. Caldarone
                                                 -------------------------------
                                                 Anthony J. Caldarone, President
                                                 and Chief Executive Officer


                                       10
<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
                                                                                      ===================
</TABLE>

                              See notes to consolidated financial statements.


                                                    F-3

<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:

                                                  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

                                      F-12
<PAGE>

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


        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).

5.      ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABIILITIES

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

                                                  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:

<TABLE>
<CAPTION>
                                                                   2003            2002
                                                              --------------  --------------
<S>                                                            <C>             <C>
            Revenues of discontinued subsidiary                $          -    $          -
                                                              ==============  ==============
            Net loss fron discontinued subsidiary              $          -    $ (1,020,000)
                                                              ==============  ==============
</TABLE>

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

                                      F-13
<PAGE>

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


        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.

        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:


            Net operating losses                            $    12,825,000
            Asset impairment charges                                321,000
            Capital loss carryforwards                           11,807,000
            Investment impairment charges                           263,000
            Unamortized start up costs                              904,000
            Bad debt and other allowances                             8,000
            Other                                                    62,000
                                                           -----------------
                Deferred tax assets                              26,190,000
            Less: Valuation allowances                          (26,190,000)
                                                           -----------------
            Net deferred taxes                              $             -
                                                           =================

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:

                                      F-16
<PAGE>

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


        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)
</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>
                                                              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.

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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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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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