================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------
                                    FORM 10-K
                                   -----------

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

                    For the Fiscal Year Ended March 31, 1998

                                       OR

  [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                  For the transition period from _____ to _____

                         Commission File Number 0-13800

                       INTERNATIONAL AMERICAN HOMES, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                              22-2472608
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)


               9950 Princess Palm Ave., Suite 112, Tampa, FL 33619
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (813) 664-1100

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

                                      NONE

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

                                 Title of class
                                 --------------
                          Common Stock, $.01 par value

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 (ss.229.405 of this chapter) 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. [X]

As of June 1, 1998, the number of shares outstanding of the registrant's common
stock, $.01 par value, was 2,780,895. As of June 1, 1998 the aggregate market
value of the registrant's common stock held by non-affiliates was $2,311,000.

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [X]

================================================================================

<PAGE>

                       INTERNATIONAL AMERICAN HOMES, INC.
                                AND SUBSIDIARIES

                                    FORM 10-K

                                      Index

                                                                           Page
                                                                           ----
Part I.

    Item 1.  Business ........................................................3
    Item 2.  Properties ......................................................8
    Item 3.  Legal Proceedings ...............................................8
    Item 4.  Submission of Matters to a Vote of Security Holders..............8

Part II.

    Item 5.  Market for the Registrant's Common Equity and Related 
             Stockholder Matters .............................................9
    Item 6.  Selected Financial Data ........................................10
    Item 7.  Management's Discussion and Analysis of Financial 
             Condition and Results of Operations ............................12
    Item 8.  Financial Statements and Supplementary Data ....................20
    Item 9.  Change in and Disagreements with Accountants on 
             Accounting and Financial Disclosure ............................20

Part III.

    Item 10. Directors and Executive Officers of the Registrant .............20
    Item 11. Executive Compensation .........................................20
    Item 12. Security Ownership by Certain Beneficial Owners 
             and Management .................................................20
    Item 13. Certain Relationships and Related Transactions .................20

Part IV.

    Item 14. Exhibits, Financial Statements, Schedules, and 
             Reports on Form 8-K.............................................21

Signatures ..................................................................23

                                     Page 2

<PAGE>

                                     PART I

Item 1. Business

General Description
-------------------

International American Homes, Inc. (the "Company") was incorporated under the
laws of the State of Delaware on April 27, 1983. The Company, through its
subsidiary, designs, builds, and sells single-family homes and villas and
develops finished building lots, primarily in middle income communities in
suburban residential areas in Greater Tampa, Florida.

During the fiscal year ended March 31, 1998, and in prior years, the Company
also conducted home building activities in Metropolitan Washington, D.C.. Such
activities have been terminated and a plan for the orderly withdrawal from that
market was adopted. During the quarter ended December 31, 1997 the sale of new
homes was discontinued. Homes for which the Company had entered into
non-contingent contracts are being completed and model homes and excess lot
inventory have been sold. It is anticipated that all construction will be
completed by July 31, 1998. See Note 1, Note 7 and Note 11 in Notes to
Consolidated Financial Statements of the Company appearing elsewhere in this
report.

On April 16, 1990, the Company and certain of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11, Title 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
New Jersey (the "Bankruptcy Court"). On August 12, 1992, the Bankruptcy Court
entered an order confirming the Company's Plan of Reorganization (the "Plan" or
"Plan of Reorganization"). See Note 1, "The Company" and Note 7, "Commitments
and Contingencies" in Notes to Consolidated Financial Statements of the Company
appearing elsewhere in this report.

Financing Arrangements
----------------------

The Company, through its subsidiary, obtains financing from commercial banks for
a portion of the cost of acquiring finished building lots and undeveloped land
and for most of the costs of the construction of homes. This financing is
generally available for homes that are subject to a contract of sale and also
for a limited number of homes in advance of sale. The Company's loan commitments
as well as current banking regulations limit the portion of each home that can
be financed to approximately 75% of its value. Since the Company uses its own
capital resources to fund those costs that cannot be financed, the Company's
future growth will be limited by the amount of such resources. As a result of
the use of these financing arrangements, the Company is currently, and expects
to continue to be, highly leveraged. All of the Company's financing arrangements
are secured by the related real estate inventory.

