<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
                                   (MARK ONE)

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

                   For the fiscal year ended November 30, 2002

                                       or

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

                           Commission file no. 1-8846

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

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

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

       Registrant's telephone number, including area code: (772) 794-1414
           Securities registered pursuant to Section 12(b) of the Act:

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

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

               Rights                                  American Stock Exchange

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

Indicate by check mark whether the registrant is an accelerated filer (as
defined by Exchange Act Rule 12b-2) Yes |_| No |X|

The aggregate market value (based upon the last sales price reported by the
American Stock Exchange) of voting shares held by non-affiliates of the
registrant as of May 31, 2002 was $1,429,492.

As of March 11, 2003, 4,644,208 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 II and Part III hereof.

                                       1
<PAGE>

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

Disclosure Concerning Forward-looking Statements
------------------------------------------------

All statements, other than statements of historical fact, included in this Form
10-K, including in Part II, Item 7: "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the statements under
"Business" are, or may be deemed to be, "Forward-Looking Statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," and variations of such words and
similar phrases are intended to identify such forward-looking statements. Such
forward-looking statements involve assumptions, known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements contained in this Form 10-K. Such potential risks and
uncertainties, include without limitation, continued operating losses and their
effects on liquidity, the Company's ability to raise capital, matters related to
national and local economic conditions, 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,
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-K and the Company assumes no
obligation to update the forward-looking statements or to update the reasons
actual results could differ from those projected in such forward-looking
statements.
--------------------------------------------------------------------------------

                                     PART I

ITEM 1.

     (A)  GENERAL DEVELOPMENT OF BUSINESS

          GENERAL

          Calton, Inc. (the "Company" or "Calton") was incorporated in 1981 for
          the purpose of acquiring all of the issued and outstanding capital
          stock of Kaufman and Broad of New Jersey, Inc., a New Jersey
          corporation and homebuilder, from Kaufman and Broad, Inc., a Maryland
          corporation. After the acquisition, the name Kaufman and Broad of New
          Jersey, Inc. was changed to Calton Homes, Inc. ("Calton Homes").
          Calton maintains its corporate offices at 2013 Indian River Boulevard,
          Vero Beach, Florida 32960 and its telephone number is (772) 794-1414.

          Calton sold its principal operating subsidiary, Calton Homes, on
          December 31, 1998. Since the completion of the sale, the Company's
          principal business activities have been:

          o    providing Internet business solutions and technology based
               consulting and staffing services through eCalton.com, Inc.
               ("eCalton"), a wholly owned subsidiary which commenced operations
               following its acquisition of the business and assets of iAW, Inc.
               in July 1999;

          o    installation of customer loyalty and co-branded credit card
               programs for the retail automobile industry in the United States
               through PrivilegeONE Networks LLC ("PrivilegeONE"), a limited
               liability company initially established as a 50.4% owned
               subsidiary, which became wholly-owned by the Company in fiscal
               2001;

          o    providing management and consulting services to entrepreneurial
               and development stage companies through its 51% owned subsidiary,
               Innovation Growth Partners LLC ("IGP") until the sale of the
               Company's interest in IGP in April 2002;

          o    analyzing potential business combination opportunities.

                                       2
<PAGE>

          On May 31, 2001, the Company's Board of Directors declared a special
          dividend of $5.00 per share to all shareholders of record on June 20,
          2001, payable on July 5, 2001. The total amount distributed pursuant
          to the dividend was approximately $22,375,000.

          Effective at the close of business on May 31, 2000, the Company
          effected a one-for-twenty-five share combination or "reverse split" of
          the Company's Common Stock. Contemporaneous with, but after giving
          effect to the share combination, the Company effected a five-for-one
          forward split of the Common Stock. As a result of this
          Recapitalization (the "Recapitalization"), each twenty-five shares of
          Common Stock outstanding was combined into one share of Common Stock
          and the resulting share was split into five shares. All Common Stock,
          stock option, warrant and per share information has been adjusted to
          give effect to the Recapitalization.

          CERTAIN RISKS

          RECENT OPERATING LOSSES AND LIMITED LIQUIDITY The Company has incurred
          net losses in recent periods, including net losses from continuing
          operations of $3,423,000, $4,233,000 and $4,809,000 during the fiscal
          years ended November 30, 2002, 2001 and 2000, respectively. There can
          be no assurance that the Company's operations will become profitable
          in the future. As a result of the losses sustained, the Company's
          working capital had declined to $2,193,000 at November 30, 2002, which
          is not enough to fund the Company's operating plan during the fiscal
          year ending November 30, 2003 without sufficient revenue generation
          from the PrivilegeONE program. These conditions raise substantial
          doubt as to the ability of the Company to continue its normal business
          operations as a going concern. See "Management's Discussion and
          Analysis of Financial Condition and Results of Operations - Liquidity
          and Capital Resources" for a description of management's plans to
          sustain the Company's operations. No assurance can be given that the
          plans will be successful.

          RISKS ASSOCIATED WITH POTENTIAL BUSINESS COMBINATIONS The Company is
          seeking to enhance shareholder value by combining with one or more
          operating businesses. Management of the Company will endeavor to
          evaluate the risks inherent in any particular target business;
          however, there can be no assurance that the Company will properly
          ascertain all such risks. In many cases, shareholder approval will not
          be required to effect such a business combination. The fair market
          value of the target business will be determined by the Board of
          Directors of the Company. Therefore, the Board of Directors has
          significant discretion in determining whether a target business is
          suitable for a proposed business combination. The success of the
          Company will depend on the Company's ability to attract and retain
          qualified personnel as well as the abilities of key management of the
          combined companies. As a result, no assurance can be given that the
          Company will be successful in implementing its strategic plan or that
          the Company will be able to generate profits from such activities.

          STRATEGIC BUSINESS FOCUS CONSIDERATIONS The Company has shifted its
          core strategy to primarily managing the growth of PrivilegeONE.
          PrivilegeONE has not earned significant revenue and there is no
          guarantee that it will be become profitable. In addition, both Fleet
          Credit Card Services ("Fleet") and PrivilegeONE have been dissatisfied
          with the results of the PrivilegeONE credit card program to date and
          there is no assurance that Fleet will continue as the credit card
          issuer for the program or that the Company will be successful in
          securing another credit card issuer if it is required or desires to do
          so.

          INVESTMENT COMPANY ACT CONSIDERATIONS The Investment Company Act of
          1940, as amended ("1940 Act"), requires the registration of, and
          imposes various substantive restrictions on, certain companies that
          engage primarily, or propose to engage primarily, in the business of
          investing, reinvesting, or trading in securities, or companies that
          fail certain statistical tests regarding the composition of assets and
          sources of income and are not primarily engaged in a business other
          than investing, holding, owning or trading securities. The Company
          intends to continue to conduct its

                                       3
<PAGE>

          activities in a manner, which will not subject the Company to
          regulation under the 1940 Act; however, there can be no assurance that
          the Company will not be deemed to be an investment company under the
          1940 Act. If the Company was required to register as an investment
          company under the 1940 Act, it would become subject to substantial
          regulation with respect to its capital structure, management,
          operations, transactions with affiliates, the nature of its
          investments and other matters. In addition, the 1940 Act imposes
          certain requirements on companies deemed to be within its regulatory
          scope, including compliance with burdensome registry, recordkeeping,
          voting, proxy, disclosure and other rules and regulations. In the
          event of the characterization of the Company as an investment company,
          the failure of the Company to satisfy regulatory requirements, whether
          on a timely basis or at all, could have a material adverse effect on
          the Company.

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

          INDEMNITY OBLIGATIONS The agreement pursuant to which the Company sold
          Calton Homes requires the Company to indemnify the purchaser for,
          among other things, certain liabilities that arise out of events
          occurring prior to the closing of the sale. On the closing date of the
          sale, the Company deposited approximately $5,200,000 in escrow,
          $3,000,000 of which was deposited to provide security for the
          Company's indemnity obligations and approximately $2,200,000 of which
          was deposited to fund costs associated with certain specified
          litigation. As of November 30, 2002, approximately $88,000 remained in
          escrow pending the resolution of claims. In January 2003, one claim
          was settled reducing the escrow balance to approximately $35,000. The
          Company's indemnification obligations are not limited to the amount in
          escrow and no assurance can be given that the purchaser will not
          assert additional claims against the Company. As described in "Item 3
          - Legal Proceedings", the purchaser of Calton Homes has served a
          Demand for Arbitration on the Company and is alleging damages of
          $1,600,000 related to alleged construction defects in homes delivered
          by Calton Homes prior to the sale. The Company believes certain of the
          claims made are without merit and that is has established adequate
          reserves with respect to this matter. In addition, the Company intends
          to assert certain counterclaims against the purchaser and seek
          recoveries from insurers and subcontractors; however, no assurance can
          be given that this matter will not have an adverse effect on the
          Company's financial condition and results of operations.

          POTENTIAL DELISTING On July 26, 2002, the Company received notice from
          the American Stock Exchange ("AMEX") indicating that the Company is
          below certain of the AMEX's continued listing standards due to the
          operating losses it has sustained in three out of four of its most
          recent fiscal years and a decline in shareholders' equity below
          $4,000,000. The Company was afforded the opportunity to submit a plan
          of compliance to the AMEX and submitted the plan on August 22, 2002.
          On September 9, 2002, the AMEX notified the Company that it accepted
          the Company's plan of compliance and granted the Company an extension
          of time to regain compliance with the continued listing standards. The
          Company will be subject to periodic reviews by the AMEX during the
          18-month extension period that ends January 2004. Failure to make
          progress consistent with the plan or to regain compliance with the
          continued listing standards by the end of the extension period could
          result in the Company being delisted from the AMEX. Delisting from the
          AMEX could adversely affect the liquidity and price of the Company's
          common stock, which could adversely impact the Company's ability to
          raise capital through public stock offerings.

                                       4
<PAGE>

          VOLATILITY OF STOCK PRICE The Company's stock price has been volatile
          in the past and may continue to be volatile in the future. Stock
          prices of companies engaged in start-up and technology related
          businesses have generally been volatile as well. This volatility may
          continue in the future. The following factors, among others, may add
          to the volatility of the Company's stock price:

          o    actual or anticipated variations in the quarterly results of the
               Company and its subsidiaries;

          o    changes in the market valuations of the Company's subsidiaries,
               and valuations of competitors or similar businesses;

          o    conditions or trends in the Internet or technology industries in
               general;

          o    the initiation of a tender offer for all or a portion of the
               Company's common stock;

          o    loss of PrivilegeONE's credit card issuer or failure to secure
               another credit card issuer;

          o    the public's perception of the prospects of early stage ventures;

          o    the delay in executing a timely rollout of expected third party
               distribution programs for PrivilegeONE in fiscal year 2003;

          o    new products or services offered by the Company, its subsidiaries
               and their competitors;

          o    additions to, or departures of, the key personnel of the Company
               or its subsidiaries;

          o    general economic conditions such as a recession, or interest rate
               fluctuations.

          Many of these factors are beyond the Company's control. These factors
          may decrease the market price of the Company's Common Stock,
          regardless of the Company's operating performance.

     (B)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

          The information required by this item is presented in Note 9 of the
          2002 Financial Statements included in this report.

     (C)  DESCRIPTION OF BUSINESS

          GENERAL The Company's business activities are primarily focused on (i)
          the development of a loyalty and co-branded credit card program
          through PrivilegeONE (ii) providing Internet business solutions and
          technology based staffing and consulting services through eCalton and
          (iii) analyzing potential combinations. eCalton will continue to
          operate as it has historically but in addition will provide
          technology, marketing and other support services to PrivilegeONE.

                                       5
<PAGE>

          PRIVILEGEONE

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

          INSTALLED DEALERSHIPS The PrivilegeONE co-branded loyalty and credit
          card program has been launched at 29 retail automotive dealerships in
          New York, New Jersey and New Hampshire. As of February 28, 2003
          approximately 1,900 cards have been issued.

          AGREEMENT WITH LARGE THIRD PARTY DISTRIBUTOR In October 2002,
          PrivilegeONE, as part of its shift in strategy toward third party
          distribution channels, entered into its first agreement with a large
          third party distributor, which is an exclusive distributor of Toyota
          vehicles to 163 Toyota dealerships. Under the terms of the agreement
          with this third party, the distributor has agreed to market and
          promote the PrivilegeONE program at these 163 dealerships. For each
          credit card account established at one of these dealerships,
          PrivilegeONE will be required to pay the distributor a new account fee
          and a portion of the finance charge revenue attributable to the
          account. The implementation of the PrivilegeONE program through this
          distribution channel has been repeatedly delayed as a result of
          factors outside of the Company's control and there is no assurance
          that the program will be implemented in fiscal year 2003.

