CALTON, INC.
                            FORM 10-K
             FOR FISCAL YEAR ENDED NOVEMBER 30, 1995

                           EXHIBIT 13
               1995 ANNUAL REPORT TO SHAREHOLDERS
                          PP. 1, 5-24





<TABLE>
Financial Highlights
(in thousands, except per share amounts)
<CAPTION>

                                                     Six Months   Six Months
                                                       Ended        Ended
                          Years Ended November 30,    November     May 31,    Years Ended November 30,
Selected Operating Data       1995         1994       30, 1993       1993         1992         1991
<S>                         <C>          <C>          <C>          <C>          <C>          <C>                
 Revenues . . . . . . . . . $180,843     $168,723     $ 83,351     $ 76,555     $135,421     $117,980
 Gross profit . . . . . . .   21,153       29,384       15,878        8,251       19,125       12,509
 Income (loss) from 
  operations. . . . . . . .   (1,225)       8,595        5,560      (15,593)     (25,630)     (43,186)
 Income (loss) before
  income taxes and
  extraordinary gain. . . .   (2,307)       6,560        4,756      (56,494)     (38,611)     (55,720)
 Income (loss) before 
  extraordinary gain. . . .   (3,138)       4,193        2,872      (56,494)     (38,611)     (43,538)
 Net income (loss). . . . .   (3,138)       4,193        2,872        1,817      (38,611)     (43,538)
 Income (loss) per share 
  before extraordinary 
  gain. . . . . . . . . . .     (.12)         .16          .11        (1.67)       (1.14)       (1.28)
 Net income (loss)
  per share . . . . . . . .     (.12)         .16          .11          .05        (1.14)       (1.28)


                                                                      At
                                      At November 30,               May 31,        At November 30,  
Selected Balance Sheet Data   1995         1994         1993         1993         1992         1991
 
 Total assets . . . . . .   $ 91,416     $122,144     $110,930     $117,462     $187,909    $216,592
 Total debt . . . . . . .     46,227       69,398       62,792       70,242      141,828     147,614
 Shareholders' equity
  (deficit)                   27,013       29,045       23,893       21,000         (452)     38,082
</TABLE>
The selected operating data for the years ended November 30, 1995 and 1994 and
the six months ended November 30, 1993 and selected balance sheet data at and
subsequent to May 31, 1993 are separated by a black line since due to the
adoption of fresh-start accounting and reporting to reflect the effects of the
Reorganization as of May 31, 1993, these amounts are not comparable to the
amounts reflected for prior periods.







Management's Discussion And Analysis Of Financial
Condition And Results Of Operations


Results Of Operations

RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 1995 AND 1994

     Revenues for the year ended November 30, 1995 were $180.8 million compared
to revenues of $168.7 million for the year ended November 30, 1994. Deliveries
of 749 homes resulted in housing revenues of $171.3 million for the year ended
November 30, 1995. For the year ended November 30, 1994, the Company delivered
899 homes which generated $165.5 million of housing revenues. Housing revenues
in 1995 increased four percent (4%) reflecting an increase in average selling
prices to $229,000 for the homes delivered during the year compared to $184,000
for the homes delivered in 1994. This increase in average revenue per home is
consistent with the Company's plan to position itself in middle and upscale
market segments in the Northeast and Orlando, Florida markets with enhanced
margin potential and reduce its former concentration in entry level,
multi-family products because of unfavorable demographic trends and increasing
regulatory costs. Deliveries in the Northeast division comprised seventy
percent (70%) of the Company's total deliveries in fiscal 1995 where average
selling prices increased to $265,000 from $226,000 in 1994. Deliveries in the
Orlando division comprised twenty-four percent (24%) of total deliveries in
fiscal 1995, where average selling prices increased to $125,000 in 1995 from
$109,000 in 1994. The seventeen percent (17%) decrease in home deliveries in
fiscal 1995 is primarily attributable to a thirty-nine percent (39%) decrease
of home deliveries in the Orlando, Florida division primarily due to the timing
of new project openings.
     The Company's gross profit margin on homes delivered was approximately
twelve percent (12%) during the year ended November 30, 1995, compared to
seventeen percent (17%) in the year ended November 30, 1994. The gross profit
margin on homes delivered in 1995 was impacted by increased competition in a
difficult market while the homes delivered in 1994 reflected the revaluation of
the Company's inventory as a result of the application of fresh-start
accounting and reporting in connection with the Company's 1993 Plan of
Reorganization. In addition, gross profit margins have been, and will continue
to be, unfavorably impacted by increased carrying costs resulting from lower
absorption rates. Gross profit margins have also been impacted by the fact that
the Company's land pipeline, which was severely depleted when it completed its
Reorganization in May 1993, has been refilled in a transitional market
environment that reflected upward price pressures on land that could not be
entirely passed along to buyers. As a result of the factors discussed above and
other variables, the number and average selling prices of homes sold and
delivered and gross profit realized in 1995 may not be indicative of future
deliveries.
     During the second quarter of fiscal 1995, as a result of the consolidation
of the New Jersey-North and New Jersey-South divisions and economic and market
conditions, the Company decided not to incur further preacquisition costs on
nine properties controlled under option. These actions resulted in a pre-tax
charge of $1.1 million that is reflected in Cost of revenues. The Company
finalized the accounting for a community during the second quarter of fiscal
1995 that delivered its last home earlier in 1995. A reserve previously
provided during the delivery period of the community was no longer required and
the likelihood of payment of the amount reserved was remote. As a result, a
pre-tax credit of $1.1 million is reflected in Cost of revenues.
     In the year ended November 30, 1995, the Company recorded non-cash charges
to the provision for estimated net realizable value of $1.6 million to reflect
certain inventory, primarily two properties, at their estimated net realizable
value. For the year ended November 30, 1994, $400,000 was recorded as a
provision for estimated net realizable value. Estimated net realizable value
has been determined based upon the amount the Company expects to realize
through sale or development based on management's plans for each property. The
estimation process involved in the determination of estimated net realizable
value is inherently subjective since it requires estimates as to future events
and conditions. The estimated net realizable value of a property may exceed the
value which could be obtained through the immediate sale of the property if
development plans for such property support a higher cost recovery.
     The Company decided to wind down the Chicago Division due to unfavorable
results and prospects. As a result, a $1.1 million charge was recorded in the
fourth quarter of 1995 and is included in Restructuring charges. The Company
plans to dispose of the remaining inventory primarily through the sale and
buildout of single family homes and the sale of the remaining finished lots. Of
the $1.1 million, $727,000 was applied as a reduction to inventory. The Company
anticipates that all of the inventory of the Chicago division will be disposed
of by the end of 1996. Also included in Restructuring charges is $840,000 in
severance benefits, $200,000 of which resulted from the consolidation in March
1995 of the New Jersey- North division and New Jersey-South division; and
$640,000 of which resulted from a severance arrangement with the Company's
former President.
     Selling, general and administrative expenses decreased to $18.8 million
(10% of revenues) for the year ended November 30, 1995, compared to $20.2
million (12% of revenues) for the year ended November 30, 1994. The decrease is
principally due to lower employee costs resulting from reductions in employee
levels and consolidation of operations in the Northeast completed early in the
second quarter of 1995.
     Gross interest cost was approximately $7.1 million for the year ended
November 30, 1995, compared to $5.5 million for the year ended November 30,
1994, respectively. The increase in gross interest cost for the year ended
November 30, 1995 resulted from higher interest rates and, to a lesser extent,
higher average loan balances compared to the year ended November 30, 1994.
Interest capitalized in the year ended November 30, 1995 was $5.0 million
compared to $4.0 million in the year ended November 30, 1994. The increase of
capitalized interest is primarily a result of higher interest rates. The
capitalized amounts will reduce future gross profit levels assuming no relative
increases in selling prices.
     Included in Other (income) expense in 1995 is $890,000 which represents 
payments received primarily in the fourth quarter in connection with the 
dissolution and liquidation of Talcon, L.P. ("Talcon") in complete satisfaction 
of Talcon's debt obligations to the Company. The Company had previously 
established a reserve for all amounts owed to it by Talcon.
     The Company, primarily as a result of the adoption of fresh-start
accounting and reporting in connection with its Reorganization in 1993, has a
tax basis in its assets held as it exited its Reorganization substantially
in excess of the carrying value of these assets used for financial reporting
purposes. As a result of this difference in basis, the Company will realize a
tax benefit over time against future earnings. In accordance with The American
Institute of Certified Public Accountants Statement of Position 90-7 ("SOP
90-7"), the Company is required to provide a provision in lieu of taxes
notwithstanding the fact that there are no significant taxes payable and must
record a corresponding reduction in the amount of Values in excess of amounts
allocable to identifiable net assets ("goodwill"), until exhausted, then as a
direct increase to Paid in capital. Results for the year ended November 30,
1995 reflect a provision in lieu of taxes for financial reporting purposes of
$831,000, due to recording the above-mentioned non-cash charges, and which is
primarily non-cash, and therefore does not impact the Company's cash position,
tangible net worth or earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Goodwill was fully extinguished during the year ended
November 30, 1994 and an increase of $719,000 was recorded to Paid in capital.
The effective rate of the 1994 provision in lieu of taxes was reduced by
approximately $700,000 as a result of a reduction in tax reserves due to the
resolution of a certain tax issue. The net operating loss carryforwards and
other deferred tax assets are subject to utilization limitations as a result of
the changes in control of the Company that occurred in 1993 and 1995.
     The distribution of the Company's stock has been shifting significantly
since May 31, 1993. This activity accelerated in the last half of 1995 when the
Company realized a greater than fifty percent (50%) change in its ownership
since its Reorganization in 1993. The recognition of this event requires that
the Company recalculate the amount of the annual net operating loss ("NOL")
limitation. The preliminary estimate of the Company's ability to use the NOL to
offset future income is approximately $1.7 million per year or approximately
$22.0 million. While the change in ownership impacted the NOL, management
believes that the wider distribution of stock represents a more positive and
liquid ownership base for the Company's common equity.
     Net sales contracts of $108.7 million (496 homes) were recorded by the
Company during the year ended November 30, 1995, representing decreases in the
dollar value of contracts of 42% compared to $188.9 million (951 homes) in the
same period in 1994. At November 30, 1995, the backlog of homes under contract
totalled 166 homes having an aggregate dollar value of $36.0 million,
reflecting decreases in the number of homes in backlog and in backlog value of
60% and 63%, respectively, over the levels at November 30, 1994 of 419 homes
having an aggregate dollar value of $98.5 million. Prior year results benefited
from a greater number of communities open for sale in the Florida division,
operating two divisions in the Northeast, and an increasing interest rate
environment which may have accelerated home purchase decisions in the first
nine months of 1994. Due to market conditions, the number of new communities
opened for sales during fiscal 1995 decreased forty-two percent (42%) to seven
communities, six of which were in the Florida market. This resulted in fewer
communities open for sales during 1995 and a reduction in the amount
outstanding under the credit facility by $15.0 million to $45.0 million by
November 30, 1995. The average price per home in backlog at November 30, 1995
decreased 8% to approximately $217,000 compared to $235,000 at November 30,
1994 primarily due to the backlog in the Florida division representing a higher
proportion of the total backlog in 1995. The backlog in both years includes
contracts containing financing and other contingencies customary in the
industry, including contracts that are contingent on the purchaser selling
their existing home. Due to changes in product offerings, the uncertainty of
future market conditions and the general economic environment, the sales
backlog, homes delivered, average selling prices and gross profit achieved in
the current and prior periods may not be indicative of those to be realized in
succeeding periods.
     Pursuant to management's continued focus on its core homebuilding
business, the Company sold two of its commercial properties in 1995 for
approximately $8.1 million in addition to the sale of one of its commercial
properties in the fourth quarter of 1994 for $800,000. The 1995 sales resulted
in an aggregate pre-tax gain of approximately $500,000 and provided
approximately $850,000 of additional cash for operations after retirement of
$6.9 million of mortgage debt.