Management believes that the Company currently has adequate financing and
liquidity to meet its financial obligations and will be able to fund the
acquisition and construction of inventory to support modest growth. However,
there is no assurance that financing will be available to the Company in the
future. In addition, homebuilding is a cyclical industry with economic
conditions having a substantial impact on operating performance.

                                     Page 3

<PAGE>

Markets
-------

During the three fiscal years ended March 31, 1998, the Company built and
delivered 1,178 homes realizing $176,540,000 in revenues. The following tables
summarize, by market area, the Company's sales revenues and number of homes
delivered, respectively, for its last three fiscal years.

                               Home Sales Revenue
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                  Year Ended March 31,
                                     ------------------------------------------------------------------------------
                                               1998                      1997                       1996
                                     -------------------------  ------------------------  -------------------------
<S>                                                  <C>                       <C>                        <C>     
  Market Area
  -----------
  Greater Tampa, Florida                             $ 42,102                  $ 40,282                   $ 32,326

  Metropolitan Washington, D.C.*                       12,299                    25,874                     23,657
                                     -------------------------  ------------------------  -------------------------
     Total*                                          $ 54,401                  $ 66,156                   $ 55,983
                                     =========================  ========================  =========================
</TABLE>

                            Number of Homes Delivered

<TABLE>
<CAPTION>
                                                                  Year Ended March 31,
                                     ------------------------------------------------------------------------------
                                               1998                      1997                       1996
                                     -------------------------  ------------------------  -------------------------
<S>                                                  <C>                       <C>                        <C>     
  Market Area
  -----------
  Greater Tampa, Florida                                  321                        309                       257

  Metropolitan Washington, D.C.*                           56                        123                       112
                                     -------------------------  ------------------------- -------------------------
     Total*                                               377                        432                       369
                                     =========================  ========================= =========================
</TABLE>

* Includes home sales revenue and number of homes delivered prior to the
restructuring of operations during the year ended March 31, 1998.

The Company is currently offering single-family homes and villas in six
communities at prices ranging from $98,000 to $205,000. Purchasers of the
Company's homes include both entry-level and move-up buyers. The average sales
price of the homes delivered in the year ended March 31, 1998 was $ 144,000.

                                     Page 4

<PAGE>

Land Acquisition and Development
--------------------------------

The Company generally acquires finished building lots under contracts which
spread the acquisition of those lots over a period of time that roughly
coincides with the estimated time required for the construction and sale of the
homes on those lots. At March 31, 1998 the Company had commitments to purchase
297 finished building lots at a total purchase price of approximately $7,277,000
over a four-year period. These commitments assure a continuing supply of
finished building lots in the near future. Substantial deposits will be
forfeited if the Company is unable to satisfy these commitments.

During the year ended March 31, 1996, the Company purchased a parcel of land in
Greater Tampa, Florida containing approximately 360 lots of which 300 were
undeveloped. At March 31, 1998, the Company had developed 150 of those lots into
finished building lots and delivered 77 homes on those lots in prior periods up
to and including March 31, 1998. The Company is not engaged in any other land
development activities.

Subcontractors and Suppliers
----------------------------

The Company constructs homes utilizing subcontractors who operate under the
supervision of the Company's staff. The subcontracts are generally fixed-price,
short-term agreements. Building materials and subcontractors are readily
available in the areas where the Company constructs its homes. Although the
Company believes that no relationship with any particular supplier or
subcontractor is material to its operations, the Company purchases substantially
all of its requirements for lumber and certain other building material products
for the homes that it builds in Greater Tampa, Florida from one supplier. The
Company does not believe that this relationship results in any significant risk
to the Company.

Warranties
----------

The Company provides warranties to all of its customers. The Company provides a
written ten-year warranty through an independent warranty program which insures
performance by the Company. The warranties cover major structural defects for
ten years, limited structural and mechanical defects for one to two years, and
all defects for one year.

Seasonal Nature of Business
---------------------------

Due to its product mix, the Company's operations have not been seasonal in
nature.

Backlog
-------

The following comparative backlog information excludes the results from
restructured operations (i.e. exiting from the Metropolitan Washington, D.C.
market).