          AGREEMENT WITH FLEET In May 2001, the Company and PrivilegeONE entered
          into a credit card processing agreement with Fleet pursuant to which
          Fleet agreed to issue the PrivilegeONE credit cards. Under the
          agreement, Fleet is required to pay PrivilegeONE a fee for each
          account established through the PrivilegeONE program and 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
          Company has complied with the capitalization and contingency reserve
          requirements outlined in the Agreement. Under the terms of the
          agreement, the Company was required to reimburse Fleet for the cost of
          Fleet's software and other costs incurred by Fleet to develop the
          PrivilegeONE program, up to a maximum of $350,000. As of November 30,
          2002, the Company had reimbursed Fleet $350,000 for its software and
          development costs. Both Fleet and PrivilegeONE have been dissatisfied
          with the program's results to date and there is no assurance that
          Fleet will continue as the credit card issuer for the PrivilegeONE
          program or that the Company will be successful in securing another
          credit card issuer if it is required or desires to do so.

                                       6
<PAGE>

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

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

          PATENTS & TRADEMARKS PrivilegeONE has applied to the United States
          Patent and Trademark Office for a patent for CCAS, its online credit
          card acquisition system. No assurance can be given that the patent
          will be issued. Failure to obtain patent protection for CCAS, which
          the Company believes gives PrivilegeONE an advantage over potential
          competitors, could result in other parties duplicating the system.

          PrivilegeONE has received trademark registrations for the following:
          PrivilegeONE and PrivilegeONE stylized (logo).

          ECALTON.COM

          GENERAL eCalton provides Internet business solutions and technology
          based consulting and staffing services. In addition, eCalton is poised
          to support the growth and development of PrivilegeONE.

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

          TECHNOLOGY CONSULTING AND STAFFING The technology staffing division,
          based in Houston, Texas, provides large and medium-sized companies
          with experienced consulting professionals to assist them in creating,
          delivering and managing their information technology and Internet
          initiatives. Services offered by this division include supply chain
          management, customer relationship management, project management,
          applications, infrastructure and Internet/intranet development and
          design. The Houston office is poised to provide support services to
          PrivilegeONE if and when PrivilegeONE expands into that marketplace.

                                       7
<PAGE>

          SALES AND MARKETING As a result of the shift of its focus to providing
          technology support to PrivilegeONE, eCalton reduced its direct sales
          force for its Internet business solutions activities in 2002. eCalton
          will continue to market its services through existing client
          referrals, strategic partnerships, its website, WWW.ECALTON.COM and
          co-operative advertising. In addition, eCalton has been establishing
          strategic partnerships with complementary organizations such as
          advertising agencies and homebuilding technology suppliers to
          facilitate cooperative advertising and lead generation. eCalton will
          also market its services to automotive dealerships that participate in
          the PrivilegeONE co-branded credit card program. The eCalton Technical
          Staffing division markets its services through, among others, existing
          client referrals and the RFP process.

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

          eCalton is responding to the industry-wide competition by primarily
          focusing on the homebuilder industry as a vertical market. eCalton has
          created iHCG and through its marketing efforts, has established iHCG
          as a recognizable brand in the industry.

          EMPLOYEES

          As of March 17, 2003, the Company and its wholly owned subsidiaries
          employed 19 full time personnel, and 1 part-time employee. None of the
          Company's employees are subject to collective bargaining agreements.
          The Company believes that its employee relations are satisfactory.

ITEM 2.   DESCRIPTION OF PROPERTY

          The Company currently leases approximately 650 square feet of office
          space located in Red Bank, New Jersey, for approximately $1,000 per
          month, for a renewable term of six months. The Company also leases
          approximately 3,800 square feet of office space in Vero Beach, Florida
          at a monthly rate of approximately $6,800 for a term of five years
          ending August 31, 2005. In addition, the Company rents approximately
          2,400 square feet of office space in Houston, Texas, on a
          month-to-month basis, for approximately $2,700 per month.

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

ITEM 3.   LEGAL PROCEEDINGS
          The agreement pursuant to which the Company sold Calton Homes in
          December 1998 requires the Company to indemnify the purchaser for,
          among other things, certain liabilities that arise out of events
          occurring prior to the closing, including certain warranty claims on
          homes built. In connection with the sale, the Company entered into a
          holdback escrow agreement with the purchaser pursuant to which
          approximately $5,200,000 of the closing proceeds was deposited into
          escrow. Of this amount, approximately $3,000,000 (the "General
          Indemnification Funds") was deposited to provide security for the
          Company's indemnity obligations and approximately $2,200,000 (the
          "Specific Indemnification Funds") was deposited to fund costs
          associated with certain specified litigation involving Calton Homes.
          As of November 30, 2002, approximately $88,000 of the

                                       8
<PAGE>

          Indemnification Funds remained in escrow. In January 2003, one claim
          was settled reducing the escrow balance to approximately $35,000. The
          Company's indemnity obligations are not limited to the amount in
          escrow.

          In July 2002, the purchaser served a Demand for Arbitration on the
          Company and is currently alleging damages of $1,600,000 related to
          alleged construction defects in homes delivered by Calton Homes prior
          to its sale. The Company believes that certain of the claims are
          without merit and that it has recorded adequate reserves to meet its
          future obligations related to the remaining warranty claims. In
          addition, the Company intends to assert certain counterclaims against
          the purchaser and pursue recoveries from insurance carriers if the
          Company is ultimately liable for damages in this matter.

          In the event that the Company elects to liquidate and dissolve prior
          to December 31, 2003, it will be required to organize a liquidating
          trust to secure its obligations to the purchaser. The Company's
          agreement with the purchaser of Calton Homes requires that the
          liquidating trust be funded with any Specific Indemnification Funds
          remaining in escrow plus $2,000,000.

          On April 12, 2002, S. Raymond Tetreault and Thomas E. Van Fechtmann,
          each of whom is a former officer and member of PrivilegeONE, filed an
          action in the United States District Court for the State of Rhode
          Island against the Company, PrivilegeONE and certain officers of the
          Company, alleging, among other things, (i) breach of their employment
          agreements with PrivilegeONE in connection with the termination of
          their employment; (ii) breach of fiduciary duty, (iii) breach of
          contract as a result of the Company's unwillingness to permit the
          early exercise of certain options to acquire the Company's Common
          Stock prior to the record date for the dividend declared by the
          Company's Board of Directors in May 2001; and (iv) common law fraud,
          misrepresentation and violations of the Securities Act of 1933 in
          connection with the acquisition by the Company of their interest in
          PrivilegeONE in May 2001, due to an alleged failure to disclose the
          proposed dividend to the plaintiffs. The plaintiffs are seeking, among
          other things, compensatory and punitive damages in an unspecified
          amount, injunctive relief and the imposition of a constructive trust
          on 190,000 shares of the Company's Common Stock and its ownership
          interest in PrivilegeONE. The Company's motion to have the case
          summarily dismissed was denied in December 2002. At this time the
          Company has not answered the complaint, asserted counterclaims nor
          confirmed insurance coverage. However, it intends to vigorously defend
          the claims which it believes are without merit.

          The Company is involved from time to time in litigation arising in the
          ordinary course of business, none of which is expected to have a
          material adverse effect on the Company and, as in the case of other
          pending claims, has been reserved for accordingly.

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

          During the fourth quarter of 2002, no matter was submitted to a vote
          of security holders through the solicitation of proxies or otherwise.

                                       9
<PAGE>

ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

          The executive officers of the Company as of February 28, 2003 are
          listed below and brief summaries of their business experience and
          certain other information with respect to them are set forth in the
          following table and in the information which follows the table:

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

<S>                                <C>   <C>
          Anthony J. Caldarone     65    Chairman and Chief Executive Officer
          John G. Yates            59    President and Chief Operating Officer President and
                                         Chief Executive Officer - PrivilegeONE
          Maria F. Caldarone       39    Executive Vice President of Corporate Development and Asst. Secretary
                                         Director and Executive Vice President of Operations - PrivilegeONE
          Thomas C. Corley         41    Senior Vice President, Chief Financial Officer and Treasurer
                                         Senior Vice President and Chief Financial Officer - PrivilegeONE
          Laura A. Camisa          40    Senior Vice President of Strategic Planning
                                         Executive Vice President and Secretary - eCalton.com, Inc.
                                         Senior Vice President of Strategic Planning - PrivilegeONE
</TABLE>

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

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

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

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

          Ms. Camisa was hired as a Financial Analyst by the Company in February
          2000. In April 2000, she was appointed Vice President of Strategic
          Planning. In June 2001, Ms. Camisa was appointed Executive Vice

                                       10
<PAGE>

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

                                       11
<PAGE>

                                     PART II

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

          Calton, Inc. common stock is traded on the American Stock Exchange
          ("AMEX") under the symbol CN. The following reflects the high and low
          sales prices of the common stock during fiscal 2002 and 2001.


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

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


                 FISCAL 2001               High           Low
                                       ------------   ------------

                 1st Quarter                 $4.25          $3.13
                 2nd Quarter                  5.50           3.40
                 3rd Quarter                  6.10           0.72
                 4th Quarter                  0.85           0.42

          At March 11, 2003, there were approximately 370 shareholders of record
          of the Company's common stock, based on information obtained from the
          Company's transfer agent. On that date, the last sale price for the
          common stock as reported by AMEX was $.12

          On July 26, 2002, the Company received notice from the AMEX indicating
          that the Company is below certain of the AMEX's continued listing
          standards due to the operating losses it has sustained in three out of
          four of its most recent fiscal years and a decline in shareholders'
          equity below $4,000,000. The Company was afforded the opportunity to
          submit a plan of compliance to the AMEX and submitted the plan on
          August 22, 2002. On September 9, 2002, the AMEX notified the Company
          that it accepted the Company's plan of compliance and granted the
          Company an extension of time to regain compliance with the continued
          listing standards. The Company will be subject to periodic reviews by
          the AMEX during the 18-month extension period that ends January 2004.
          Failure to make progress consistent with the plan or to regain
          compliance with the continued listing standards by the end of the
          extension period could result in the Company being delisted from the
          AMEX.

          The information to be set forth in the table captioned "Equity
          Compensation Plan" is incorporated herein by reference to the Company
          Proxy Statement for its 2003 Annual Meeting of Shareholders.

                                       12
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

          The following table sets forth historical selected financial
          information of the Company as of the dates and for the periods
          indicated. The data set forth below should be read in conjunction with
          "Management's Discussion and Analysis of Financial Condition and
          Results of Operations" and the Company's Consolidated Financial
          Statements and Notes thereto included elsewhere in this report.

<TABLE>
<CAPTION>
                                                                            Fiscal Years Ended November 30,
                                                         --------------------------------------------------------------------
                                                                  (IN THOUSANDS EXCEPT OTHER DATA AND PER SHARE ITEMS)
SELECTED OPERATING DATA                                      2002          2001          2000          1999          1998
                                                         ------------  ------------  ------------  ------------  ------------
                                                                        (RESTATED)    (RESTATED)
<S>                                                       <C>           <C>           <C>           <C>           <C>
Revenues                                                  $    1,954    $    5,208    $    3,335    $    1,351    $        -
                                                         ============  ============  ============  ============  ============
Net income (loss) from continuing operations                  (3,423)       (4,233)       (4,809)          661        (1,960)
Net income (loss) from discontinued operations(1)             (1,561)         (806)       (1,087)        4,178         6,315
                                                         ------------  ------------  ------------  ------------  ------------
Net income (loss)                                         $   (4,984)   $   (5,039)   $   (5,896)   $    4,839    $    4,355
                                                         ============  ============  ============  ============  ============

Basic earnings (loss) per share:
Net income (loss) from continuing operations              $    (0.76)   $    (0.98)   $    (1.13)   $     0.15    $    (0.37)
Net income (loss) from discontinued operations(1)              (0.35)        (0.19)         (.25)         0.92          1.18
                                                         ------------  ------------  ------------  ------------  ------------
Net income (loss)                                         $    (1.11)   $    (1.17)   $    (1.38)   $     1.07    $     0.81
                                                         ============  ============  ============  ============  ============

Diluted earnings (loss) per share:
Net income (loss) from continuing operations              $    (0.76)   $    (0.98)   $    (1.13)   $     0.14    $    (0.37)
Net income (loss) from discontinued operations(1)              (0.35)        (0.19)         (.25)         0.87          1.18
                                                         ------------  ------------  ------------  ------------  ------------
Net income (loss)                                         $    (1.11)   $    (1.17)   $    (1.38)   $     1.01    $     0.81
                                                         ============  ============  ============  ============  ============

SELECTED OTHER DATA
                                                         ------------  ------------  ------------  ------------  ------------
Cash Dividend per share                                   $        -    $     5.00    $        -    $        -    $        -
                                                         ============  ============  ============  ============  ============

                                                                                    At November 30,
                                                         --------------------------------------------------------------------
SELECTED BALANCE SHEET DATA                                 2002          2001          2000          1999          1998
                                                         ------------  ------------  ------------  ------------  ------------

Total assets                                              $    3,905    $    9,813      $ 35,100      $ 40,441      $ 40,082
Total debt                                                         -             -             -             -             -
Shareholders' equity                                      $    2,300    $    7,217      $ 32,887      $ 38,654      $ 38,221
</TABLE>

--------------------------------------------------------------------------------
(1)  As a result of the sale of Calton Homes, Inc. that occurred on December 31,
     1998, the financial statements presentation treats the Company's
     homebuilding business and results as discontinued operations in accordance
     with APB Opinion No. 30, "Reporting the Results of Operations-Reporting the
     Effects of Disposal of a Segment of a Business." The Company recognized a
     gain of $4,418,000 that is net of a provision in lieu of taxes of
     $3,173,000 on the sale.