  RESULTS OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1994 AND THE
SIX MONTH PERIODS ENDED NOVEMBER 30, 1993 AND MAY 31, 1993

     Economic and industry conditions including increased unemployment and
declining real estate values caused the Company to file and consummate a
"pre-packaged" plan of reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Reorganization") in the second quarter of 1993. As a
result of the Reorganization, the Company's financial statements were restated
to reflect the estimated fair market value of individual assets in accordance
with the SOP 90-7. A reorganization value of $21.0 million as of May 31, 1993
was established by the Company after consideration of a range of values
furnished by the Company's independent advisors.
     Due to the adoption of fresh-start accounting and reporting in accordance
with SOP 90-7, the Company's results of operations for periods ending on or
prior to May 31, 1993 are not comparable to results experienced by the Company
in subsequent periods particularly in the areas of interest expense, cost of
revenues and gross profit. Accordingly, operating results for periods
subsequent to May 31, 1993 are separated by a black line from periods ending on
or prior to such date. The following discussion of the results of operations is
presented on a comparative basis with reference to the impact of fresh-start
accounting and reporting where appropriate.
     Revenues for the year ended November 30, 1994 were $168.7 million compared
to revenues of $159.9 million for the year ended November 30, 1993. Deliveries
of 899 homes resulted in housing revenues of $165.5 million for the year ended
November 30, 1994. For the year ended November 30, 1993, the Company delivered
860 homes which generated $157.3 million of housing revenues. Revenues in 1994
increased five percent (5%) reflecting an increase in deliveries and average
selling prices to $184,000 for the homes delivered during the year compared to
$183,000 for the homes delivered in 1993. This increase in average revenue per
home is consistent with the Company's plan to position itself in upscale market
segments in the Northeast with enhanced margin potential and reduce its former
concentration in entry level, multi-family products in part, because of
unfavorable demographic trends and increasing regulatory costs. The five
percent (5%) increase in home deliveries in fiscal 1994 is attributable to the
improved land pipeline, a fifty-four percent (54%) increase of home deliveries
in the Florida division and the opening of sixteen (16) new communities since
the Reorganization in May 1993. The Company delivered substantially all of the
remainder of the California division's homebuilding inventory (50 home
deliveries) in fiscal 1994 compared to 116 homes delivered in 1993.
     The Company's gross profit margin on homes delivered was approximately
seventeen percent (17%) during the year ended November 30, 1994 compared to
nineteen percent (19%) in the six month period ended November 30, 1993. The
Company had confronted increased competition in a housing market that showed
further signs of slowing due, among other things, to increases in mortgage
rates. In addition, gross profit margins were unfavorably impacted by
construction labor and material cost increases, interest rate increases and the
impact of the timing of certain start-up costs associated with opening a number
of new communities for sales within a short time span. Gross profit margins
were also impacted by the fact that the Company's land pipeline, which was
severely depleted when it completed its Reorganization in May 1993, had been
refilled in a transitional market environment that reflected upward price
pressures on land that could not be entirely passed along to buyers in a rising
interest rate environment. The Company's gross profit margin on homes delivered
was approximately 10% for the six month period ended May 31, 1993. The increase
in gross profit margin in the six months ending November 30, 1993 was primarily
due to the adoption of fresh-start accounting and reporting as of May 31, 1993
which included the revaluation of inventory to estimated fair market value. In 
the six months ended May 31, 1993, the Company recorded non-cash charges to the
provision for estimated net realizable value of approximately $3.4 million to
reflect certain inventory and receivables at their estimated net realizable
value. For the year ended November 30, 1994, $400,000 was recorded as a
provision for estimated net realizable value. There were no such charges to the
provision for estimated net realizable value for the six months ended November
30, 1993.
     Selling, general and administrative expenses decreased to $20.2 million
(12% of revenues) for the year ended November 30, 1994, compared to $10.1
million (12% of revenues) and $20.9 million (13% of revenues) for the six and
twelve month periods ended November 30, 1993. The decrease is principally due
to lower insurance costs and a reduction of legal and professional fees.
     Gross interest cost was approximately $5.5 million for the year ended
November 30, 1994, compared to $2.5 million and $7.2 million for the six and
twelve month periods ended November 30, 1993, respectively. The decrease in
gross interest cost for the year ended November 30, 1994 resulted from lower
average loan balances (primarily due to the impact of the Reorganization)
compared to the year ended November 30, 1993. The increase of $500,000 to $3.0
million for the six month period ended November 30, 1994 compared to the six
month period ended November 30, 1993 is due to interest rate increases in the
revolving credit agreement during 1994. Interest capitalized in the year ended
November 30, 1994 was $4.0 million compared to $1.5 million and $2.6 million in
the six and twelve month periods ended November 30, 1993. The increase of
capitalized interest is primarily a result of higher inventory levels subject
to capitalization and, to a lesser extent, higher interest rates.
     Equity in operations of joint ventures resulted in a loss of $9.4 million
for the six month period ended May 31, 1993. These reflected non-cash
write-offs primarily from Talcon investments in  certain joint ventures which
resulted from the illiquidity of such joint ventures and continued
deterioration in the markets in which they operate. Talcon's results had no
effect on the results of the Company for the year ended November 30, 1994 and
the six months ended November 30, 1993.
     Reorganization charges for the six month period ended May 31, 1993 of $37.5
million reflects the successful consummation of the Reorganization and the
corresponding fresh-start accounting and reporting which includes a $23.9
million inventory adjustment to fair market value,  $11.4 million write-off of
the values in excess of amounts allocable to identifiable net assets and $2.2
million of restructuring costs and other reserves incurred in the debt
restructuring. No such additional charges were reflected in the year ended
November 30, 1994 and the six months ended November 30, 1993.
     The Company recorded a charge against earnings of $800,000 in fiscal 1994
relating to a proposed offering of securities and related working capital
facility. The proposed offering was terminated due to unfavorable conditions in
the financial markets. Results for the year ended November 30, 1994 and the six
month period ended November 30, 1993 reflected a provision in lieu of income
taxes for financial reporting purposes of $2.4 million and $1.9 million,
respectively. This provision was primarily non-cash and, therefore, did not
impact the Company's cash position, tangible net worth or EBITDA.
     The Reorganization resulted in the discharge of approximately $83.4
million of principal and interest due the holders of 12-5/8% Subordinated and
16-5/8% Senior Subordinated Notes in exchange for stock, warrants to purchase
common stock, cash and short-term notes. An extraordinary gain of $58.3 million
resulted for the six month period ended May 31, 1993 since the value of debt
discharged was greater than the consideration given in the exchange.
     During the year ended November 30, 1994, the Company recorded net sales
contracts of $188.9 million (951 homes), representing increases in the dollar
value of contracts of fifteen percent (15%) compared to $164.3 million (890
homes) in the same period in 1993. At November 30, 1994, the backlog of homes
under contract totalled 419 homes having an aggregate dollar value of $98.5
million, a record level at a fiscal year end, reflecting increases in the
number of homes in backlog and in backlog value of fourteen percent (14%) and
thirty-one percent (31%), respectively, over the levels at November 30, 1993 of
367 homes having an aggregate dollar value of $75.0 million. The average price
per home in backlog at November 30, 1993 increased fifteen percent (15%) to
approximately $235,000 compared to $205,000 at November 30, 1993. Management
attributes these favorable results to an improved land pipeline, the opening of
sixteen (16) new communities from May 31, 1993 through November 30, 1994 and
the Company's strategic plan, including emphasis on marketing and building
higher priced single family detached homes in the Northeast.
     Pursuant to management's continued focus on its core homebuilding
business, the Company sold one of its commercial properties in the fourth
quarter of 1994 for approximately $800,000. Although this sale did not generate
any significant profit or loss, it did result in a reduction of mortgages
payable of approximately $750,000.