As of March 31, 1998 and 1997 the Company had a backlog of signed non-contingent
contracts for 107 homes with aggregate sales prices of $14,676,000 and 82 homes
with aggregate sales prices of $10,372,000, respectively. 

                                     Page 5

<PAGE>

As of March 31, 1998 the backlog of signed non-contingent contracts in the
restructured operations was 13 homes with aggregate sales prices of $2,710,000.

Sales and Marketing
-------------------

The Company generally sells its homes through its own sales personnel who work
in on-site model homes. Sales personnel are compensated through a combination of
salary and commission. A significant portion of those sales are initiated by
independent real estate brokers who are compensated on a commission basis.

The Company advertises in local and regional newspapers and publications and
provides prospective purchasers with illustrated brochures and floor plans. The
Company's customers may select custom options to be incorporated into their
homes at additional cost.

The Company requires a cash deposit from purchasers at the time a contract of
sale is executed. Such deposits are held in trust, escrow, or segregated bank
accounts. Purchasers are permitted to cancel their contract and receive a refund
of their deposit under certain limited circumstances including their inability
to obtain permanent mortgage financing or to sell their existing home. For the
years ended March 31, 1998, 1997 and 1996, the Company experienced cancellation
rates of 21%, 21%, and 19%, respectively.

Although the Company attempts to limit its inventory of unsold homes, it may
commence construction of homes prior to obtaining sales contracts. The Company
frequently discounts the purchase price of these homes or provides various
options and other sales incentives to purchasers.

Customer Financing
------------------

The Company assists customers in arranging permanent mortgage financing by
providing information regarding potential mortgage lenders. There currently is
an adequate supply of competitively priced permanent mortgages available from
unrelated sources to satisfy the needs of homebuyers.

Prior to 1987, the Company originated mortgages (secured by the homes it built
and sold) for certain of its subsidiaries through its wholly-owned mortgage
subsidiaries and assembled them into pools against which collateralized mortgage
obligation bonds were issued or such mortgages were sold in the open market.
Most of such mortgage loan repayments are insured by the U.S. Department of
Housing and Urban Development or the Federal Housing Administration ("FHA"), or
guaranteed by the Veterans' Administration ("VA").

The Company receives in cash, at closing, the full sales price for its homes,
less any financing subsidies, deposits, closing costs, and loan repayments.

                                     Page 6

<PAGE>

Competition
-----------

The homebuilding industry is highly competitive and fragmented. The Company
competes in the geographic areas in which it operates with numerous residential
construction companies ranging from small local builders to large regional and
national builders. The Company's competitors include: Pulte Corporation, Centex
Corporation, U.S. Home Corporation, Lennar Corporation, M.D.C. Holdings, Inc.,
NVR, Inc., and Washington Homes, Inc. The national builders and many of the
local and regional companies have higher sales and greater financial resources
than the Company. The Company considers all homes, whether offered for sale or
rent (including apartment and condominium housing), to be competitive with its
homes in each local market in which the Company operates. The Company competes
primarily on the basis of quality, location, price, design, and reputation in
each local market.

Regulation
----------

The Company's business is affected by various local, state, and Federal
statutes, ordinances, rules, and regulations concerning zoning, building design
and construction, home sales, environmental protection, and other matters.
Changes in governmental regulations may adversely affect the Company's business.

Many of the homes built by the Company are approved for FHA or VA financing.
Where required, all construction is inspected by local government inspectors
and, on FHA and VA approved homes, by FHA or VA building inspectors.

Employees
---------

The Company employed 38 persons as of March 31, 1998 of whom 2 were executive
officers, 12 were sales personnel, 11 were administrative and clerical personnel
and 13 were involved in construction and supervision of construction. The
Company believes its employee relations are satisfactory.

                                     Page 7

<PAGE>

Item 2. Properties

As of March 31, 1998, the Company occupied leased office facilities in Tampa,
Florida and Lanham, Maryland totaling approximately 8,420 square feet. See Item
1 and Note 7 in Notes to Consolidated Financial Statements of the Company
appearing elsewhere in this report.