                                       13
<PAGE>

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

          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 web site development.

          Finally, during the second quarter 2002, the Company commenced the
          generation of revenues from the Credit Card Loyalty business segment.
          While 2002 revenues were $34,000, management has placed significant
          emphasis on the development of this segment and currently believes
          that its revenues will comprise the material amount of consolidated
          revenues in future periods. However, the successful generation of
          revenues from this segment is dependent upon many factors including
          the acceptance of the program by a high level of automotive dealers
          and the acquisition and maintenance of credit card processing
          services.

          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 previously balances from collections, estimate
          changes and other business decisions. Management continues to curtail
          costs where appropriate during 2003, with further reductions
          anticipated until the credit card loyalty segment becomes operational
          in mid to late 2003.

          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 from principally 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 cash

                                       14
<PAGE>

          dividend of $22,375,000 during 2001. Currently, cash is being used in
          operating activities and, accordingly, interest income is expected to
          decline during 2003.

          LOSSES ON INVESTMENTS/GAINS AND RECOVERIES: The 2002 loss on
          investments relates to management's decision to write off the AIM Note
          Receivable (see Note 3 in the Financial Statements). 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.

          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 interests 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.

          Results of operations from Innovation Growth Partners were as follows
          during each fiscal year ended November 30:

<TABLE>
<CAPTION>
                                                                    2002             2001           2000
                                                                 ---------------------------------------------
<S>                                                               <C>             <C>             <C>
                Revenues of discontinued subsidiary               $          -    $    91,000     $  199,000
                                                                 =============================================
                Net loss from discontinued subsidiary,  net of
                   income tax benefits of $98,000 and $48,000
                   during 2001 and 2000, respectively             $ (1,020,000)   $  (806,000)    $ (517,000)
                                                                 =============================================
</TABLE>

          No future losses are anticipated from the IGP disposal.

          RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 2001 AND 2000

          REVENUES: Revenues for fiscal 2001 increased to $5,208,000 compared to
          $3,335,000 in fiscal 2000. The primary reason for the increase was a
          full year of operations for the technical staffing division of
          eCalton, which commenced operations in July 2000. Revenues for the
          Internet business development division of eCalton were $1,148,000 in
          2001 compared to $1,109,000 in 2000 and revenues for the technical
          staffing division of eCalton were $2,760,000 compared to $936,000.
          Also included in revenues was $1,300,000 in homebuilding consulting
          for both fiscal 2001 and 2000. Homebuilding consulting fees were
          derived from a consulting agreement that expired in December 2001.

          COSTS OF REVENUES: Project personnel and expenses for eCalton were
          $2,420,000 in 2001 compared to $1,514,000 in 2000. The increase is
          primarily attributable to a full year of operations for the technical
          staffing division, which began operations in July 2000.

                                       15
<PAGE>

          SELLING GENERAL AND ADMINISTRATIVE: Selling, general and
          administrative expenses experienced an increase from $7,162,000 in
          2000 to $8,238,000 in 2001. The increase in 2001 is primarily from
          increased personnel and business activities at PrivilegeONE, a full
          year of operations for the technical staffing division of eCalton and
          a provision for uncollectible receivables in 2001. In addition, the
          Company recorded a non-cash charge in the amount of $367,000 in 2001
          for stock options issued as consideration for consulting services,
          which is included in selling, general and administrative expenses.

          IMPAIRMENTS OF LONG-LIVED ASSETS: During the year ended November 30,
          2001, the Company recognized impairment charges amounting to $359,000
          related to property and equipment and $119,000 related to goodwill
          associated with the PrivilegeONE subsidiary. Such impairments arose
          after the subsidiary failed to meet its revenue projections and when
          it was further determined by management that the market conditions
          were not supportive of the subsidiary's ongoing revenue projections.
          During 2000, management concluded that goodwill associated with
          eCalton and PrivilegeONE having a carrying value of $324,000 had been
          permanently impaired and charged the entire amount to operations.

          INTEREST INCOME: Interest income in fiscal 2001 experienced a sharp
          decline compared to fiscal 2000 primarily due to a lower cash position
          as a result of the $22,375,000 liquidating cash dividend discussed in
          Note 7 to the consolidated financial statements, as well as a decline
          in short term interest rates.

          INCOME TAXES: The Company recorded a deferred tax benefit for income
          taxes amounting to $615,000, which represents the expected tax benefit
          of certain net operating loss carrybacks. During fiscal 2001 and 2000
          the Company received federal income tax refunds in the amount of
          $362,000 and $1,298,000, respectively, resulting from the carrybacks
          of certain losses to years in which the Company paid income taxes.


          LIQUIDITY AND CAPITAL RESOURCES

          GENERAL:

          The Company's consolidated financial statements are prepared on a
          going concern basis, which assumes that Calton will realize its assets
          and discharge its liabilities in the normal course of business. As
          reflected in the financial statements, Calton has incurred losses from
          continuing operations of $(3,423,000), $(4,233,000) and $(4,809,000)
          and has used cash in continuing operations of $(3,497,000),
          $(3,810,000) and $(2,243,000) during the fiscal years ended November
          30, 2002, 2001 and 2000, respectively. As of November 30, 2002, the
          Company has working capital of $2,193,000, which is not sufficient to
          fund the current operating plan during the fiscal year ending on
          November 30, 2003. These conditions raise substantial doubt as to the
          ability of Calton to continue its normal business operations as a
          going concern.

          Management's plans to sustain Calton operations include accelerating
          and augmenting revenue opportunities, principally in the credit card
          loyalty segment, curtailing operating expenses to the extent
          appropriate and raise additional debt or equity capital from external
          sources. As discussed above and in Note 6 to the accompanying
          financial statements, during 2002, Calton sold its non-performing
          interest in Innovation Growth Partners which contributed to the
          Company's net loss in the amounts of $(1,020,000), $(806,000) and
          $(517,000) during the fiscal years ended November 30, 2002, 2001 and
          2000, respectively. In addition, the Internet development group of
          eCalton and PrivilegeONE consolidated office space to best cross train
          and to leverage employee skill sets. While management is actively
          addressing multiple sources of capital, there are currently no
          commitments, and there can be no assurances that sufficient capital
          can be raised under terms acceptable to management. The financial
          statements do not include any adjustments that may arise as a result
          of this uncertainty.

                                       16
<PAGE>

          CASH FLOWS FROM OPERATING ACTIVITIES:

          The Company used $3,497,000 in 2002 operating activities, compared to
          $3,810,000 in 2001 operating activities. The use of cash in each
          period was due to operating losses incurred in each period. Such
          losses are anticipated to continue until the Company's credit card
          loyalty business segment commences the generation of significant
          revenues.


          CASH FLOWS FROM INVESTING ACTIVITIES:

          The Company generated cash of $2,020,000 from investing activities,
          principally from the cash that was made available from the sale of the
          Company's interest in Innovation Growth Partners as well as settlement
          of certain litigation claims of the Company. Currently, there are no
          formal plans to dispose of businesses. However, management is closely
          monitoring the business activities of all business segments and may
          chose to sell or dispose of such operations to either curtail expenses
          or generate cash.

          In addition, the Company currently has no commitments for capital
          acquisition or equity purchases.

          CASH FLOWS FROM FINANCING ACTIVITIES:

          The Company generated cash of $48,000 from financing activities from
          the sale of common stock to Company employees under the Company's
          employee stock purchase plan. The amount received of $60,000 was
          offset by purchases of treasury stock in the amount of $12,000. There
          are no further plans to purchase treasury stock in the open market.

          As a result of the above cash flow activities, cash decreased from
          $4,715,000 at November 30, 2001 to $3,286,000 at November 30, 2002.
          Total working capital deceased from $3,543,000 at November 30, 2001 to
          $2,193,000 at November 30, 2001. Working capital available to the
          Company as of November 30, 2002 is not currently sufficient to fund
          the Company current operating plan. As a result, management is engaged
          in reviewing alternative sources of capital and expense curtailment
          activities. There can be no assurance that management will be
          successful in its efforts to curtail expenses or raise capital in
          amounts sufficient to sustain operations and achieve the Company's
          plans.

          COMMITMENTS, GUARANTEES AND CONTINGENCIES

          LITIGATION CLAIMS:

          The Company continues to have responsibility for certain warranty and
          other claims in connection with the sale of Calton Homes and the
          purchase of PrivilegeONE. The agreement pursuant to which the Company
          sold Calton Homes in December 1998 requires the Company to indemnify
          the purchaser for, among other things, certain liabilities that arise
          out of events occurring prior to the closing, principally related to
          certain warranty claims on homes built. As of November 30, 2002 and
          2001, $88,000 and $86,000, respectively, were maintained in an escrow
          account for such contingencies. However, the Company's indemnification
          obligations are not limited to the amount in escrow. As of November
          30, 2002, the Company has accrued $710,000 for known and estimable
          contingencies related to the sale of Calton Homes, the purchase of
          PrivilegeONE and for matters that occur in the ordinary course of
          business. In July 2002, the purchaser served a Demand for Arbitration
          on the Company and is currently alleging damages of $1,600,000 related
          to alleged construction defects in homes delivered by Calton Homes
          prior to its sale. The arbitration is expected by management to be
          completed during 2003. The Company intends to assert certain
          counterclaims against the purchaser and seek recoveries from insurers
          and subcontractors. Management is in the process of reviewing the
          additional claims of the purchaser and currently believes that its
          reserves are adequate for this matter.

                                       17
<PAGE>

          In addition to the general indemnification clause, in the event that
          the Company elects to liquidate and dissolve prior to December 31,
          2003, it will be required to organize a liquidating trust to secure
          its obligations to the Calton Homes purchaser. The liquidating trust
          will be funded with the current escrowed amounts plus $2,000,000. At
          this time, management does not plan to liquidate or dissolve the
          Company.

          CREDIT CARD PROCESSING AGREEMENT:

          The Company and PrivilegeONE have entered into a credit card
          processing agreement with 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
          Company has complied with the capitalization and contingency reserve
          requirements outlined in the Agreement.

          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 through 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.

          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:

                            2003           $          97,000
                            2004                      82,000
                            2005                      68,000
                                          -------------------
                            Total          $         247,000
                                          ===================


          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. During the current year, an in-depth formal
          review was performed to review 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 process, reserves were reduced from $404,000 as of
          November 30, 2001 to $31,000 as of November 30, 2002. Such reduction
          was effected by writing off $301,000 of deemed uncollectible accounts
          and a general reduction in the reserve of $72,000.

                                       18
<PAGE>

          OTHER RESERVES: The Company continues to have responsibility for
          certain warranty and other claims in connection with the sale of
          Calton Homes and the purchase of PrivilegeONE. This accrual requires
          significant subjective estimates about existing and future claims; the
          ultimate outcome may be known only as a result of litigation or
          arbitration proceedings. Currently, management makes its estimates
          based upon the best available evidence, which includes its historical
          experience in the home building industry and the counsel of outside
          lawyers engaged in litigating certain other matters. Management
          applies 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 processes,
          reserves for the various litigation claims of $710,000 are established
          as of November 30, 2002, compared to $686,000 as of November 30, 2001.

          RECENT ACCOUNTING PRINCIPLES

          SFAS NO. 148, ACCOUNTING FOR STOCK-BASED COMPENSATION--TRANSITION AND
          DISCLOSURE (SFAS NO. 148):

          During December 2002, the Financial Accounting Standards Board (FASB)
          issued SFAS No. 148. SFAS No. 148 establishes standards for two
          alternative methods of transition to the fair value method of
          accounting for stock-based employee compensation under SFAS No. 123.
          SFAS No. 148 also amends and augments the disclosure provisions of
          SFAS No. 123 and APB No. 28, INTERIM FINANCIAL REPORTING to require
          disclosure in the summary of significant accounting policies for all
          companies the effects of an entity's accounting policy with respect to
          stock-based employee compensation on reported net income and earnings
          per share in annual and interim financial statements. The transition
          standards and disclosure requirements of SFAS No. 148 are effective
          for fiscal years and interim periods ending after December 15, 2002.