  Liquidity and  Capital Resources

     During the past several years, the Company has financed its operations
primarily from internally generated funds from home sales and borrowings under
its Amended Credit Agreement (the "Facility"), which became effective upon the
consummation of the Reorganization. In February 1996, the Company amended its
Facility to meet anticipated operating results through the remainder of the
term of the Facility. In conjunction with the Company's decision to exit from
the Chicago market, the amended Facility will permit borrowings of up to $55.0
million until November 1, 1996, when the commitment is reduced to $50.0
million, subject to borrowing base and other limitations. The amended Facility
increased the interest rate charged to the Company to the lender's prime rate
(8.75% at November 30, 1995) plus two percent (2%). The Company believes that
funds generated by its operating activities, income tax payment reductions
derived from NOL utilization and borrowing availability under the Facility will
provide sufficient capital to support the Company's operations and near term
plans through the term of the Facility; however, the Company will have to seek
an extension of the Facility or arrange replacement financing prior to the
expiration of the Facility on February 28, 1997. Recent market conditions have
resulted in a strategy to conserve capital and reduce the amount
outstanding under the Facility by $15.0 million to $45.0 million at November
30, 1995. As of November 30, 1995, approximately $3.5 million was available to
be borrowed under the Facility.
     The February 1996 amendment to the Facility changed various restrictions
and financial covenants with which the Company is required to comply, including
covenants relating to cash basis interest coverage, EBITDA and tangible net
worth and limits the amount which can be expended on land acquisition and land
development. Purchase money financing from other sources is limited to $5.0
million under the Facility. Although these limitations will restrict the
Company's ability to expand its business, the Company believes it will be able
to comply with the amended financial covenants based on its business plan.
There can be no assurance that, if market conditions deteriorate further,
business plan levels will be met. For the year ended November 30, 1995, the
Company's EBITDA was $8.6 million compared to $13.0 million in 1994. Certain
subsidiaries of the Company are guarantors of the obligations under the
Facility. The Lenders have a security interest in substantially all of the
assets of the Company and its subsidiaries, subject only to certain permitted
liens approved by the Lenders.
     The number of lenders under the Facility has recently decreased to four
participants with Foothill Capital acquiring thirty-seven and one-half percent
(37.5%) of the Facility from the Apollo Group and Fidelity Investments.
     Interest rate increases will continue to impact the Company's cost of
capital and related interest costs. Increases in capitalized interest could
reduce future gross profit levels assuming no relative increases in home
selling prices. EBITDA, however, would not be adversely impacted.