Item 3. Legal Proceedings

On April 16, 1990, the Company and certain of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11, Title 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
New Jersey (the "Bankruptcy Court"). On August 12, 1992, the Bankruptcy Court
entered an order confirming the Company's Plan of Reorganization (the "Plan" or
"Plan of Reorganization").

The Company is currently involved in litigation brought by a former officer of
its Washington, D.C. subsidiary. The Company has filed a counterclaim against
the former officer and is vigorously defending all claims. Due to the
uncertainty of the outcome of this litigation, no provision related to either
claim has been made in the accompanying Consolidated Financial Statements.
However, under any circumstances, there would be no material adverse effect on
the Consolidated Financial Statements. The Company believes that the claim is
without merit.

The Company is involved from time to time in other litigation arising in the
ordinary course of business which is not expected to have a material adverse
effect on the Company's financial position or its results of operations. See
Note 7 in Notes to Consolidated Financial Statements of the Company appearing
elsewhere in this report.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of shareholders during the fourth quarter of
the fiscal year covered by this report.

                                     Page 8

<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

At the 1994 Annual Meeting of Stockholders, which was held on September 13,
1994, the stockholders approved a proposal to adopt certain amendments (the
"Amendments"), to the Company's Restated Certificate of Incorporation (i) to
effect a 1-for-10 reverse stock split of the Company's issued and outstanding
common stock (the "Reverse Stock Split"), and (ii) to change the number of
authorized shares of common stock from 30 million to 10 million. The Amendments
did not change the par value of the common stock which remained at $.01 per
share. The Amendments became effective on May 31, 1995 with the filing of a
Certificate of Amendment with the Secretary of State of Delaware. The effect of
the Reverse Stock Split has been retroactively reflected in this report.

Shares of the Company's common stock are traded in the over-the-counter market.
The trading symbol is "IAHM".

The following table sets forth the range of high and low bid prices for the
periods indicated as reported by the National Quotation Bureau (which reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions).

                                   High               Low
                                   ----               ---
Calendar Year 1996
------------------
First Quarter                    $ 1.00             $ .38
Second Quarter                     1.56               .94
Third Quarter                      1.38              1.13
Fourth Quarter                     1.81               .81

Calendar Year 1997
------------------
First Quarter                      1.63              1.19
Second Quarter                     1.56              1.19
Third Quarter                      1.50              1.38
Fourth Quarter                     1.50              1.38

Calendar Year 1998
------------------
First Quarter                      1.50              1.50


As of June 1, 1998, there were 2,512 stockholders of record.

The Company has never declared or paid any cash dividends. In addition, the
payment of dividends is not permitted under the Plan of Reorganization during
the six (6) year period ending August 13, 1998. The Plan also provides that
after August 12, 1998, the Company may not pay any cash dividends to
stockholders until it has first paid an additional $1,250,000 to the creditors.

                                     Page 9

<PAGE>

Item 6. Selected Financial Data

               Selected Consolidated Statements of Operations (1)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                                              
                                                          Year Ended March 31,
                          -------------------------------------------------------------------------------
                             1998 (2)          1997             1996            1995           1994
                          --------------  ---------------  ---------------  -------------  --------------
<S>                       <C>             <C>              <C>              <C>            <C>
Revenues:

Home sales                     $ 54,401         $ 66,156         $ 55,983       $ 50,347        $ 34,356

Interest and other income           482              617              792            878           1,277
                          --------------  ---------------  ---------------  -------------  --------------
                                 54,883           66,773           56,775         51,225          35,633
                          --------------  ---------------  ---------------  -------------  --------------
Costs and expenses:

Cost of home sales               47,359           57,712           48,425         43,455          28,814
 
Restructuring provision           1,840                -                -              -               -

Selling, general and              6,137            7,455            6,541          5,673           4,560
administrative

Interest                            473              545              747            857           1,239

Depreciation                        158              131               59             81              64
                          --------------  ---------------  ---------------  -------------  --------------
                                 55,967           65,843           55,772         50,066          34,677
                          --------------  ---------------- ---------------  -------------  --------------
(Loss) income before            (1,084)              930            1,003          1,159             956
income taxes              --------------  ---------------- ---------------  -------------  --------------
                          
(Benefit)  provision for          (380)              280               60             72           (124)
income taxes
                          ==============  ================ ===============  =============  ==============