          SFAS No. 148 does not require Calton to transition from the intrinsic
          approach provided in APB No. 25. In addition, Calton does not
          currently plan to transition to the fair value approach in SFAS No.
          123. However, Calton has adopted the additional disclosure
          requirements of SFAS No. 148 in this annual report.

          FASB INTERPRETATION 45, GUARANTOR'S ACCOUNTING AND DISCLOSURE
          REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF
          INDEBTEDNESS OF OTHERS (INTERPRETATION 45):

          During November 2002, the FASB issued Interpretation 45. Under
          Interpretation 45 guarantees, contracts and indemnification agreements
          are required to be initially recorded at fair value. Current practice
          provides for the recognition of a liability only when a loss is
          probable and reasonably estimable, as those terms are defined under
          SFAS No. 5, ACCOUNTING FOR CONTINGENCIES. In addition, Interpretation
          45 requires significant new disclosures for all guarantees even if the
          likelihood of the guarantor's having to make payments under the
          guarantee is remote. The disclosure requirements are effective for
          financial statements of interim and annual periods ending after
          December 15, 2002. The initial recognition and measurement provisions
          of Interpretation 45 are applicable on a prospective basis to
          guarantees, contracts or indemnification agreements issued or modified
          after December 31, 2002.

          Calton is currently reviewing guarantees, contracts and
          indemnification agreements that may require fair value treatment under
          the new standard. However, the effect on its future financial
          statements is not currently determinable.

          SFAS NO. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL
          ACTIVITIES (SFAS NO. 146):

          During July 2002, the FASB issued SFAS No. 146. SFAS No. 146 addresses
          accounting and reporting for costs associated with exit or disposal
          activities and nullifies Emerging Issues Task Force Issue No. 94-3,
          LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND
          OTHER COSTS TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A
          RESTRUCTURING) (EITF-94-3). SFAS No. 146 requires the recognition of a
          liability for costs associated with exit or disposal activities when
          the liability is actually incurred. Under

                                       19
<PAGE>

          EITF 94-3, such costs were generally recognized in the period in which
          an entity committed to an exit plan or plan of disposal. While both
          standards covered costs associated with one-time termination benefits
          (e.g. severance pay or stay-bonus arrangements), SFAS No. 146 provides
          standards that provide for the timing of recognition of these types of
          benefits. SFAS No. 146 is effective for exit or disposal activities
          initiated after December 31, 2002.

          Management's plans with respect to the continuation of Calton as a
          going concern are described in Note 2. While there is currently no
          specific plans to exit activities as part of these plans, any such
          activity would require the application of SFAS No. 146.

          SFAS NO. 145 RESCISSION OF SFAS NO. 4, 44 AND 64, AMENDMENT OF SFAS
          NO. 13 AND TECHNICAL CORRECTIONS (SFAS 145):

          During April 2002, the FASB issued SFAS No. 145. SFAS No. 145 rescinds
          SFAS No. 4, REPORTING GAINS AND LOSSES FROM EXTINGUISHMENTS OF DEBT
          (SFAS No. 4), which required all gains and losses from extinguishments
          of debt to be aggregated and, if material, classified as an
          extraordinary item, net of related income tax effect. As a result of
          the rescission of SFAS No. 4, the classification of gain and losses
          arising from debt extinguishments requires consideration of the
          criteria for extraordinary accounting treatment provided in APB No.
          30, Reporting the Results of Operations. In the absence of SFAS No. 4,
          debt extinguishments that are not unusual in nature and infrequent in
          occurrence would be treated as a component of net income or loss from
          continuing operations. SFAS No. 145 is effective for financial
          statements issued for fiscal years beginning after May 15, 2002. SFAS
          145 is not expected to have a material impact on the Company's
          financial statements.

          SFAS NO. 144: ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG LIVED
          ASSETS (SFAS 144):

          The Company early adopted (SFAS 144) during the first quarter of its
          fiscal year ended November 30, 2002. Statement 144 superseded
          Financial Accounting Standard No. 121 ACCOUNTING FOR THE IMPAIRMENT OF
          LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS
          121). While SFAS 144 retained the fundamental provisions of Statement
          121 as it relates to assessing and measuring the carrying values of
          long-lived assets to be held and used (e.g. property, equipment,
          goodwill, and intangibles), it significantly changed the approach to
          income statement recognition of discontinued operations. SFAS 144
          introduced a "component" approach to determining whether a disposal
          should be reported as a discontinued operation. A component is
          generally defined as a group of assets that has discrete and
          discernable operations (such as a subsidiary or division). Prior
          accounting standards provided for discontinued operations in the event
          of sale or disposal of a complete operating segment. As a result of
          the adoption of SFAS 144, the Company has treated the sale of its
          interest in Innovation Growth Partners as a discontinued operation for
          financial reporting purposes.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          The Company currently has no outstanding indebtedness other than
          accounts payable. As a result, the Company's exposure to market rate
          risk relating to interest rates is not material. The Company's funds
          are primarily invested in highly liquid money market funds with its
          underlying investments comprised of investment-grade, short-term
          corporate issues currently yielding approximately 1.41%. The Company
          does not believe that it is currently exposed to market risk relating
          to foreign currency exchange risk or commodity price risk. However, a
          substantial part of the Company's cash equivalents are not FDIC
          insured or bank guaranteed. As of November 30, 2002, the Company is
          reporting no readily marketable securities.

                                       20
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9.   CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
          DISCLOSURE

          NONE


                                       21
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          The information required by Item 10 with respect to directors is
          incorporated herein by reference to the Company's proxy statement to
          be filed with the Securities and Exchange Commission pursuant to
          Regulation 14A, not later than 120 days after the end of the fiscal
          year covered by this report. The information required by Item 10 with
          respect to executive officers is presented in Part I - Item 4A of this
          report.

ITEM 11.  EXECUTIVE COMPENSATION

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

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The information required by Item 13 is incorporated herein by
          reference to the Company's proxy statement to be filed with the
          Securities and Exchange Commission pursuant to Regulation 14A, not
          later than 120 days after the end of the fiscal year covered by this
          report.

ITEM 14.  CONTROLS AND PROCEDURES

          As required by Rule 13d-15 under the Securities Exchange Act of 1934,
          within the 90 days prior to the filing date of this report, the
          Company carried out an evaluation of the effectiveness of the design
          and operation of the Company's disclosure controls and procedures.
          This evaluation was carried out under the supervision and with the
          participation of the Company's management, including the Company's
          Chairman and Chief Executive Officer along with the Company's Chief
          Financial Officer, who concluded that the Company's disclosure
          controls and procedures are effective. There have been no significant
          changes in the Company's internal controls or in other factors, which
          could significantly affect internal controls subsequent to the date
          the Company carried out its evaluation.

          Disclosure controls and procedures are controls and other procedures
          that are designed to ensure that information required to be disclosed
          in the Company reports filed or submitted under the Exchange Act is
          recorded, processed, summarized and reported, within the time periods
          specified in the Securities and Exchange Commission's rules and forms.
          Disclosure controls and procedures include, without limitation,
          controls and procedures designated to ensure that information required
          to be disclosed in Company reports filed under the Exchange Act is
          accumulated and communicated to management, including the Company's
          Chief Executive Officer and Chief Financial Officer as appropriate, to
          allow timely decisions regarding required disclosure.

                                       22
<PAGE>
<TABLE>
<CAPTION>

                                             PART IV

<S>                                                                             <C>
ITEM 15.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
                                                                                           Page
                                                                                           ----
    (a)   1. and 2.    Financial statements and financial statement schedules              F-1
                       Reference is made to the Index of Financial Statements
                       and Financial Statements Schedules hereinafter contained

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

    (b)                Reports on Form 8-K

                       On December 5, 2002, the Company filed a Report on
                       Form 8-K to report a strategic shift in the business
                       strategy of PrivilegeONE.

                       On October 31, 2002, the Company filed a Report on
                       Form 8-K to announce the appointment of John G. Yates to
                       the Board of Directors.
</TABLE>

                                                23
<PAGE>

SIGNATURES


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

                                      CALTON, INC.
                                      (Registrant)

Dated:  March 15, 2003           By:  /s/ Thomas C. Corley
                                      ------------------------------------------
                                      Thomas C. Corley, Senior Vice President,
                                      Chief Financial Officer and Treasurer

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

<TABLE>
<CAPTION>
             Signature                                     Title                              Date
             ---------                                     -----                              ----
<S>                                    <C>                                               <C>
/s/ Anthony J. Caldarone               Chairman and Chief Executive                      March 15, 2003
-------------------------------------  Officer (Principal Executive Officer)
Anthony J. Caldarone

/s/ Thomas C. Corley                   Senior Vice President, Chief Financial            March 15, 2003
-------------------------------------  Officer & Treasurer (Principal Financial
Thomas C. Corley                       & Accounting Officer)

/s/ Anthony J. Caldarone               Director                                          March 15, 2003
-------------------------------------
Anthony J. Caldarone

/s/ J. Ernest Brophy                   Director                                          March 15, 2003
-------------------------------------
J. Ernest Brophy

/s/ Mark N. Fessel                     Director                                          March 15, 2003
-------------------------------------
Mark N. Fessel

/s/ Kenneth D. Hill                    Director                                          March 15, 2003
-------------------------------------
Kenneth D. Hill

/s/ Robert E. Naughton                 Director                                          March 15, 2003
-------------------------------------
Robert E. Naughton

/s/ Frank Cavell Smith, Jr.            Director                                          March 15, 2003
-------------------------------------
Frank Cavell Smith, Jr.

/s/ John G. Yates                      Director                                          March 15, 2003
-------------------------------------
John G. Yates
</TABLE>

                                       24
<PAGE>

                                  CERTIFICATION


     I, Anthony J. Caldarone, certify that:

1.   I have reviewed this annual report on Form 10-K for the fiscal year ended
     November 30, 2002 of Calton, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     (b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date.

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls.

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:  March 15, 2003

                                            ------------------------------------
                                            Anthony J. Caldarone
                                            Chairman and Chief Executive Officer

                                       25
<PAGE>

                                  CERTIFICATION


     I, Thomas C. Corley, certify that:

1.   I have reviewed this annual report on Form 10-K for the annual period ended
     November 30, 2002 of Calton, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a.   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c.   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date.

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a.   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b.   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls.

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:  March 15, 2003

                                       -------------------------------------
                                       Thomas C. Corley
                                       Senior Vice President,
                                       Chief Financial Officer and Treasurer

                                       26
<PAGE>
<TABLE>
<CAPTION>
                                        CALTON, INC. AND SUBSIDIARIES
                                      INDEX OF FINANCIAL STATEMENTS AND
                                        FINANCIAL STATEMENT SCHEDULE

                                                                                                       Page
                                                                                                       ----
<S>                                                                                                   <C>
       Report of Independent Certified Public Accountants                                              F-2

       Consolidated Balance Sheets as of November 30, 2002 and 2001 (restated)                         F-3

       Consolidated Statements of Operations for the Years Ended November 30, 2002, 2001 (restated)    F-4
       and 2000 (restated)

       Consolidated Statements of Cash Flows for the Years Ended November 30, 2002, 2001 (restated)    F-5
       and 2000 (restated)

       Consolidated Statements of Shareholders' Equity for the Years Ended November 30, 2002, 2001     F-6
       (restated) and 2000 (restated)

       Notes to Consolidated Financial Statements                                                      F-7
</TABLE>


       Schedule:

                 II - Valuation and Qualifying Accounts

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

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

                                       F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------

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, 2002 and 2001, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended November 30, 2002. Our audits also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and schedule are the responsibility of Calton's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the 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, 2002 and 2001, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended November 30, 2002, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

The accompanying financial statements have been prepared assuming that Calton
will continue as a going concern. As more fully described in Note 2, the Company
has incurred recurring operating losses and negative cash flows from operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans with respect to these conditions are also
discussed in Note 2. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.

As more fully discussed in Note 10, the consolidated financial statements for
2001 and 2000 have been restated to reflect Innovation Growth Partners as a
discontinued operation.