  CASH FLOWS FROM OPERATING ACTIVITIES

     Inventories amounted to $64.2 million at November 30, 1995, compared to
$88.8 million at November 30, 1994. The decrease of $24.6 million was primarily
a result of home deliveries, offset to a lesser extent by land acquisitions
totalling $10.5 million. Commercial properties were reduced by 
$7.2 million from the sale of two commercial buildings during the year. In
addition, inventories decreased by $1.6 million at November 30, 1995 from
non-cash writedowns to adjust primarily two properties to estimated net
realizable value and the abandonment of nine properties under option resulting
in a charge of $1.1 million during the second quarter of 1995. The net effect
of reductions in residential and commercial inventories in 1995 was $27.9
million. Inventories amounted to $78.2 million at November 30, 1993, $73.4
million at May 31, 1993 and $110.3 million at November 30, 1992. The increase
in inventory from November 30, 1993 to November 30, 1994 of $10.6 million was a
result of land acquisitions of $25.8 million during the year which were offset
by reductions in inventory levels through deliveries. Of the $25.8 million in
land acquisitions, approximately $2.5 million was financed with purchase money
mortgage debt. The increase in inventory from May 31, 1993 to November 30, 1993
of $4.8 million included: (i) the purchase of $16.6 million of additional land
primarily in New Jersey, and (ii) the depletion of existing inventories of
$11.8 million which includes the effects of the wind down of the California
operations. The decrease in inventory from November 30, 1992 to May 31, 1993
was primarily due to $23.9 million in non-cash charges to adjust to estimated 
fair market value in accordance with SOP 90-7 and, to a lesser extent, certain 
non-cash writedowns to estimated net realizable value, partially offset with the
acquisition of approximately $8.2 million of land.
     Receivables increased by approximately $1.1 million from November 30, 1994
to November 30, 1995, primarily due to the timing of home closings, offset to a
lesser extent by reductions in cash collateral held for performance guarantees
that were released in conjunction with the completion of communities during the
year. The $900,000 increase in receivables in 1994 is attributable to the
timing of home closings. Receivables decreased by approximately $7.3 million at
November 30, 1993 compared to November 30, 1992 primarily due to the refund of
cash collateral held for performance guarantees returned in exchange for $4.0
million in letters of credit, and the timing of home closings.
     The Company will continue to seek opportunities to obtain control of land
for future communities at advantageous prices and terms. Funds generated by the
Company's operations will be utilized for the acquisition of such properties.
In addition, borrowings from the Facility will be utilized for acquisitions as
needed, and to the extent available. Also, options will be utilized to the
extent possible to minimize risks, conserve cash and maximize the Company's
land pipeline. The Facility requires approval of the Lenders for land
acquisitions.
     A $3.7 million decrease in accounts payable from $7.0 million at November
30, 1994, to $3.3 million at November 30, 1995, was the result of a decreased
level of homebuilding operations and communities under development. The
decrease in accrued expenses and other liabilities of $1.8 million from $16.7
million at November 30, 1994, to $14.9 million at November 30, 1995, was
primarily the result of a $1.1 million credit taken in the second quarter of
1995 from the reversal of a reserve provided during the delivery period of a
community that closed out in early 1995. A $2.4 million increase in accounts
payable from $4.5 million at November 30, 1993 to $7.0 million at November 30,
1994 was a result of an increased level of homebuilding operations and
communities under development. The decrease in accrued expenses and other
liabilities of $3.0 million from $19.7 million at November 30, 1993 to $16.7
million at November 30, 1994 was the result of payments made in conjunction
with litigation settlements, the Talcon dissolution and the California wind
down. In addition, a $700,000 reserve related to a certain tax issue was
reversed.

  CASH FLOWS FROM INVESTING ACTIVITIES

     At November 30, 1995, 1994 and 1993, investments in joint ventures
amounted to $850,000, which consists primarily of a partnership interest in a
joint venture located in Maryland. The Company expects to realize this amount
when the joint venture activities are completed in 1996.
     In 1995, Talcon, a limited partnership formed by the Company in 1987, paid
the Company $890,000 in full satisfaction of its debt obligations to the
Company. The Company had previously established a reserve for all amounts owed
to it by Talcon and, as a result, the payment received in 1995 was classified
in Other (income) expense.

  CASH FLOWS FROM FINANCING ACTIVITIES

     The aggregate principal amount of loans outstanding under the Facility was
$45.0 million at November 30, 1995, $60.0 million at November 30, 1994, and
$55.0 million at November 30, 1993. The $15.0 million decrease since November
30, 1994 occurred during the second half of 1995 in conjunction with the
Company's recent strategy to reduce inventory levels, improve the Company's
financial condition and due to a restrictive covenant in the Facility. This 
covenant requires the Company to reduce outstanding borrowings to the extent 
that the amount held in its collateral deposit account with the lenders' 
collateral agent exceeds $6.5 million. The amount outstanding had increased 
from November 30, 1993 to November 30, 1994 primarily due to land 
acquisitions.
     The Company utilizes mortgages payable, when available, to finance a
portion of its acquisitions. Mortgages payable decreased to $1.2 million at
November 30, 1995, from $9.4 million at November 30, 1994, as a result of the
repayment of approximately $6.9 million of the proceeds from the sale of two of
its commercial properties and payment under a purchase money mortgage of $1.3
million.

  Inflation

     The Company, as well as the homebuilding industry in general, may be
adversely affected by inflation, which can cause increases in the price of
land, raw materials and labor. Unless cost increases are recovered through
higher sales prices, gross margins can decrease. Increases in interest rates
result in higher construction and financing costs which can also adversely
affect gross margins. In addition, increases in home mortgage interest rates
make it more difficult for the Company's customers to qualify for mortgage
loans, potentially reducing the demand for homes. Historically, the Company, in
periods of high inflation, has generally been able to recover increases in
land, construction, labor and interest expenses through increases in selling
prices; however, the Company believes that its gross margins in 1994 and 1995
were adversely impacted by increased costs which could not be entirely passed
through to buyers. See "Results of Operations."


Consolidated Balance Sheet
November 30, 1995 And 1994



                                                     1995            1994
Assets
 Cash and cash equivalents . . . . . . . . . .  $  5,161,000     $ 5,759,000
 Receivables . . . . . . . . . . . . . . . . .     8,964,000       7,823,000
 Inventories . . . . . . . . . . . . . . . . .    64,246,000      88,802,000
 Commercial land and buildings . . . . . . . .     9,439,000      16,597,000
 Investments in joint ventures . . . . . . . .       850,000         850,000
 Prepaid expenses and other assets . . . . . .     2,756,000       2,313,000
  Total assets . . . . . . . . . . . . . . . .  $ 91,416,000    $122,144,000

Liabilities and Shareholders' Equity
 Revolving credit agreement. . . . . . . . . .   $45,000,000    $ 60,000,000
 Mortgages payable . . . . . . . . . . . . . .     1,227,000       9,398,000
 Accounts payable. . . . . . . . . . . . . . .     3,270,000       6,968,000
 Accrued expenses and other liabilities. . . .    14,906,000      16,733,000
  Total liabilities. . . . . . . . . . . . . .    64,403,000      93,099,000

Commitments and contingent liabilities

Shareholders' Equity
 Common stock, $.01 par value, 53,700,000
  shares authorized; issued and outstanding
  26,371,000 in 1995 and 25,997,000 in 1994. .       264,000         260,000
 Paid in capital . . . . . . . . . . . . . . .    22,822,000      21,720,000
 Retained earnings . . . . . . . . . . . . . .     3,927,000       7,065,000
  Total shareholders' equity . . . . . . . . .    27,013,000      29,045,000

  Total liabilities and shareholders' equity .  $ 91,416,000    $122,144,000

           See accompanying notes to consolidated financial statements.


[CAPTION]
Consolidated Statement Of Income
<TABLE>
                                                                                                         
                                                                            Six Month        Six Month
                                                                           Period Ended     Period Ended
                                            Years Ended November 30,       November 30,        May 31,
                                                1995            1994            1993            1993
<S>                                       <C>             <C>             <C>             <C>                              
Revenues. . . . . . . . . . . . . . . .   $ 180,843,000   $ 168,723,000   $  83,351,000   $ 76,555,000
Equity in operations 
 of joint ventures. . . . . . . . . . .              --              --              --     (9,422,000)
                                            180,843,000     168,723,000      83,351,000     67,133,000
Costs and expenses
  Cost of revenues. . . . . . . . . . .     159,690,000     139,339,000      67,473,000     68,304,000
  Selling, general and administrative .      18,845,000      20,183,000      10,100,000     10,785,000
  Provision for estimated 
   net realizable value . . . . . . . .       1,593,000         400,000              --      3,384,000
  Restructuring charges . . . . . . . .       1,940,000              --              --             --
  Amortization of values in excess of 
   amounts allocable to identifiable 
   net assets . . . . . . . . . . . . .              --         206,000         218,000        253,000
                                            182,068,000     160,128,000      77,791,000     82,726,000

Income (loss) from operations . . . . .      (1,225,000)      8,595,000       5,560,000    (15,593,000)

Other charges (credits)
  Interest expense, net . . . . . . . .       1,847,000       1,235,000         879,000       3,338,000
  Other (income) expense. . . . . . . .        (765,000)             --         (75,000)         70,000
  Reorganization charges. . . . . . . .              --              --              --      37,493,000
  Write-off of financing costs. . . . .              --         800,000              --              --
Income (loss) before income taxes
  and extraordinary gain. . . . . . . .      (2,307,000)      6,560,000       4,756,000    (56,494,000)
Provision in lieu of income taxes . . .         831,000       2,367,000       1,884,000          --
Income (loss) before 
  extraordinary gain. . . . . . . . . .      (3,138,000)      4,193,000       2,872,000    (56,494,000)