Net (loss) income                ($704)         $    650         $    943       $  1,087        $  1,080
                          ==============  ================ ===============  =============  ==============

Per Common Share:

Basic net (loss) income          ($.25)         $    .24         $    .35       $    .40        $    .40
                          ==============  ================ ===============  =============  ==============

Weighted average number
of shares used in basic
net (loss) income per         2,785,576         2,765,025       2,724,395      2,724,395       2,724,395
share data, as adjusted
for the Reverse Stock
Split
                          ==============  ================ ===============  =============  ==============
</TABLE>

                                     Page 10

<PAGE>

                  Selected Consolidated Balance Sheet Data (1)
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                             March 31,       March 31,       March 31,      March 31,       March 31,
                             1998 (2)          1997            1996           1995            1994
                          --------------  --------------  -------------- --------------  --------------
<S>                       <C>             <C>             <C>            <C>             <C>     
Receivables                    $    532        $    949        $  1,223       $    444        $    431

Collateral for bonds              4,500           4,972           5,871          7,620           9,666
payable

Real estate inventory            20,964          22,654          21,860         16,997          11,177

Total assets                     28,183          31,757          31,527         27,668          25,395

Mortage notes and loans          11,246          13,967          13,814          9,724           6,116
payable

Bonds payable                     4,341           4,800           5,660          7,362           9,337

Total liabilities                21,749          24,623          25,073         22,177          20,971

Stockholders' equity              6,434           7,134           6,454          5,511           4,424
</TABLE>

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

(1) In conjunction with the Reorganization, the Company adopted fresh start
    reporting pursuant to which all assets and assumed liabilities are restated
    to reflect their reorganization value which approximates their fair value at
    the date of reorganization. Accordingly, the Selected Consolidated
    Statements of Operations for the period March 31, 1994 through March 31,
    1998 and the Selected Consolidated Balance Sheet Data as of March 31, 1994
    through March 31, 1998 are not comparable to the related statements for any
    prior period and as of any prior date.

(2) The Selected Consolidated Statement of Operations and Selected Consolidated
    Balance Sheet Data for the year ended March 31, 1998 include the
    restructuring of operations, $1,840,000 (i.e. exiting from the Washington,
    D.C. market).

                                     Page 11

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations

The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Consolidated Financial Statements and the notes thereto and
other financial information included elsewhere in this Annual Report on Form
10-K. Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
See "Special Note Regarding Forward-Looking Statements".

During the past several years an adverse housing market in Metropolitan
Washington, D.C., especially in the areas in which the Company conducted home
building operations, resulted in continued operating losses in the Company's
Metropolitan Washington, D.C. subsidiary. Management changes were made and
administrative costs were reduced in order to minimize the loss. In addition,
several communities in which operations had been poorly performing were
abandoned. Notwithstanding those changes, lower operating margins and higher
selling expenses continued to adversely affect the Company's ability to restore
profitability in the Metropolitan Washington, D.C. market. Accordingly during
the quarter ended December 31, 1997 the Board of Directors of the Company
approved management's plan to discontinue the building and sale of homes and
effect an orderly withdrawal from the Metropolitan Washington, D.C. housing
market.

Liquidity and Capital Resources
-------------------------------

The consolidated financial statements for the year ended March 31, 1998 include
a restructuring charge of $1,840,000 ($1,214,000 after benefit for federal
income tax) associated with the termination of home-building operations in
Metropolitan Washington, D.C. ( See Note 7 and Note 11 in Notes to the
Consolidated Financial Statements of the Company appearing elsewhere in this
report). The Company believes that it has sufficient cash flow and cash on hand
to absorb the restructuring charge.

The Company, through its subsidiary, obtains financing from commercial banks for
a portion of the cost of acquiring finished building lots and for most of the
costs of the construction of homes. This financing is generally available for
homes that are subject to a contract of sale and also for a limited number of
homes in advance of sale. The Company's loan commitments as well as current
banking regulations generally limit the portion of each home that can be
financed to approximately 75% of its value. Since the Company must use its own
capital resources to fund those costs that cannot be financed, the Company's
future growth will be limited by the amount of such resources. As a result of
the use of these financing arrangements, the Company is currently, and expects
to continue to be, highly leveraged.