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

Tampa, Florida
March 10, 2003

                                      F-2

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC.
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 2002 AND 2001

                                                                                         November 30,          November 30,
                                                                                             2002                  2001
                                                                                       ---------------       ---------------
<S>                                                                                     <C>                   <C>
ASSETS                                                                                                           (RESTATED)
     Current Assets
         Cash and cash equivalents                                                      $   3,286,000         $   4,715,000
         Available for sale securities
         Holdback receivable                                                                   88,000                86,000
         Accounts receivable, net of allowance for doubtful accounts of
            $31,000 and $404,000 at November 30, 2002 and 2001, respectively                  281,000               479,000
         Prepaid expenses and other current assets                                            143,000               173,000
                                                                                       ---------------       ---------------
            Total current assets                                                            3,798,000             5,453,000
                                                                                       ---------------       ---------------
         Non-current portion of holdback receivable
         Notes receivable
         Goodwill

         Investments                                                                                -               750,000
         Property and equipment, net                                                          107,000               355,000
         Assets of discontinued subsidiary                                                          -             3,255,000
         Other assets                                                                               -                     -
                                                                                       ---------------       ---------------
            Total assets                                                                $   3,905,000         $   9,813,000
                                                                                       ===============       ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
     Current Liabilities
         Accounts payable, accrued expenses and other liabilities                       $   1,118,000         $   1,423,000
         Deferred taxes                                                                       487,000               487,000
                                                                                       ---------------       ---------------
            Total current liabilities                                                       1,605,000             1,910,000
                                                                                       ---------------       ---------------

     Commitments and contingencies (Note 10)                                                        -                     -

     Liabilities of discontinued component                                                          -               686,000
                                                                                       ---------------       ---------------
            Total liabilities                                                               1,605,000             2,596,000
                                                                                       ---------------       ---------------

     Shareholders' Equity
         Common stock, $.05 par value, 10,740,000 shares authorized;
            4,644,000 and 4,417,000 shares outstanding at November 30, 2002
            and November 30, 2001, respectively                                               232,000               221,000
         Additional paid-in capital                                                        12,138,000            13,134,000
         Retained earnings (deficit)                                                         (968,000)            4,016,000
         Unrealized loss on available for sale securities
         Less cost of shares held in treasury, 1,607,000 and 1,782,000 shares
            as of  November 30, 2002 and November 30, 2001, respectively                   (9,102,000)          (10,154,000)
                                                                                       ---------------       ---------------
            Total shareholders' equity                                                      2,300,000             7,217,000
                                                                                       ---------------       ---------------
            Total liabilities and shareholders' equity                                  $   3,905,000         $   9,813,000
                                                                                       ===============       ===============

                                       See notes to consolidated financial statements.

                                                             F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 2002, 2001 AND 2000


                                                                              2002              2001              2000
                                                                         --------------    --------------    --------------
                                                                                             (RESTATED)         (RESTATED)
<S>                                                                       <C>               <C>               <C>
REVENUE
    Technical staffing services                                           $  1,274,000      $  2,760,000      $    926,000
    Consulting services                                                        108,000         1,300,000         1,300,000
    Website design and implementation                                          538,000         1,148,000         1,109,000
    Credit card loyalty program revenue                                         34,000                 -                 -
                                                                         --------------    --------------    --------------
                                                                             1,954,000         5,208,000         3,335,000
                                                                         --------------    --------------    --------------
COSTS AND EXPENSES
    Project personnel and expenses                                           1,238,000         2,420,000         1,514,000
    Credit card loyalty program direct expenses                                 12,000                 -                 -
    Selling, general and administrative                                      4,312,000         8,238,000         7,162,000
    Impairment of long lived assets                                            116,000           478,000           324,000
                                                                         --------------    --------------    --------------
                                                                             5,678,000        11,136,000         9,000,000
                                                                         --------------    --------------    --------------
      Loss from operations                                                  (3,724,000)       (5,928,000)       (5,665,000)

OTHER (EXPENSE) INCOME
    Interest income                                                            124,000         1,082,000         2,117,000
    Gain on the sale of subsidiary stock                                             -            96,000                 -
    Loss on investments                                                       (750,000)                -        (1,708,000)
    Gains on recoveries on investments                                         350,000                 -                 -
    Litigation settlements                                                     458,000                 -                 -
    Other income                                                               119,000                 -                 -
                                                                         --------------    --------------    --------------
      Loss from continuing operations before income taxes,
        minority interest and discontinued operations                       (3,423,000)       (4,750,000)       (5,256,000)

INCOME TAX BENEFIT                                                                   -           517,000           447,000
                                                                         --------------    --------------    --------------
      Loss from continuing operations                                       (3,423,000)       (4,233,000)       (4,809,000)
                                                                         --------------    --------------    --------------
DISCONTINUED OPERATIONS:
    Loss from operations of discontinued subsidiary, net of income
      tax benefits of $98,000 and $48,000 in 2001 and 2000                  (1,020,000)         (806,000)         (517,000)
    Loss from disposals of discontinued subsidiaries, net of income
      tax benefits of $84,000 in 2000                                         (541,000)                -          (570,000)
                                                                         --------------    --------------    --------------
      Loss from discontinued operations                                     (1,561,000)         (806,000)       (1,087,000)
                                                                         --------------    --------------    --------------

NET LOSS                                                                  $ (4,984,000)     $ (5,039,000)     $ (5,896,000)
                                                                         ==============    ==============    ==============

LOSS PER SHARE:
    Basic and Diluted:
      Loss from continuing operations                                     $      (0.76)     $      (0.98)     $      (1.13)
      Loss from discontinued operations                                          (0.35)            (0.19)            (0.25)
                                                                         --------------    --------------    --------------
      Net loss per common share                                           $      (1.11)     $      (1.17)     $      (1.38)
                                                                         ==============    ==============    ==============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
      Basic                                                                  4,509,000         4,292,000         4,276,000
                                                                         ==============    ==============    ==============
      Diluted                                                                4,509,000         4,292,000         4,276,000
                                                                         ==============    ==============    ==============

                                       See notes to consolidated financial statements.

                                                             F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 2002, 2001 AND 2000


                                                                           2002               2001                2000
                                                                      ---------------   ----------------     ---------------
                                                                                           (RESTATED)          (RESTATED)
<S>                                                                    <C>               <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                               $ (4,984,000)     $  (5,039,000)       $ (5,896,000)
     Adjustments to reconcile net loss to net cash used in
         operating activities:
     Impairment of investments                                              750,000                  -           1,708,000
     Losses from disposals of discontinued component                        541,000                  -             654,000
     Impairments of long lived assets                                       116,000            478,000             324,000
     Provision for uncollectible receivables                                (72,000)           282,000             121,000
     Depreciation and amortization                                          139,000            195,000             201,000
     Stock-based compensation                                                19,000            367,000              35,000
     Deferred income taxes                                                        -           (615,000)            647,000
     Changes in operating assets and liabilities:
         Accounts receivable                                                269,000            (22,000)           (533,000)
         Prepaid expenses and other assets                                   30,000             39,000             (15,000)
         Accounts payable, accrued expenses and other liabilities          (305,000)           144,000             501,000
         Refundable income taxes                                                  -            361,000                   -
                                                                      ---------------   ----------------     ---------------
Net cash from operating activities                                       (3,497,000)        (3,810,000)         (2,253,000)
                                                                      ---------------   ----------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Assets and liabilities of discontinued subsidiaries                  2,028,000         (1,016,000)         (1,910,000)
     Purchases of property and equipment                                     (6,000)          (461,000)           (544,000)
     Receipts from (payments to) holdback escrow account                     (2,000)         1,203,000           2,104,000
     Purchases of investments                                                     -           (618,000)           (967,000)
     Acquisition of business                                                      -                  -            (138,000)
     Proceeds from the sale of investments                                        -                  -           1,366,000
                                                                      ---------------   ----------------     ---------------
Net cash from investing activities                                        2,020,000           (892,000)            (89,000)
                                                                      ---------------   ----------------     ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Purchase of treasury stock                                             (12,000)          (415,000)         (1,051,000)
     Cash dividend                                                                -        (22,375,000)                  -
     Proceeds from the sale of treasury stock and
         exercise of stock options                                           60,000          1,665,000             149,000
                                                                      ---------------   ----------------     ---------------
Net cash from financing activities                                           48,000        (21,125,000)           (902,000)
                                                                      ---------------   ----------------     ---------------

Net (decrease)  in cash and cash equivalents                             (1,429,000)       (25,827,000)         (3,244,000)
Cash and cash equivalents at beginning of period                          4,715,000         30,542,000          33,786,000
                                                                      ---------------   ----------------     ---------------
Cash and cash equivalents at end of period                             $  3,286,000      $   4,715,000        $ 30,542,000
                                                                      ===============   ================     ===============

SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid for interest                                            $          -      $           -        $      2,000
                                                                      ===============   ================     ===============
     Cash paid for income taxes                                        $          -      $      19,000        $     35,000
                                                                      ===============   ================     ===============
     Non-cash investing and financing activities:
         Issuance of stock options in business acquisition             $          -      $     127,000        $          -
                                                                      ===============   ================     ===============

                                       See notes to consolidated financial statements.

                                                             F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CALTON, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 2002, 2001 AND 2000
(AMOUNTS IN THOUSANDS)


                                                                                          Accumulated
                                     Common Stock      Additional   Retained                 Other        Total
                                   -----------------   Paid In      Earnings    Treasury    Compre-    Shareholders'  Comprehensive
                                   Shares     Amount   Capital      (Deficit)    Stock    hensive Loss    Equity      Income (Loss)
                                   ------     ------  ------------  ---------  ---------- ------------ -------------  -------------
<S>                                <C>        <C>     <C>           <C>        <C>        <C>          <C>            <C>
Balances,
 Balances December 1, 1999         4,295      $ 215     $ 32,704     $14,951   $  (8,698)     $(518)     $ 38,654
 Net Loss                              -          -            -      (5,896)          -          -        (5,896)       $ (5,896)
 Exercise of stock options            73          4          145           -           -          -           149               -
 Stock options granted                 -          -           35           -           -          -            35               -
 Recapitalization and retirement      (1)         -          (10)          -           -          -           (10)              -
 Income tax refund                     -          -          478           -           -          -           478               -
 Purchases of treasury stock        (235)       (12)          12           -      (1,041)         -        (1,041)              -
 Unrealized losses on securities       -          -            -           -           -        518           518             518
                                  -------    -------   ----------   ---------  ----------    -------    ----------      -----------
Balances November 30, 2000         4,132      $ 207     $ 33,364     $ 9,055   $  (9,739)     $   -      $ 32,887        $ (5,378)
                                                                                                                        ===========
 Net Loss                              -          -            -      (5,039)          -          -        (5,039)       $ (5,039)
 Exercise of stock options           451         22        1,643           -           -          -         1,665               -
 Cash dividend                         -          -      (22,375)          -           -          -       (22,375)              -
 Stock options granted-acquisition     -          -          127           -           -          -           127               -
 Stock options granted-employees       -          -          367           -           -          -           367               -
 Purchases of treasury stock        (166)        (8)           8           -        (415)         -          (415)              -
                                  -------    -------   ----------   ---------  ----------    -------    ----------      -----------
Balances November 30, 2001         4,417      $ 221     $ 13,134     $ 4,016   $ (10,154)     $   -      $  7,217        $ (5,039)
                                                                                                                        ===========
 Net Loss                              -          -            -      (4,984)          -          -        (4,984)       $ (4,984)
 Stock issued to Directors            52          3           16           -           -          -            19               -
 Purchases of treasury stock         (19)        (1)           1           -         (12)         -           (12)              -
 Stock issued to 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        $ (4,984)
                                  =======    =======   ==========   =========  ==========    =======    ==========      ===========


                                       See notes to consolidated financial statements.

                                                             F-6
</TABLE>

<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     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) providing Internet
     business solutions and technology based staffing and consulting services
     through its wholly owned subsidiary, eCalton.com, Inc. ("eCalton") and (ii)
     the development of a loyalty and co-branded credit card program through
     PrivilegeONE Networks, LLC, ("PrivilegeONE"),

     In April 2002, Calton, Inc. disposed of its 51% ownership interest in
     Innovation Growth Partners ("IGP"), a management consulting company (see
     Note 6). 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 also discussed
     in Note 6 the Company discontinued its Calton Homes operation during its
     fiscal year ended November 30, 1999, with respect to which $570,000 of loss
     was recorded in 2000.

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Calton, Inc.
     and its majority-owned and wholly owned subsidiaries (the "Company"). All
     significant intercompany accounts and transactions have been eliminated in
     the accompanying consolidated financial statements.

     REVENUE RECOGNITION

     Revenues from technical staffing services are derived from service
     contracts with principally commercial business customers. Technical
     staffing revenues are recognized when earned, which is when the staffing
     services are rendered, and considered by management to be collectible.
     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, 2002 and 2001. Revenues
     from consulting services were derived solely from the purchaser of Calton
     Homes under a contract that expired on December 31, 2001. Consulting
     services revenues were recognized as the services were rendered. The
     Company's services contain no material warranty or return privileges.

     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-7
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     INVESTMENTS

     The Company classifies all short-term equity investments as
     available-for-sale securities. Such investments are carried at fair value
     based on quoted market prices, with unrealized gains and losses, net of
     tax, reported as a separate component of comprehensive income (loss) in
     shareholders' equity. Realized gains and losses, and declines in value
     judged to be other than temporary, are included in the caption "Loss on
     Investments" (see Note 3). The Company classifies debt-type investments for
     which it has a positive intent and ability to hold to maturity as
     held-to-maturity investments. Held-to-maturity investments are recorded and
     measured at amortized cost.