Extraordinary gain. . . . . . . . . . .              --              --              --     58,311,000
Net income (loss) . . . . . . . . . . .   $  (3,138,000)  $   4,193,000   $   2,872,000   $  1,817,000

Income (loss) per share
 Income (loss) before 
  extraordinary gain. . . . . . . . . .   $        (.12)  $         .16   $         .11   $      (1.67)
 Extraordinary gain . . . . . . . . . .              --              --              --           1.72
  Net income (loss) . . . . . . . . . .   $        (.12)  $         .16   $         .11   $        .05

</TABLE>
           See accompanying notes to consolidated financial statements.
[CAPTION]
Consolidated Statement Of Cash Flows
<TABLE>
                                                                                                         
                                                                           Six Month        Six Month
                                                                           Period Ended     Period Ended
                                            Years Ended November 30,       November 30,      May 31,
                                                1995           1994            1993            1993
<S>                                       <C>             <C>             <C>             <C>    
Cash Flows from Operating Activities
 Net (loss) income. . . . . . . . . . .   $  (3,138,000)  $   4,193,000   $   2,872,000   $  1,817,000
 Adjustments to reconcile net (loss)
  income to net cash provided (used)
  by operating activities
   Restructuring  charges . . . . . . .       1,940,000              --              --              --
   Depreciation and amortization. . . .       1,741,000       1,877,000       1,151,000      1,327,000
   Provision for estimated net 
    realizable value. . . . . . . . . .       1,593,000         400,000              --      3,384,000
   Option abandonments. . . . . . . . .       1,050,000              --              --              --
   Provision in lieu of income taxes. .         831,000       2,928,000       1,649,000              --
   Issuance of stock under 401(k) Plan.         213,000         198,000              --              --
   Reserve reversal . . . . . . . . . .      (1,113,000)             --              --              --
   Extraordinary gain . . . . . . . . .              --              --              --    (58,311,000)
   Equity in operations of
    joint ventures. . . . . . . . . . .              --              --              --      9,422,000
   Reorganization charges . . . . . . .              --              --              --     35,765,000
   (Increase) decrease in receivables .      (1,141,000)     (1,460,000)      6,744,000        146,000
   Decrease (increase) in inventories .      26,897,000     (11,345,000)     (5,530,000)    11,318,000
   (Decrease) increase in accounts
    payable, accrued expenses and other
    liabilities . . . . . . . . . . . .      (5,508,000)     (1,138,000)     (1,834,000)     1,945,000
   (Increase) decrease in prepaid
    expenses and other assets . . . . .        (792,000)        633,000         616,000     11,281,000
                                             22,573,000      (3,714,000)      5,668,000     18,094,000
Cash Flows from Financing Activities
  Repayment under revolving credit 
   agreement. . . . . . . . . . . . . .     (19,500,000)     (9,500,000)    (13,479,000)    (8,473,000)
  Proceeds under revolving credit
   agreement. . . . . . . . . . . . . .       4,500,000      14,500,000       7,500,000              --
  Repayment of mortgages payable. . . .      (8,171,000)       (882,000)       (471,000)    (2,571,000)
  Repurchase of Senior Subordinated
   Notes. . . . . . . . . . . . . . . .              --              --      (1,000,000)    (5,000,000)
                                            (23,171,000)      4,118,000      (7,450,000)   (16,044,000)
Net (decrease) increase in cash and
  cash equivalents. . . . . . . . . . .        (598,000)        404,000      (1,782,000)     2,050,000
Cash and cash equivalents at
  beginning of period . . . . . . . . .       5,759,000       5,355,000       7,137,000      5,087,000
Cash and cash equivalents at end 
  of period . . . . . . . . . . . . . .   $   5,161,000   $   5,759,000  $    5,355,000   $  7,137,000

           See accompanying notes to consolidated financial statements.
</TABLE>
[CAPTION]
Consolidated Statement Of Shareholders' Equity
<TABLE>

                                                    Class B                                  Retained
                                      Common        Common      Preferred      Paid In       Earnings
                                      Stock         Stock         Stock        Capital       (Deficit) 
<S>                                <C>           <C>           <C>           <C>          <C>           
Balance, November 30, 1992. . . .  $   321,000   $    76,000   $        --   $43,431,000  $(28,113,000)
Net income for the six month
 period ended May 31, 1993. . . .           --            --            --            --     1,817,000
Elimination of accumulated 
 deficit in connection with the 
 reorganization . . . . . . . . .          --             --            --            --    26,296,000
Retirement of stock in connection
 with the plan of reorganization.    (321,000)       (76,000)           --   (22,925,000)           --
Issuance of common and. . . . . .     234,000             --       260,000            --            --
Balance, May 31, 1993 . . . . . .     234,000             --       260,000    20,506,000            --
Net income for the six month
 period ended November 30, 1993 .          --             --            --            --     2,872,000
Amortization of deferred
 compensation related to stock 
 option plan. . . . . . . . . . .          --             --            --        21,000            --
Balance, November 30, 1993. . . .     234,000             --       260,000    20,527,000     2,872,000
Net income. . . . . . . . . . . .          --             --            --            --     4,193,000
Conversion of preferred stock . .      26,000             --      (260,000)      234,000            --
Issuance of stock under
 401(k) Plan. . . . . . . . . . .          --             --            --       198,000            --
Tax adjustment. . . . . . . . . .          --             --            --       719,000            --
Amortization of deferred
 compensation related to stock 
 option plan. . . . . . . . . . .          --             --            --        42,000            --
Balance, November 30, 1994. . . .     260,000             --            --    21,720,000     7,065,000
Net loss. . . . . . . . . . . . .          --             --            --            --    (3,138,000)
Issuance of stock under
 401(k) Plan. . . . . . . . . . .       4,000             --            --       209,000            --
Provision in lieu of income taxes          --             --            --       831,000            --
Amortization of deferred
 compensation related to stock 
 option plan. . . . . . . .  . .           --             --            --        62,000            --
Balance, November 30, 1995. . .    $  264,000    $        --   $        --   $22,822,000   $ 3,927,000
</TABLE>
           See accompanying notes to consolidated financial statements.


Notes To Consolidated Financial Statements


1. Summary Of Significant Accounting Policies

Principles of consolidation

     The consolidated financial statements include the accounts of Calton, Inc.
and all of its wholly-owned and majority-owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated.
     The Company accounts for its investments in its 50% or less interests in
corporate and unincorporated joint ventures by the equity method.
     The accompanying financial statements for the years ended November 30,
1995 and 1994 and the six months ended November 30, 1993 are separated by a
black line from prior periods due to the adoption of fresh-start accounting and
reporting to reflect the effects of the Reorganization as of May 31, 1993, and
are not comparable to the amounts reflected for prior periods (see Note 11).
Certain reclassifications have been made to prior years' financial statements
in order to conform with the 1995 presentation.

Income recognition

     Revenue and cost of revenue on sales of homes are recognized when
individual homes are completed, and title and other attributes of ownership
have been transferred by means of a closing to the buyer. Revenue and cost of
revenue on land sales are recognized when all conditions precedent to closing
have been fulfilled, a specified minimum down payment has been received and
there is reasonable assurance that resulting receivables will be collected.

Cash and cash equivalents

     Cash equivalents consist of short-term, highly liquid investments, with
original maturities of three months or less, that are readily convertible into
cash.

Inventories

     Inventories are stated at the lower of cost or estimated net realizable
value for each property. As of November 30, 1995, certain inventories had been
restated to reflect estimated net realizable value. Estimated net realizable
value has been determined based upon the amount the Company expects to realize
through sale or development based on management's present plans for each
property. In a buildout of a community, certain assumptions are made concerning
future sales prices and absorption of sales and closings in the community's
life span. There is an inherent risk that those assumptions made may not occur.
The estimated net realizable value of a property may exceed the value which
could be obtained through the immediate sale of the property if development
plans for such property support a higher cost recovery. Cost includes direct
and allocated indirect costs. Land and land development costs generally include
interest and property taxes incurred. Interest is capitalized using interest
rates on specifically related debt and the Company's average borrowing rate.
Inventoried costs are charged to cost of revenues based upon the estimated
average cost within each community.

