We are all too familiar with the present conditions of the battered housing market on a national scale, which has been compounded by a distressed subprime and soft financial market and as a result, we contiue to see a drop in home values across the country.

In fiscal year 2007, we were faced with yet another tough year. We too have been impacted by the uncertainty of a distressed homebuilding market, signs of weakness in the overall economy, and land values that continued to decline. As we dealt with the continued downturn, sales activity declined and we delivered fewer homes in fiscal 2007 than in the previous year. In order to promote sales activity and be competitive in this unsettled market, we offered buyer incentives with significant price concessions on inventory homes which naturally, have impacted our financial statements for the year.

Homes by Calton, LLC, our homebuilding division, is currently constructing homes in the Pointe West community, located in Vero Beach, Florida. Magnolia Plantation, our newest subdivision, has all of the needed approvals to begin construction and pending market conditions, will commence later this year.

We continue to promote our HBC Custom Home division, where each custom home is specifically tailored to an individual's needs through our creative home designs. In November 2007, we contracted to build and deliver our newest custom home at Indian River Club, an upscale golfing community in Vero Beach, Florida, and have been named as one of their 'Preferred Builders'.

As a prominent custom homebuilder, we are committed to using the highest qualify materials and workmanship to provide quality construction and attenton to detail with our award-winning designs. We are dedicated to offering exceptional quality and value, with a strong commitment to customer satisfaction.

In 2007, Homes by Calton was named as a Pinnacle Builder by the Treasure Coast Builders Assocaition, which signifies the Company's high standards and commitment to professionalism. We also received the Parade of Homes Silver Award for our outdoor living area design.

Our other business entity, PrivilegeONE Networks, LLC, was formed to develop and implement the PrivilegeONE Loyalty and co-branded credit card program. It received a patent on its User Rewards Program and Associated Communications System. At the present time, PrivilegeONE does not generate any revenues, but continues to explore other licensing and joint venture opportunities.

As we enter another year of uncertainty in the housing industry, coupled with a lending market that has become increasingly complicated, we are committed to be prudent and do all we can to meet next year's challenges. Market downturns usually provide opportunities to capitalize on unique opportunities that could provide a good basis for a turnaround. We will continue to look for business opportunities during this unusual market.

Once again, we acknowledge and appreciate the teamwork and commitment of our employees, and thank all of our shareholders for their continued support.

Sincerely,