     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.

     During the year ended November 30, 2001, the Company recognized impairment
     charges amounting to $359,000 related to property and equipment and
     $119,000 related to goodwill associated with the PrivilegeONE subsidiary.
     Such impairments arose after the subsidiary failed to meet its revenue
     projections and when it was further determined by management that the
     market conditions were not supportive of the subsidiary's ongoing revenue
     projections. During 2000, management concluded that goodwill associated
     with eCalton and PrivilegeONE having a carrying value of $324,000 had been
     permanently impaired and charged the entire amount to operations.

     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.

                                      F-8
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     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. At November 30, 2002 and 2001, 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
     $61,000, $200,000 and $86,000 for the years ended November 30, 2002, 2001
     and 2000, respectively.

     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.

     LOSS PER SHARE COMPUTATIONS

     Basic net loss per common share is computed by dividing net loss by the
     weighted average number of common shares outstanding during the period.
     Diluted loss per share is computed by dividing the net 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 731,000, 692,000 and 979,000 stock options and warrants
     outstanding at November 30, 2002, 2001 and 2000, 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 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 value approach for stock options and warrants, in accordance
     with SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ARRANGEMENTS.

                                      F-9
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     STOCK-BASED COMPENSATION (CONTINUED)

     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:                                               2002                2001               2000
                                                                         ------------------- ------------------- ------------------
<S>                                                                      <C>                 <C>                 <C>
          Net loss, as reported                                           $     (4,984,000)   $     (5,039,000)   $    (5,896,000)
                                                                         =================== =================== ==================
          Loss per share, as reported                                     $          (1.11)   $          (1.17)   $         (1.38)
                                                                         =================== =================== ==================
          Stock-based employee compensation costs used in the
          determination of net loss, as reported                          $          (0.00)   $       (367,000)   $         (0.00)
                                                                         =================== =================== ==================
          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           $         (4,000)   $        (41,000)   $       (40,000)
                                                                         =================== =================== ==================
          Unaudited pro forma net loss, as if the fair value method
          had been applied to all awards                                  $     (4,988,000)   $     (5,080,000)   $    (5,936,000)
                                                                         =================== =================== ==================
          Unaudited pro forma loss per share, as if the fair value
          method had been applied to all awards                           $          (1.11)   $          (1.18)   $         (1.39)
                                                                         =================== =================== ==================
</TABLE>

     Stock based compensation costs that would have been included in the
     determination of net loss if the fair value method is 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 2.64% in 2002, 4.88% in 2001 and 6.54% in 2000, assumed forfeiture
     rate as they occur, and an expected life of 7.9, 6.0 and 5.8 years at
     November 30, 2002, 2001 and 2000, respectively.

     RECENT ACCOUNTING PRONOUNCEMENTS

     SFAS No. 148, ACCOUNTING FOR STOCK-BASED COMPENSATION--TRANSITION AND
     DISCLOSURE (SFAS No. 148):

     During December 2002, the Financial Accounting Standards Board (FASB)
     issued SFAS No. 148. SFAS No. 148 establishes standards for two alternative
     methods of transition to the fair value method of accounting for
     stock-based employee compensation under SFAS No. 123. SFAS No. 148 also
     amends and augments the disclosure provisions of SFAS No. 123 and APB No.
     28, INTERIM FINANCIAL REPORTING to require disclosure in the summary of
     significant accounting policies for all companies the effects of an
     entity's accounting policy with respect to stock-based employee
     compensation on reported net income and earnings per share in annual and
     interim financial statements. The transition standards and disclosure
     requirements of SFAS No. 148 are effective for fiscal years and interim
     periods ending after December 15, 2002.

     SFAS No. 148 does not require Calton to transition from the intrinsic
     approach provided in APB No. 25. In addition, Calton does not currently
     plan to transition to the fair value approach in SFAS No. 123. However,
     Calton has adopted the additional disclosure requirements of SFAS No. 148
     in this annual report.

     FASB Interpretation 45, Guarantor's Accounting and Disclosure Requirements
     for Guarantees, Including Indirect Guarantees of Indebtedness of Others
     (Interpretation 45:)

                                      F-10
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

     During November 2002, the FASB issued Interpretation 45. Under
     Interpretation 45 guarantees, contracts and indemnification agreements are
     required to be initially recorded at fair value. Current practice provides
     for the recognition of a liability only when a loss is probable and
     reasonably estimable, as those terms are defined under SFAS No. 5,
     ACCOUNTING FOR CONTINGENCIES. In addition, Interpretation 45 requires
     significant new disclosures for all guarantees even if the likelihood of
     the guarantor's having to make payments under the guarantee is remote. The
     disclosure requirements are effective for financial statements of interim
     and annual periods ending after December 15, 2002. The initial recognition
     and measurement provisions of Interpretation 45 are applicable on a
     prospective basis to guarantees, contracts or indemnification agreements
     issued or modified after December 31, 2002.

     Calton is currently reviewing guarantees, contracts and indemnification
     agreements that may require fair value treatment under the new standard.
     However, the effect on its future financial statements is not currently
     determinable.

     SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL
     ACTIVITIES (SFAS No. 146):

     During July 2002, the FASB issued SFAS No. 146. SFAS No. 146 addresses
     accounting and reporting for costs associated with exit or disposal
     activities and nullifies Emerging Issues Task Force Issue No. 94-3,
     LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER
     COSTS TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A
     RESTRUCTURING) (EITF-94-3). SFAS No. 146 requires the recognition of a
     liability for costs associated with exit or disposal activities when the
     liability is actually incurred. Under EITF 94-3, such costs were generally
     recognized in the period in which an entity committed to an exit plan or
     plan of disposal. While both standards covered costs associated with
     one-time termination benefits (e.g. severance pay or stay-bonus
     arrangements), SFAS No. 146 provides standards that provide for the timing
     of recognition of these types of benefits. SFAS No. 146 is effective for
     exit or disposal activities initiated after December 31, 2002.

     Management's plans with respect to the continuation of Calton as a going
     concern are described in Note 2. While there is currently no specific plans
     to exit activities as part of these plans, any such activity would require
     the application of SFAS No. 146.

     SFAS No. 145 RESCISSION OF SFAS NO. 4, 44 AND 64, AMENDMENT OF SFAS NO. 13
     AND TECHNICAL CORRECTIONS (SFAS 145):

     During April 2002, the FASB issued SFAS No. 145. SFAS No. 145 rescinds SFAS
     No. 4, REPORTING GAINS AND LOSSES FROM EXTINGUISHMENTS OF DEBT (SFAS No.
     4), which required all gains and losses from extinguishments of debt to be
     aggregated and, if material, classified as an extraordinary item, net of
     related income tax effect. As a result of the rescission of SFAS No. 4, the
     classification of gain and losses arising from debt extinguishments
     requires consideration of the criteria for extraordinary accounting
     treatment provided in APB No. 30, Reporting the Results of Operations. In
     the absence of SFAS No. 4, debt extinguishments that are not unusual in
     nature and infrequent in occurrence would be treated as a component of net
     income or loss from continuing operations. SFAS No. 145 is effective for
     financial statements issued for fiscal years beginning after May 15, 2002.
     SFAS 145 is not expected to have a material impact on the Company's
     financial statements.

                                      F-11
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     2.   LIQUIDITY AND MANAGEMENT'S PLANS

     The accompanying financial statements are prepared on a going concern
     basis, which assumes that Calton will realize its assets and discharge its
     liabilities in the normal course of business. As reflected in the
     accompanying financial statements, Calton has incurred losses from
     continuing operations of $(3,423,000), $(4,233,000) and $(4,809,000) and
     has used cash in continuing operations of $(3,497,000), $(3,810,000) and
     $(2,243,000) during the fiscal years ended November 30, 2002, 2001 and
     2000, respectively. As of November 30, 2002, the Company has working
     capital of $2,193,000, which is not sufficient to fund the current
     operating plan during the fiscal year ending on November 30, 2003. These
     conditions raise substantial doubt as to the ability of Calton to continue
     its normal business operations as a going concern.

     Management's plans to sustain Calton operations include accelerating and
     augmenting revenue opportunities, principally in the Credit Card Loyalty
     Business Segment, curtailing operating expenses to the extent appropriate
     and raise additional debt or equity capital from external sources. During
     2002, Calton sold its non-performing interest in Innovation Growth Partners
     which contributed to the Company's net loss in the amounts of $(1,020,000),
     $(806,000) and $(517,000) during the fiscal years ended November 30, 2002,
     2001 and 2000, respectively. In addition, the Internet development group of
     eCalton and PrivilegeONE consolidated office space to best cross train and
     to leverage employee skill sets. While management is actively addressing
     multiple sources of capital, there are currently no commitments, and there
     can be no assurances that sufficient capital can be raised under terms
     acceptable to management. In addition, 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. The financial statements do not include any
     adjustments that may arise as a result of this uncertainty.

     3.   INVESTMENTS

     In September 2001, the Company advanced $750,000 to Automated Information
     Management, Inc. ("AIM") in exchange for a convertible promissory note (the
     "AIM Note") and a warrant to acquire 1,059,660 shares of AIM Common Stock
     at an exercise price of $2.12 per share. The AIM Note provided that the
     note was mandatorily convertible into 1,000,000 shares of AIM Common Stock
     no later than five days after the Company was given notice that the
     Securities and Exchange Commission had declared a proposed registration of
     these shares effective. AIM defaulted on its agreement to register the
     shares. Management performed an assessment of the AIM Note during the first
     fiscal quarter of 2002 and, based upon a review of AIM's operating results,
     which were materially different than projections provided to management by
     AIM, management believed that the note was not fully recoverable. As a
     result, the investment was written off during the first fiscal quarter of
     2002. Subsequent to the impairment, AIM repaid $150,000 of the principal
     amount due under the note. In July 2002, the Company entered into a
     Forbearance Agreement ("the Agreement") with Bodark T. Corporation
     ("Bodark"), the successor of AIM. Pursuant to the Agreement, the Company
     agreed to forbear from exercising remedies provided that Bodark repaid the
     remaining principal balance of $600,000 outstanding under the AIM Note in
     equal installments on August 31, 2002, October 31, 2002 and November 30,
     2002. In addition, the Company was issued 1,000,000 shares of Bodark common
     stock and warrants to acquire 1,059,660 shares of Bodark common stock at an
     exercise price of $2.12 per share. The warrant originally issued by AIM was
     cancelled. In September 2002, Bodark remitted the August 31, 2002 payment
     of $200,000. Both this payment and the $150,000 received from AIM
     subsequent to the impairment was recorded as other income in the
     accompanying 2002 statement of operations, and the Company will record any
     subsequent payments upon the date of receipt. Bodark has not paid any of
     the remaining installments. Management continues to believe the note is not
     fully recoverable due to economic conditions affecting Bodark's ability to
     make good on its obligation on the AIM Note.

                                      F-12
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     3.   INVESTMENTS (CONTINUED)

     At November 30, 2002 and 2001 the Company also held 518,000 shares of CorVu
     Corporation common stock ("CorVu" OTCBB: CRVU). The Company had previously
     valued and reported these securities based on the closing price of CorVu
     common stock, as reported on the "Over-the-Counter" Bulletin Board. In
     accordance with Statement of Financial Accounting Standards No. 115,
     "Accounting for Certain Investments in Debt and Equity Securities" the
     Company has assessed the carrying value of these shares and concluded that
     the decline in value was other than temporary. This conclusion was based
     on, among other things, CorVu's financial condition and sustained losses
     from operations, the low per share value at which CorVu common stock is
     trading, the Company's inability to liquidate its shares in CorVu, and
     other factors that management considered relevant under the circumstances.
     The loss associated with this other-than-temporary impairment amounted to
     $990,000 for fiscal 2000, and is included on the statement of operations as
     loss on investments.

     In addition to the CorVu loss described above, the fiscal 2000 loss on
     investments includes a capital loss on the sale of common stock of two
     publicly traded New York Stock Exchange companies in the amount of
     $508,000, for which the Company received proceeds in the amount of
     approximately $1,350,000. The remaining $210,000 of loss on investments
     resulted from the write off of non-readily marketable securities.