Commercial land and buildings

     Commercial land and buildings, stated at estimated fair market value,
include certain assumptions in their ultimate disposition such as future cash
flow, the ability of the Company to obtain certain zoning changes and
regulatory or governmental approvals. There is an inherent risk that those
assumptions made may not be realized.

Income taxes

     Deferred income taxes are determined on the liability method in accordance
with Statement of Financial Accounting Standards No. 109 (see Note 8).

Prepaid expenses and other assets

     Prepaid expenses and other assets consist primarily of property and
equipment, prepaid architect fees and prepaid insurance. Prepaid architect fees
are amortized on a per unit basis as homes are delivered.

Risks and uncertainties

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses for the periods
reported. Actual results could differ from those estimates.
     The Company, as well as the homebuilding industry in general, is very
sensitive to economic conditions. Inflation, interest rate fluctuations,
available capital and consumer confidence impact the ability of the Company
to market, sell and build homes.

Per share computations

     Per share computations are based upon the weighted average number of
shares of common stock and preferred stock outstanding during each period
presented (26,281,000 and 26,095,000 for the years ended November 30, 1995 and
1994, respectively, and 26,239,000 for the six months ended November 30, 1993.
Prior to the Company's Reorganization in 1993, the weighted average number of
shares of Common Stock and Class B Common Stock was 33,819,000 for the six
months ended May 31, 1993).

2. Receivables

     Receivables consist of the following (amounts in thousands):

                                                           November 30,
                                                        1995          1994
Closing proceeds due . . . . . . . . . . . . .       $  4,946      $  2,830
Due from municipalities. . . . . . . . . . . .          2,573         3,192
Mortgages and notes receivable, net. . . . . .            557           524
Other. . . . . . . . . . . . . . . . . . . . .            888         1,277
                                                     $  8,964      $  7,823

3. Inventories

     The components of inventories are as follows (amounts in thousands):
                                                                                
                                                           November 30,
                                                        1995          1994
Land and land development costs. . . . . . . .       $ 37,144      $ 59,555
Direct and indirect construction costs . . . .         22,603        24,955
Land purchase options and cost of 
 projects in planning. . . . . . . . . . . . .          4,499         4,292
                                                     $ 64,246      $ 88,802

     The total amount of interest costs capitalized was $5,016,000 for the year
ended November 30, 1995, $4,005,000 for the year ended November 30, 1994,
$1,467,000 for the six month period ended November 30, 1993 and $1,130,000 for
the six month period ended May 31, 1993.
     In the year ended November 30, 1995, the Company recorded provisions of
$1,593,000 to state inventory, consisting primarily of two properties, to
estimated net realizable value. For the year ended November 30, 1994, $400,000
was recorded as a provision for estimated net realizable value. In the six 
month period ended May 31, 1993, the Company recorded provisions of $2,200,000 
to state inventory at estimated net realizable value. These charges are 
reflected in the provision for estimated net realizable value. There were no 
charges recorded in the six month period ended November 30, 1993. During 1995, 
the Company acquired $10,511,000 of land. During 1994, the Company acquired 
$25,700,000 of land, $2,486,000 of which was financed with a purchase money 
mortgage.

4. Commercial land and buildings

     During the year ended November 30, 1995, the Company sold approximately
$7,000,000 of its commercial building property and reduced related mortgage
payables by $6,900,000, in accordance with management's plan to focus on its
core business of residential homebuilding. As a result, Commercial land and
buildings was reduced from $16,597,000 at November 30, 1994, to $9,439,000 at
November 30, 1995.
     The sales were consummated in April 1995 and July 1995 for proceeds of
$880,000 and $7,200,000, respectively. The sales resulted in pre-tax gains of
approximately $80,000 and $425,000, respectively, and provided approximately
$850,000 of cash for operations after the retirement of the mortgage debt.
     The remaining properties consists primarily of land located in
Pennsylvania, New Jersey and Florida. These properties are available for sale
as a result of management's focus on residential homebuilding.
     In the last month of 1994, the Company sold a commercial building for
$800,000 in cash which reduced Commercial land and buildings by $770,000. The
net proceeds of approximately $750,000 were used to reduce mortgages payable.
The sale of this building did not result in a significant gain or loss.

5. Revolving Credit Agreement

     In February 1995, the Company entered into an agreement with its Lenders
extending the term of the existing Amended Credit Agreement (the "Facility")
from its maturity date of June 1, 1995 to February 28, 1997. In
February 1996, the Company amended its Facility to meet anticipated operating
results through the remainder of the term of the Facility. In conjunction with
the Company's decision to exit from the Chicago market, the amended Facility
will permit borrowings of up to $55,000,000 until November 1, 1996, when the
commitment is reduced to $50,000,000. The amended Facility increased the
interest rate charged to the Company to the lender's prime rate (8.75% at
November 30, 1995) plus two percent (2%). The Company believes that funds
generated by its operating activities and borrowing availability under the
Facility will provide sufficient capital to support the Company's operations
through the term of the Facility; however, the Company believes that it will
have to seek an extension of the Facility or arrange replacement financing
prior to the expiration of the Facility on February 28, 1997.
     The February 1996 amendment to the Facility changed various covenants, the
most restrictive of which prescribe levels of tangible net worth (as defined),
EBITDA, and cash basis interest expense coverage and limits the acquisition of
land and land development expenditures and the incurrence of other
indebtedness. Although these limitations will restrict the Company's ability to
expand its business, the Company believes it will be able to comply with the
amended financial covenants based on its business plan. There can be no
assurance that, if market conditions deteriorate further, business plan levels
will be met.
     The Facility also limits the aggregate amount of cash and letters of
credit which can be used to collateralize performance bonds to $5,000,000 of
cash (approximately $2,600,000 and $3,200,000 was outstanding as of November
30, 1995 and November 30, 1994, respectively) and up to $10,000,000 of letters
of credit ($1,500,000 and $3,000,000 were outstanding as of November 30, 1995
and November 30, 1994, respectively). At November 30, 1995, approximately
$46,500,000, including $1,500,000 of letters of credit, was outstanding under
the Facility. The Facility includes a borrowing base, based upon a percentage
of the Company's eligible inventory, which restricted borrowings to $50,000,000
at November 30, 1995. The unused Facility commitment of $8,500,000 is available
as of November 30, 1995 to the Company for investment in inventory that results
in the corresponding growth of its borrowing base. As of November 30, 1995,
approximately $3,500,000 was available to be borrowed under the borrowing base
restriction. Substantially all of the Company's assets are pledged as
collateral under the Facility.     The number of lenders under the Facility has
recently decreased to four participants with Foothill Capital acquiring
thirty-seven and one-half percent (37.5%) of the Facility from the Apollo Group
and Fidelity Investments.
     Amounts borrowed under the Facility during the year ended November 30,
1995, bore interest at the lenders prime rate (8.75% at November 30, 1995) plus
one and one-half percent (1-1/2%). The weighted average interest rates for the
years ended November 30, 1995 and 1994 were 11.1% and 8.1%, respectively. The
weighted average amounts borrowed for the corresponding years were $58,105,000
and $56,704,000, respectively.
     The total amount of interest paid, net of amounts capitalized, in the
years ended November 30, 1995 and 1994 was $2,124,000 and $1,440,000,
respectively; $893,000 for the six months ended November 30, 1993; and
$1,445,000 for the six months ended May 31, 1993.

6. Mortgages Payable

     Mortgages payable consist of the following (amounts in thousands):
                                                                                
                                                           November 30,     
                                   Interest Rate        1995          1994   
Mortgages payable, land (a). . . . Prime             $  1,227      $  2,486
Mortgages payable, other (b) . . . Prime + 1%              --         6,912
                                                     $  1,227      $  9,398

(a) Approximately $1,885,000 of inventories are pledged as collateral
for a purchase money mortgage to a land seller at November 30, 1995 compared to
$3,400,000 at November 30, 1994. During 1995, the purchase money mortgage was
reduced by payments in exchange for mortgage releases. The remaining mortgage
payable is due in 1996. The interest rate is prime (8.75% at November 30, 1995)
but is not to exceed 10% and interest is paid semi-annually in March and
September.
(b) Mortgages of $6,912,000 at November 30, 1994 were paid from the proceeds
from the sale of the commercial properties in April and July 1995 (see Note 4).

     The weighted average interest rate for mortgages payable during the year
ended November 30, 1995 was 9.9%.

7. Shareholders' Equity

     Pursuant to the Plan of Reorganization on May 28, 1993, the Company's
Restated Certificate of Incorporation was amended to (i) eliminate the
Company's Class B Stock, (ii) provide for 53,700,000 authorized shares of
Common Stock (par value $.01 per share) and (iii) 2,600,000 shares of
Redeemable Convertible Preferred Stock (par value $.10 per share). In 1994, the
Amended and Restated Certificate of Incorporation was amended to also provide
10,000,000 shares of Class A Preferred Stock (par value $.10 per share) none of
which is issued or outstanding.
     The Company adopted the Calton, Inc. 1993 Non-Qualified Stock Option Plan
(the "Plan") which became effective upon the consummation of the Reorganization
under which a total of 1,493,000 shares of Common Stock were reserved for
issuance. Under the terms of the Plan, options may be granted at an exercise
price designated by the Compensation Committee. The term of the option is for a
maximum term of ten years. As of November 30, 1995, 1,270,000 options had been
granted, none of which had been exercised and 1,046,000 were exercisable.
     During the second quarter of fiscal 1995, the Company's Board of Directors
reviewed the outstanding options granted under the Company's Plan. The Board
considered that the outstanding options were granted in more favorable economic
periods. Therefore, in order to continue to provide an incentive to management,
the Board adjusted the exercise price of all outstanding options held by
employees to $.50 per share, the fair market value of the Company's Common
Stock at the date of the Board action. The market value of the Company's stock
at November 30, 1995 was $.4375.
     In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation". Effective December 1, 1995,
the Company will adopt the disclosure only alternative.

8. Income Taxes

     The following schedule reconciles the federal provision in lieu of income
taxes computed at the statutory rate to the actual provision in lieu of income
taxes (amounts in thousands):





                                                              Six       Six
                                                             Month      Month
                                                             Period    Period
                                            Years Ended      Ended      Ended
                                            November 30,    November   May 31,
                                          1995       1994   30, 1993    1993
Computed (benefit)/provision in lieu
 of income taxes at 34% . . . . . . . . $  (784)   $ 2,231   $ 1,617  $   618
Expenses for which deferred tax
 benefit cannot be
 currently recognized. . . . . . . . .    1,258        409        --   18,722
State and local tax provision/(benefit).    352        346       267   (3,737)
State tax reserves . . . . . . . . . . .     --       (695)       --       --
Nondeductible acquisition
 costs and expenses. . . . . . . . . .       --         --        --    4,223
Gain on extinguishment of debt . . . . .     --         --        --  (19,826)
Other, net . . . . . . . . . . . . . . .      5         76        --       --
Total provision in lieu
 of income taxes . . . . . . . . . . .  $   831    $ 2,367   $ 1,884  $    --

   The components of the provision in lieu of income taxes are as follows
   (amounts in thousands):

                                                              Six       Six
                                                             Month      Month
                                                             Period    Period
                                            Years Ended      Ended      Ended
                                            November 30,    November   May 31,
                                          1995       1994   30, 1993    1993
Federal
 Current . . . . . . . . . . . . . . .  $    --    $    --   $    --  $   --
 Deferred. . . . . . . . . . . . . . .       --         --        --      --
 Provision in lieu of income taxes . .      479      2,537     1,479      --
State
 Current . . . . . . . . . . . . . . .       79         24       235      --
 Deferred. . . . . . . . . . . . . . .       --         --        --      --
 Provision/(benefit) in lieu of
  income taxes. . . . . . . . . . . .       273       (194)      170      --
                                        $   831    $ 2,367   $ 1,884  $   --



     Fresh-start accounting and reporting requires the Company to report a
provision in lieu of income taxes when the Company recognizes a
pre-reorganization deferred tax asset. This requirement applies despite the
fact that the Company's pre-reorganization net operating loss carryforward and
other deferred tax assets would eliminate the related federal income tax
payable. The current and future year tax benefit related to the
pre-reorganization net deferred tax asset was recorded as a reduction of values
in excess of amounts allocable to identifiable net assets until exhausted and
then as a direct increase to paid in capital. The net deferred tax asset of
$18,647,000 is primarily attributable to pre-reorganization deductible
temporary differences.
     Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities at November 30, 1995 and 1994
are as follows (amounts in thousands):

                                       November 30, 1995     November 30, 1994
                                        Deferred Deferred   Deferred Deferred
                                           Tax      Tax        Tax      Tax
                                         Assets Liabilities  Assets Liabilities
Fresh-start inventory reserves . . . . .$ 1,114    $   --    $ 2,636  $    --
Income from joint ventures . . . . . . .    328       417      5,344    2,040
Inventory and other reserves . . . . . .  2,064        --      5,542       --
Preproduction interest . . . . . . . . .     --       536         --      536
Federal net operating losses . . . . . .  7,568        --     14,110       --
State net operating losses . . . . . . .  6,647        --      8,483       --
Condemnation . . . . . . . . . . . . . .     --        --         --      245
Depreciation . . . . . . . . . . . . . .    285        89        306        7
Deferred state taxes . . . . . . . . . .  1,691        --      3,938      957
Other. . . . . . . . . . . . . . . . . .    812       820      1,209      891
                                         20,509     1,862      41,568   4,676
Valuation allowance. . . . . . . . . . .(18,647)       --     (36,892)     --
Total deferred taxes . . . . . . . . . .$ 1,862   $ 1,862     $ 4,676 $ 4,676


     Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. For federal and state tax purposes, a valuation allowance was
provided on the deferred tax assets due to uncertainty of realization. Federal
tax effects of deferred tax assets were recognized to the extent of existing
available deferred tax credits.
     The federal net operating loss carryforward for tax purposes is
approximately $22,000,000 at November 30, 1995 and $43,000,000 at November 30,
1994. The decrease is related to the reduction due to the Section 382
limitation and the utilization against taxable income attributable to Talcon 
L.P. A preliminary estimate of the Company's ability to use its deferred tax 
assets to offset future income is approximately $1,700,000 per year under 
Section 382 of the Internal Revenue Code as a result of the recent change in 
control of the Company. These federal carryforwards will expire between 2007 
and 2009. The Company received an income tax refund of $50,000 in 1995. No such
amounts were received in 1994 and 1993.

9. Commitments and Contingent Liabilities

     (a) In July 1994, an action was filed against Calton Homes, Inc., the
Township of Plainsboro, New Jersey and its planning board, certain real estate
brokers and certain unnamed officers of Calton Homes, Inc., by approximately 60
purchasers in the Company's Princeton Manor development seeking compensatory
and punitive damages arising out of an alleged failure to disclose that a
portion of the property adjacent to the community could be developed by
Plainsboro Township as a public works site. The Company is vigorously
contesting this matter and, although there can be no assurances, does not
believe that the case will have any material effect on the financial condition
or results of operations of the Company. In addition, the Company believes that
it is contractually entitled to indemnification from Plainsboro Township in the
event that any liability should arise.
     (b) The Company is involved from time to time in other litigation in the
ordinary course of business. Management presently believes that the resolution
of any such matter should not have a material, adverse effect on the financial
condition or results of operations of the Company.
     (c) The Company is obligated under operating leases for office space
expiring between 1996 and 2000 with total annual rentals of approximately
$313,000. Rental expense for the year ended November 30, 1995, November 30,
1994, and the six and twelve month periods ended November 30, 1993 amounted to
$781,000, $715,000, $408,000 and $846,000, respectively.
     (d) The Company  has a qualified contributory retirement plan (401(k)
Plan) which covers all eligible full-time employees with a minimum of one year
of service. Employees may contribute up to eighteen percent (18%) of their
annual compensation with employer matching at the Company's discretion. The
Company's contribution to the plan was $213,000 in 1995 and $198,000 in 1994.
The Company's contribution to the plan was not significant in 1993. The
Company's matching contribution, in the form of registered Common Stock of the
Company, for 1995 was 75% of participant contributions. The Company's matching
contribution, in the form of registered Common Stock of the Company, for 1996
will be 5% of participant contributions.
     (e) Commitments include the usual obligations of housing producers for the
completion of contracts in the ordinary course of business.