     4.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following as of November 30, 2002
     and 2001:


                                                  November 30,      November 30,
                                                     2002              2001
                                                --------------    --------------
                                                                    (RESTATED)
        Computer equipment and furniture         $    176,000      $    577,000
        Leasehold improvements                         65,000           155,000
        Other                                           1,000                 -
                                                --------------    --------------
                                                      242,000           732,000
               Less: Accumulated Depreciation        (135,000)         (377,000)
                                                --------------    --------------
                                                 $    107,000      $    355,000
                                                ==============    ==============

     5.   ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABIILITIES

     Accounts payable, accrued expenses and other liabilities consist of the
     following as of November 30, 2002 and 2001:


                                                  November 30,      November 30,
                                                     2002              2001
                                                --------------    --------------
                                                                    (RESTATED)
        Accounts payable, trade                  $    121,000      $    152,000
        Accrued expenses                              287,000           585,000
        Accrued contingency reserves (Note 10)        710,000           686,000
                                                --------------    --------------
                                                 $  1,118,000      $  1,423,000
                                                ==============    ==============

                                      F-13
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     6.   BUSINESS ACQUISITION AND DIVESTITURE ACTIVITIES

     PRIVILEGEONE In January 2000, the Company acquired a 50.4% collective
     direct and indirect equity interest (through ownership in a parent company)
     in PrivilegeONE Networks, LLC. PrivilegeONE was formed in 1999 to develop a
     customer loyalty program for automobile dealers, including the development
     of a co-branded credit card. The purchase price for the Company's interest
     in PrivilegeONE was comprised of $105,000 in cash and a five-year warrant
     to acquire 240,000 shares of the Company's Common Stock at an exercise
     price of $12.50 per share. As a result of the acquisition, the Company
     recorded goodwill in the amount of $138,000, which was originally to be
     amortized over five years. However, during fiscal 2000 management concluded
     that this goodwill had been permanently impaired and charged the entire
     unamortized balance of goodwill to operations. The warrant became
     exercisable only if PrivilegeONE surpassed certain specified earnings
     targets. In addition to its equity interest, the Company agreed to loan up
     to $1,500,000 to PrivilegeONE pursuant to a note that bore interest at the
     rate of 10% per annum and was to become due in January 2004. The Company
     entered into agreements with the other owners of PrivilegeONE and its
     parent company that obliged each of the owners to offer its equity interest
     in PrivilegeONE or its parent to the other owners in the event that the
     owner wished to transfer its equity interest.

     In February 2001, the Company made an additional $50,000 equity investment
     in PrivilegeONE that increased its direct and indirect ownership interest
     to 75.4%. The Company also agreed to lend PrivilegeONE up to an additional
     $1,450,000 if PrivilegeONE achieved certain milestones related to the
     development of its proposed credit card program. The Company granted the
     other owners of PrivilegeONE an option to purchase the interest in
     PrivilegeONE acquired by the Company in February 2001 at a price of
     $10,000,000.

     In May 2001, the Company acquired the remaining minority interests in
     PrivilegeONE. As consideration for the remaining interest in PrivilegeONE,
     the Company granted 200,000 options exercisable at $4.02 per share to the
     minority owners of PrivilegeONE. The options were fully vested, became
     exercisable six months after the grant date and have a term of five years.
     The Company applied the purchase method of accounting to record this
     acquisition of the remaining minority interest and recorded goodwill in the
     amount of $127,000 based on a Black-Scholes option pricing model with the
     following assumptions: discount rate of 4.827%; volatility of 80%; option
     life of five years. The warrant to purchase 240,000 shares of the Company's
     common stock at a price of $12.50 and the option granted to the owners of
     PrivilegeONE in February 2001 to purchase their interests back at
     $10,000,000 were cancelled.

     INNOVATION GROWTH PARTNERS In June 2000, the Company acquired a 51%
     interest in IGP, a newly formed entity established to develop businesses,
     provide management and consulting services and acquire controlling
     interests in entrepreneurial and development stage companies.

     In exchange for its controlling interest in IGP, the Company contributed
     $1,500,000 in cash and agreed to loan up to $3,500,000 (the "IGP Note") to
     the new venture. The IGP Note, which bore interest at a rate equal to prime
     plus one percent per annum, was to be due in June 2004. Executive
     management of IGP contributed $500,000 in cash and certain assets,
     including existing client contracts, in exchange for their collective 49%
     interest. The accounts of IGP were consolidated along with those of the
     Company, with the executive management's interest shown as minority
     interest. Certain owners of IGP were issued warrants to acquire an
     aggregate 11.1% interest in IGP at a value to be determined by appraisal if
     certain events occurred, including the completion of a public offering, a
     merger or other business combination, a change of control of the Company,
     or if Anthony J. Caldarone ceased to be Chairman of the Company. The
     original purchase agreement provided that IGP management would be granted
     options to acquire up to 150,000 shares of Common Stock of the Company at
     an exercise price of $5.56 per share if IGP surpassed certain specified
     earnings targets. Such earnings levels were not achieved.

                                      F-14
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     6.   BUSINESS ACQUISITION AND DIVESTITURE ACTIVITIES (CONTINUED)

     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 IGP's 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 Innovation Growth Partners are as follows:

<TABLE>
<CAPTION>
                                                               2002            2001           2000
                                                          --------------------------------------------
<S>                                                        <C>             <C>            <C>
        Revenues of discontinued subsidiary                $          -    $   91,000     $  199,000
                                                          ============================================
        Net loss from discontinued subsidiary,  net of
           income tax benefits of $98,000 and $48,000
           during 2001 and 2000, respectively              $ (1,020,000)   $ (806,000)    $ (517,000)
                                                          ============================================
</TABLE>

     CALTON HOMES On December 31, 1998, the Company completed the sale of Calton
     Homes. The sales price for the stock of Calton Homes was $48,100,000 plus
     certain post-closing adjustments. In fiscal 1999, the Company recorded a
     pretax gain of $7,591,000 on the sale. In fiscal 2000, the Company recorded
     an additional provision for certain costs associated with the sale in the
     amount of $654,000, which reduced the previously recognized gain on sale to
     $6,937,000.

     The pro forma effects of the Company's acquisition activities were not
     material to the financial results for the periods presented.

     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.

     CASH DIVIDEND

     On May 31, 2001, the Company's Board of Directors declared a liquidating
     dividend of $5.00 per share to all shareholders of record on June 20, 2001,
     payable on July 5, 2001. The total amount distributed pursuant to the
     dividend was approximately $22,375,000. The dividend has been characterized
     as a liquidating dividend, as it is considered a return of capital rather
     than a distribution of retained earnings. Consequently, the consolidated
     balance sheet and statement of shareholders' equity reflect a reduction of
     additional paid-in capital, rather than a reduction of retained earnings.

                                      F-15
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     7.   SHAREHOLDERS' EQUITY ACTIVITY (CONTINUED)

     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 years ended November 30, 2002,
     2001, and 2000, the Company purchased 19,000, 167,000 and 235,000 shares of
     common stock for $12,000, $415,000 and $1,051,000, respectively.

     STOCK COMPENSATION PROGRAMS AND TRANSACTIONS

     As of November 30, 2002 there were 271,000 options exercisable under all
     plans in the aggregate with a weighted average exercise price of $5.53.
     Stock option activity is summarized as follows (shares in thousands):

<TABLE>
<CAPTION>
                                   2002                           2001                         2000
                                   ----                           ----                         ----
                                           WEIGHTED                     WEIGHTED                     WEIGHTED
                                           AVERAGE                      AVERAGE                      AVERAGE
                                           EXERCISE                     EXERCISE                     EXERCISE
                              OPTIONS       PRICE         OPTIONS         PRICE        OPTIONS        PRICE
                             -----------------------------------------------------------------------------------
<S>                          <C>         <C>             <C>          <C>             <C>          <C>
     Outstanding
      Beginning of year         292       $    5.89          459       $    6.04          372        $    3.44
      Granted at market price   467            0.45          359            3.31          167            10.29
      Exercised                  --              --        (451)            3.32         (72)             2.00
      Expired or cancelled     (28)           l0.79         (75)            3.75          (8)            10.85
                             -----------------------------------------------------------------------------------
     Outstanding -
      End of year               731       $    3.24          292       $    5.89          459        $    6.04
                             ===================================================================================
     Exercisable as of
      November 30               271       $    5.53          100       $    6.91          346        $    4.79
                             ===================================================================================
</TABLE>

     The weighted average exercise price of the options granted during fiscal
     years ended 2002, 2001 and 2000 is $0.45, $3.31 and $10.29, respectively.
     The range of exercise prices for exercisable options and the weighted
     average remaining lives are reflected in the following table.


                                      F-16
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     7.   SHAREHOLDERS' EQUITY ACTIVITY (CONTINUED)

     STOCK COMPENSATION PROGRAMS AND TRANSACTIONS (CONTINUED)

<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>
     $   0.01 - 1.00           509,000        8.95 yrs.        $           0.50         10,000    $           0.83
         1.01 - 5.00            50,200        3.50 yrs.                    4.12        106,840                3.59
         5.01 - 6.00             4,000        1.50 yrs.                    5.45         10,000                5.45
         6.01 - 7.00           120,000        6.25 yrs.                    6.10        120,000                6.10
         7.01 - 9.00             8,000        2.50 yrs                     8.75          8,000                8.75
       13.01 - 14.00            40,000        7.25 yrs.                   13.90         16,000               13.90
                         --------------   ------------------  ------------------   ------------  ------------------

     $  0.01 - 14.00           731,200        7.93 yrs.        $           3.24        270,840    $           5.53
                         ==============   ==================  ==================   ============  ==================
</TABLE>

     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 weighted average purchase price of all shares
     in treasury, and the difference was recorded as a reduction of paid-in
     capital.

     During 2001, an officer resigned, but remained as a Board member and agreed
     to act as a consultant to the Company. As a result, the Board vested 80,000
     previously granted options in return for his consulting services, which
     resulted in a charge of $367,000.

     As more fully discussed in Note 6, during May 2001, the Company granted
     options to purchase 200,000 shares of Common Stock in connection with the
     acquisition of the minority interest in PrivilegeONE. The options were fair
     valued at $127,000 using the Black-Scholes pricing model.

     As of November 30, 2002, there were 4,000 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

                                      F-17
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     7.   SHAREHOLDERS' EQUITY ACTIVITY (CONTINUED)

     PREFERRED STOCK RIGHTS AGREEMENTS (CONTINUED)

     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.

     8. INCOME TAXES

     The income tax (expense) benefit consisted of the following for the years
     ended November 30, 2002, 2001, and 2000:

<TABLE>
<CAPTION>
                                                    2002           2001          2000
                                                -------------------------------------------
<S>                                             <C>             <C>            <C>
          Federal income taxes:
                 Current                         $          -   $    (98,000)  $   557,000
                 Deferred                                   -        615,000       (84,000)
                 Provision in lieu of taxes                 -              -             -
          State income taxes:
                 Current                                    -              -       (26,000)
                 Provision in lieu of taxes                 -              -             -
                                                -------------------------------------------
          Total federal and state income taxes              -        517,000       447,000

          Discontinued operations                           -         98,000       132,000
                                                -------------------------------------------
                                                 $          -    $   615,000   $   579,000
                                                ===========================================
</TABLE>

     The federal net operating loss carryforward for tax purposes is
     approximately $24,732,000 at November 30, 2002. 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
     2022.

                                      F-18
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     8.   INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                                                        2002            2001            2000
                                                    ----------------------------------------------

<S>                                                  <C>             <C>             <C>
          (Provision) benefit using statutory rate   $   1,743,000   $   1,967,000   $  2,266,000
          Change in valuation allowance                 (1,743,000)     (1,352,000)    (1,851,000)
          Other                                                  -               -        164,000
                                                    ----------------------------------------------
                                                     $           -   $     615,000   $    579,000
                                                    ==============================================


     Temporary differences and carryforwards that give rise to deferred tax
     assets and liabilities as of November 30, 2002 and 2001 are as follows:


                                                       Deferred Tax Assets (Liabilities)
                                                     ------------------------------------
                                                           2002                2001
                                                     ------------------------------------
Net operating losses                                  $   10,751,000     $    9,910,000
Asset impairment charges                                     321,000            281,000
Accrued obligations arising from Calton Homes sale           261,000            252,000
Capital loss carryforwards                                   189,000                  -
Investment impairment charges                                140,000                  -
Bad debt and other allowances                                 11,000            234,000
Other                                                         47,000             76,000
                                                     ------------------------------------
  Deferred tax assets                                     11,720,000         10,753,000
  Deferred tax liabilities                                  (487,000)          (487,000)
Less: Valuation allowances                               (11,720,000)       (10,753,000)
                                                     ------------------------------------
Net deferred taxes                                    $     (487,000)     $    (487,000)
                                                     ====================================
</TABLE>


                                      F-19
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     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 three business
     segments, as follows.

     INTERNET DEVELOPMENT AND STAFFING

     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 their services to small and medium size companies in
     various industries, as well as one prime vertical market - the Homebuilding
     industry. eCalton also operates a technology based consulting and staffing
     operation specializing in network design and management. Through this
     technical staffing division, eCalton assists clients in managing and
     improving their IT systems and networks. This division operates in the
     Houston, Texas market.