10. Investments In Joint Ventures

     Investments in joint ventures at November 30, 1995 consist of a
partnership interest in a joint venture located in Maryland.
     The Company previously wrote off its entire equity investment in Talcon 
L.P. and recorded a reserve for $1,000,000 of indebtedness owed to it by 
Talcon L.P. In connection with Talcon L.P.'s dissolution and liquidation, 
it paid the Company $890,000 in the 1995 in full satisfaction of its debt
obligations. This payment was classified as non-operating Other (income) 
expense.
     Equity in operations of joint ventures was a loss of $9,422,000 for the
six months ended May 31, 1993. No such amounts were recorded for the years
ended November 30, 1995 and 1994 and the six month period ended November 30,
1993.

11. Reorganization

     Calton, Inc. and certain of its subsidiaries consummated a Plan of
Reorganization on May 28, 1993 (the "Effective Date"). The Plan of
Reorganization (the "Reorganization"), which was confirmed by the United States
Bankruptcy Court on May 6, 1993, resulted in the discharge of approximately
$61,542,000 of principal and $22,847,000 of interest due the holders of the
16-5/8% Senior and 12-5/8% Subordinated Notes of Calton, Inc. and certain of
its subsidiaries in exchange for 21,709,000 shares of Common Stock, 2,600,000
Warrants to purchase Common Stock, 2,600,000 shares of Preferred Stock,
$5,000,000 of cash and $1,000,000 of the short term new notes (retired on
September 30, 1993) which were issued to the 16- 5/8% Noteholders. During the
second quarter of fiscal 1994, 2,072,185 Warrants were exercised and, as
required under the terms of the Reorganization, the Company used the proceeds
to redeem 2,072,185 shares of Redeemable Convertible Preferred Stock at a
redemption price of $1.53 per share. The remaining 527,815 shares of Redeemable
Convertible Preferred Stock were automatically converted into Common Stock. The
value of the cash, notes and securities issued was less than the debt
discharged, thereby resulting in an extraordinary gain of $58,311,000.
     In accounting for the effects of the Reorganization, the Company
implemented Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" issued by the American
Institute of Certified Public Accountants in November 1990. SOP 90-7 requires
an allocation of the reorganization value in conformity with the procedures
specified by Accounting Principles Board Opinion No. 16, "Business
Combinations" for transactions reported on the basis of the purchase method.
     The Company's reorganization value was determined to be $21,000,000 with
the assistance of independent advisors. The reorganization value was based upon
discounted projected cash flows for the reorganized Company over a five-year
period. The projected cash flows included assumptions as to anticipated sales
and margins, marketing plans and operating expense levels. A discount rate of
16% was used, which reflected the weighted average cost of capital, the
uncertainty of the cash flows, the general inherent risk of the housing
industry and general business conditions. In this regard, the Company
incurred $23,917,000 in charges to adjust its inventories and commercial land
and buildings to estimated fair market value. Such estimates and assumptions
were inherently subject to significant economic and competitive uncertainties
beyond the control of the Company, including, but not limited to, those
with respect to the future courses of the Company's business activity.
Accordingly, there will usually be differences between projections and actual
results because events and circumstances frequently do not occur as expected,
and those differences may be material.
     As a result of the determination of the amount of reorganization value and
the fair market value of assets and liabilities (other than intangibles), a
$11,360,000 write-off of Values in excess of amounts allocable to identifiable
net assets ("goodwill") was recorded and a $5,000,000 balance resulted. The 
resulting goodwill was amortized and was reduced by the realization of deferred
tax assets through the recognition of the provision in lieu of income taxes. As 
a result of these two factors, the amount of goodwill was reduced to zero as 
of November 30, 1994.

12. Quarterly Financial Results

     Quarterly financial results for the years ended November 30, 1995 and 1994
are as follows (amounts in thousands, except per share amounts):

                                            Three Months Ended
                             February 28,  May 31,   August 31,  November 30,
                                 1995        1995        1995        1995
Revenues . . . . . . . . . .   $38,215     $38,836     $60,362     $43,430
Gross profit . . . . . . . .     4,411       4,403(b)    7,418       4,921
Net income (loss). . . . . .      (375)(a)    (316)      1,008      (3,455)(c)
Net income (loss) per share.      (.01)       (.01)        .04        (.13)

                                            Three Months Ended
                             February 28,  May 31,   August 31,  November 30,
                                 1994        1994        1994        1994
Revenues . . . . . . . . . .   $28,994     $36,252     $47,129     $56,348
Gross profit . . . . . . . .     5,558       6,441       8,280       9,105
Net income . . . . . . . . .       746         705       1,355       1,387(d)
Net income per share . . . .       .03         .03         .05         .05


     (a)Includes a $200,000 charge for costs primarily associated with the
consolidation of the New Jersey-North and New Jersey-South divisions.

     (b)Includes a $1.1 million charge resulting from abandoning nine
properties under option and a credit of $1.1 million realized from the reversal
of a reserve previously provided on a completed community.

     (c)Includes $1.6 million writedown of inventories to estimated net 
realizable value, $1.1 million of restructuring charges related to the wind
down of the Chicago division and $640,000 in executive severance, partially
offset by the $820,000 collection of a note previously reserved.

     (d)Includes costs of $800,000 relating to the proposed unit offering and 
related working capital facility and a tax benefit of approximately $700,000
related to the resolution of a certain tax issue.

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Shareholders of Calton, Inc.

  We have audited the accompanying consolidated balance sheet of Calton, Inc.
and Subsidiaries as of November 30, 1995 and 1994 and the related consolidated 
statements of income, shareholders' equity and cash flows for the years ended
November 30, 1995 and 1994 and the six month periods ended November 30, 1993 
and May 31, 1993.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
  We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement.  An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the consolidated
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 reasonable basis for our opinion.
  On May 28, 1993, Calton, Inc. reorganized and emerged from bankruptcy.
As discussed in Note 11 to the consolidated financial statements, the 
financial statements at May 31, 1993 reflect the estimated fair market value
of assets in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7.  The consolidated financial statements
for the years ended November 30, 1995 and 1994 and the six month period ended
November 30, 1993 referred to above are presented on the new basis, and 
accordingly, are not comparable to May 31, 1993 and prior.
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Calton, Inc.
and Subsidiaries as of November 30, 1995 and 1994 and the consolidated results
of their operations and their cash flows for the years ended November 30, 1995
and 1994 and the six month periods ended November 30, 1993 and May 31, 1993 in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND LLP
/s/ Coopers & Lybrand
Princeton, New Jersey
January 12, 1996  

CALTON, INC. COMMON STOCK

Calton, Inc. common stock is traded on the American Stock exchange ("AMEX")
under the symbol CN.  The following reflects the high and low sales prices of
the common stock during fiscal 1995 and 1994.


            Fiscal 1995                 High           Low
            1st Quarter                 1-1/8          5/8
            2nd Quarter                 11/16          3/8
            3rd Quarter                  1/2           3/8
            4th Quarter                  9/16          5/16

            Fiscal 1994
            1st Quarter                 2-5/16         1-1/2
            2nd Quarter                 2-11/16        1-1/2
            3rd Quarter                 1-11/16        1-3/8
            4th Quarter                 1-13/16        7/8

At February 1, 1996, there were approximately 663 holders of the Company's
common stock.  On that date, the last sale price for the common stock
as reported by AMEX was $3/8.