     CORPORATE AND CONSULTING

     Revenues from consulting services were derived solely from the purchaser of
     Calton Homes under a contract that expired on December 31, 2001. The
     Company recognized revenues in the Corporate and Consulting Services
     division from the purchaser in the amount of $108,000, $1,300,000 and
     $1,300,000 for the years ended November 30, 2002, 2001 and 2000,
     respectively. No further revenues from this contract are expected.

     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-20
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     Operating results, by segment, for the years ended November 30, 2002, 2001
     and 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                    Fiscal year ended November 30, 2002
                                     ------------------------------------------------------------------
                                         eCalton           P1            Corp/IGP
                                        Internet       Credit Card     Corporate and
                                       Development       Loyalty        Consulting          Total
                                      and Staffing      Business         Services          Company
                                     ------------------------------------------------------------------
<S>                                   <C>               <C>              <C>              <C>
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)           (2,757)         (4,984)
Total assets                          $          321    $         22     $       3,562    $      3,905

                                                 Fiscal year ended November 30, 2001 - Restated
                                     ------------------------------------------------------------------
                                        Internet       Credit Card     Corporate and
                                       Development       Loyalty        Consulting          Total
                                      and Staffing      Business         Services          Company
                                     ------------------------------------------------------------------

Segment revenues                      $        3,908    $          -     $       1,300    $      5,208
Cost of revenues                               2,420               -                 -           2,420
Depreciation and amortization                    132               5                58             195
Interest income                                    -               -             1,082           1,082
Loss from operations                          (1,399)         (3,012)             (339)         (4,750)
Income tax benefit                                 -               -              (517)           (517)
Net loss                                      (1,399)         (3,012)             (628)         (5,039)
Total assets                          $          562    $         18     $       9,233    $      9,813

                                                 Fiscal year ended November 30, 2000 - Restated
                                     ------------------------------------------------------------------
                                        Internet       Credit Card     Corporate and
                                       Development       Loyalty        Consulting          Total
                                      and Staffing      Business         Services          Company
                                     ------------------------------------------------------------------

Segment revenues                      $        2,035    $          -     $       1,300    $      3,335
Cost of revenues                               1,514               -                 -           1,514
Depreciation and amortization                    109              26                66             201
Interest income                                    -               -             2,117           2,117
Loss from operations                          (2,910)         (1,709)             (637)         (5,256)
Income tax benefit                                 -               -              (447)           (447)
Net loss                                      (2,911)         (1,859)           (1,126)         (5,896)
Total assets                          $        1,172    $         39     $      33,889    $     35,100
</TABLE>

                                      F-21
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     10.  COMMITMENTS AND CONTINGENT LIABILITIES

     CALTON HOMES

     The agreement pursuant to which the Company sold Calton Homes in December
     1998 required the Company to indemnify the purchaser for, among other
     things, certain liabilities that arise out of events occurring prior to the
     closing, principally related to certain warranty claims on homes built. In
     connection with the sale, the Company entered into a holdback escrow
     agreement with the purchaser pursuant to which approximately $5,200,000 of
     the closing proceeds was deposited into escrow. Of this amount,
     approximately $3,000,000 (the "General Indemnification Funds") was
     deposited to provide security for the Company's indemnity obligations and
     approximately $2,200,000 (the "Specific Indemnification Funds") was
     deposited to fund costs associated with certain specified litigation
     involving Calton Homes. During October 2001, the Company entered into a
     settlement agreement with the seller that released certain remaining funds
     in the escrow account. As of November 30, 2002 and 2001, $88,000 and
     $86,000, respectively, remained in the escrow account. In January 2003, one
     claim was settled reducing the escrow balance to approximately $35,000. The
     Company's indemnification obligations are not limited to the amount in
     escrow. In July 2002, the purchaser served a Demand for Arbitration on the
     Company and is currently alleging damages of $1,600,000 related to alleged
     construction defects in homes delivered by Calton Homes prior to its sale.
     The arbitration is expected by management to be completed during 2003. The
     Company intends to assert certain counterclaims against the purchaser and
     seek recoveries from insurers and subcontractors. Management is in the
     process of reviewing the additional claims of the purchaser and currently
     believes that its reserves are adequate for this matter.

     The Company provided a basic limited warranty, including parts and labor,
     for all Calton Homes products. The Company estimated the costs that might
     be incurred under its basic limited warranty and recorded a liability in
     the amount of such costs at the time product revenue was recognized.
     Factors that affect the Company's warranty liability include the number of
     sold units, historical and anticipated rates of warranty claims, and
     average cost per claim. The Company periodically assesses the adequacy of
     its recorded warranty liabilities and adjusts the amounts as necessary. The
     Company's warranty liability is included in Accounts Payable, Accrued
     Expenses and other Liabilities in the accompanying balance sheet. See Note
     5.

     In the event that the Company elects to liquidate and dissolve prior to
     December 31, 2003, it will be required to organize a liquidating trust to
     secure its obligations to the Calton Homes purchaser. The liquidating trust
     will be funded with the Specific Indemnification Funds plus $2,000,000. Any
     General Indemnification Funds remaining in the holdback escrow fund will be
     applied as a credit against amounts required to be deposited in the
     liquidating trust.

     OTHER LITIGATION
     On April 12, 2002, S. Raymond Tetreault and Thomas E. Van Fechtmann, each
     of whom is a former officer and member of PrivilegeONE, filed an action in
     the United States District Court for the State of Rhode Island against the
     Company, PrivilegeONE and certain officers of the Company, alleging, among
     other things, (i) breach of their employment agreements with PrivilegeONE
     in connection with the termination of their employment; (ii) breach of
     fiduciary duty, (iii) breach of contract as a result of the Company's
     unwillingness to permit the early exercise of certain options to acquire
     the Company's Common Stock prior to the record date for the dividend
     declared by the Company's Board of Directors in May 2001; and (iv) common
     law fraud, misrepresentation and violations of the Securities Act of 1933
     in connection with the acquisition by the Company of their interest
     in PrivilegeONE in May 2001, due to an alleged failure to disclose the
     proposed dividend to the plaintiffs. The plaintiffs are seeking, among
     other things, compensatory and punitive damages in an unspecified amount,
     injunctive relief and the imposition of a constructive trust on 190,000
     shares of the Company's Common Stock and its ownership interest

                                      F-22
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


         in PrivilegeONE. The Company's motion to have the case summarily
         dismissed was denied in December 2002. At this time the Company has not
         answered the complaint, asserted counterclaims nor confirmed insurance
         coverage. However, it intends to vigorously defend the claims which it
         believes are without merit.

         The Company is involved from time to time in litigation arising in the
         ordinary course of business, none of which is expected to have a
         material adverse effect on the Company and, as in the case of other
         pending claims, has been reserved for accordingly.

         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 Company has
         complied with the capitalization and contingency reserve requirements
         outlined in the Agreement.

         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.

         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:

                              2003           $          97,000
                              2004                      82,000
                              2005                      68,000
                                            -------------------
                              Total          $         247,000
                                            ===================

          Rent expense for the years ended November 30, 2002, 2001 and 2000
          amounted to $193,000, $268,000 and $206,000, 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-23
<PAGE>

CALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMER 30, 2002, 2001 AND 2000


     11.  QUARTERLY FINANCIAL RESULTS (UNAUDITED)

     Quarterly financial results for the years ended November 30, 2002 and 2001
     are as follows (amounts in thousands except per share items):

     <TABLE>
     <CAPTION>
                                                                       Three Months Ended
                                               ----------------------------------------------------------------------
                                                   Feb. 28,           May 31,          Aug. 31,          Nov. 30,
                                                     2002              2002              2002              2002
                                               ---------------   ----------------  ----------------  ----------------
                                                  RESTATED
     <S>                                        <C>               <C>               <C>               <C>
     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)  $        (0.04)
          Net loss                              $       (0.48)     $        (0.42)  $         (0.17)  $        (0.04)


                                                                       Three Months Ended
                                               ---------------------------------------------------------------------
                                                   Feb. 28,           May 31,          Aug. 31,          Nov. 30,
                                                     2001              2001              2001              2001
                                               ---------------   ----------------  ----------------  ----------------
                                                  RESTATED
     Revenue                                    $       1,486     $        1,435    $        1,268    $        1,019
                                               ===============   ================  ================  ================
     Gross Profit                               $         880     $          700    $          654    $          554
                                               ===============   ================  ================  ================
     Loss from continuing operations            $        (493)    $         (981)   $       (1,192)   $       (1,567)
                                               ===============   ================  ================  ================
     Net loss                                   $        (870)    $       (1,335)   $       (1,463)   $       (1,371)
                                               ===============   ================  ================  ================

     Basic and diluted loss per share:
          Loss from continuing operations       $       (0.12)    $        (0.24)   $        (0.27)   $        (0.35)
          Net loss                              $       (0.21)    $        (0.33)   $        (0.33)   $        (0.30)
     </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 and 2001 differs
     from the Company's quarterly filing for that period since it has been
     restated to reflect Innovation Growth Partners as a discontinued operation.

     The Company's investment in AIM (see Note 3) 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 (see Note 10) of $147,000 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
     and $478,000 were recorded during the fourth quarters of fiscal 2002 and
     2001, respectively.

                                      F-24
<PAGE>
<TABLE>
<CAPTION>
                                                             SCHEDULE II
                                                    CALTON, INC. AND SUBSIDIARIES
                                                  VALUATION AND QUALIFYING ACCOUNTS
                                                       (AMOUNTS IN THOUSANDS)


                                                                                 Additions
                                                                        -----------------------------
                                                         Balance at      Charged to       Charged to                     Balance at
                                                          Beginning       Costs and          Other                          End
Description                                                of Year        Expenses         Accounts      Deductions       of Year
------------------------------------------------------- ------------    ------------     ------------   ------------    ------------
<S>                                                     <C>             <C>              <C>            <C>             <C>
Year ended November 30, 1999:

      Inventory valuation reserves                        $     255       $       -         $     -      $      100      $      155
                                                        ============    ============     ============   ============    ============
      Valuation allowance for net deferred tax asset      $  13,541       $       -         $     -      $    4,736 (a)  $    8,805
                                                        ============    ============     ============   ============    ============
Year ended November 30, 2000:

      Allowance for doubtful accounts                     $       -       $     122         $     -      $        -      $      122
                                                        ============    ============     ============   ============    ============
      Inventory valuation reserves                        $     155       $     108         $     -      $        -      $      263
                                                        ============    ============     ============   ============    ============
      Valuation allowance for net deferred tax asset      $   8,805       $   1,864         $     -      $        -      $   10,669
                                                        ============    ============     ============   ============    ============
Year ended November 30, 2001:

      Allowance for doubtful accounts                     $     122       $     376         $     -      $       94      $      404
                                                        ============    ============     ============   ============    ============
      Inventory valuation reserves                        $     263       $       -         $     -      $      263      $        -
                                                        ============    ============     ============   ============    ============
      Valuation allowance for net deferred tax asset      $  10,669       $      84         $     -      $        -      $   10,753
                                                        ============    ============     ============   ============    ============
Year ended November 30, 2002:

      Allowance for doubtful accounts                     $     404       $       -         $     -      $      373      $       31
                                                        ============    ============     ============   ============    ============
      Valuation allowance for net deferred tax asset      $  10,753       $     967         $     -      $        -      $   11,720
                                                        ============    ============     ============   ============    ============

(a) The majority of the change in valuation allowance is due to the sale of Calton Homes, Inc. and did not have an
    income statement impact.
</TABLE>

                                                                F-25

<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.

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.

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.

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. (*)

                                      E-1

<PAGE>

10.4   Incentive Compensation Plan of Registrant.

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 and Third Amendment to Executive
       Employment Agreement dated as of October 30, 2002(**).

10.9   2000 Equity Incentive Plan incorporated by reference to Exhibit 10.10 to
       Form 10-K of Registrant for the fiscal year ended November 30, 1999. (*)

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  Consulting Agreement dated July 17, 2001 between the Registrant and
       Robert E. Naughton, incorporated by reference to similarly numbered
       exhibit filed with Form 10-K of Registrant for the fiscal year ended
       November 30, 2001.

10.23  Mandatory Redeemable, Convertible, Subordinated Note issued by Automated
       Information Management, Inc., incorporated by reference 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.
       Information has been omitted from this exhibit and is subject to a
       request for confidential treatment.

10.25  Amendment No. 1 to Co-Bran Credit Card Agreement dated as of August 15,
       2002 between Fleet Credit Card Services, L.P. and PrivilegeONE Networks,
       LLC. Information has been omitted from this exhibit and is subject to a
       request for confidential treatment.

10.26  Services Agreement dated as of October ___, 2002 between PrivilegeONE
       Networks, LLC and World Omni Financial Corp. Information has been omitted
       from this exhibit and is subject to a request for confidential treatment.

21.    Subsidiaries of the Registrant.

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


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

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

                                      E-2