The Company's subsidiaries currently have financing agreements in the aggregate
amount of $26,542,000 with commercial banks located in the areas in which the
subsidiaries operate. The terms of these financing agreements vary, are each for
one year or more from their date of origination (with expiration dates ranging
from April, 1998 to September, 1999), are generally guaranteed by the Company,
and are all secured by the related real estate inventory. The Company's Chairman
and President has personally guaranteed certain of these obligations in the
aggregate maximum amount of $13,700,000, at a fee of one percent of the amount

                                     Page 12

<PAGE>

guaranteed, not to exceed $80,000 per year. At March 31, 1998, the outstanding
principal amount of loans guaranteed by the Company's Chairman and President was
$3,766,000.

The Company generally acquires finished building lots under contracts which
spread the acquisition of such lots over a period of time that roughly coincides
with the estimated time required for the construction and sale of homes on those
lots. At March 31, 1998, the Company had commitments to purchase 297 finished
building lots at a total purchase price of approximately $7,277,000 over a
four-year period. These commitments assure a continuing supply of finished
building lots in the near future. Substantial deposits will be forfeited if the
Company is unable to satisfy these commitments.

During the year ended March 31, 1996, the Company purchased a parcel of land in
Greater Tampa, Florida containing approximately 360 lots of which 300 were
undeveloped. At March 31, 1998, the Company had developed 150 of those lots into
finished building lots and delivered 77 homes on those lots in prior periods up
to and including March 31, 1998. The Company obtained financing from a
commercial bank to fund a portion of the cost of acquiring and developing the
land.

The Company's short-term liquidity and its ability to operate over the
short-term are reasonably assured by the financing agreements in place, by the
Company's backlog of sales contracts, and by the commitments to acquire finished
building lots. The Company's long-term liquidity is not affected by any material
capital expenditures but would be impacted by the inability to renew certain of
the financing agreements when they mature. The strength of the housing market in
the area where the Company will continue operations and the ability of the
Company to maintain a continued supply of finished building lots will also
affect the Company's long-term liquidity. Management believes that the Company
currently has adequate financing and liquidity to meet its financial obligations
and will be able to fund the acquisition and construction of inventory to
support modest growth. However, there is no assurance that such financing will
be available to the Company in the future.

The Plan does not permit the subsidiaries of the Company to pay any dividends to
the Company. The Plan further prohibits the Company and its subsidiaries from
acquiring debt securities from or loaning or advancing any money to any other
party except in the ordinary course of business. These restrictions are
effective until August 12, 1998 and by their nature require the Company's
subsidiaries to be self-sufficient. From time to time, a subsidiary of the
Company makes a purchase of land or finished building lots from or on behalf of
another subsidiary and later resells that land to the latter on terms that will
assure that the accommodation purchaser recovers its costs. While such
transactions can temporarily affect the cash flow of each of the participating
subsidiaries, they do not impact the overall cash flow of the Company. The Plan
further provides for the payment of distributions to the creditors equal to 50
percent of excess cash flows (as defined by the Plan), if any, generated by the
Company's subsidiaries for the periods ending June 30, 1993 through June 30,
1998. Any such payment of 50 percent of the excess cash flow would be funded
from the excess cash flow generated. Despite these requirements and
restrictions, management believes that the Company and each of its subsidiaries
currently have adequate liquidity to meet their financial obligations. However,
there is no assurance that these requirements and restrictions will not have an
impact on the future liquidity of the Company or its subsidiaries. The Plan also

                                     Page 13

<PAGE>

provides that after August 12, 1998, the Company may not pay any cash dividends
to stockholders until it has first paid an additional $1,250,000 to the
creditors.

Results of Operations
---------------------

The following table and the paragraphs that follow sets forth certain
information with respect to homes delivered and homes sold during the periods
presented (dollars in thousands). For comparative purposes, the information has
been restated to eliminate the results from restructured operations (i.e. the
exiting from the Washington, D.C. market).

<TABLE>
<CAPTION>

                                                            Year Ended March 31,
                                  --------------------------------------------------------------------------
                                           1998                     1997                     1996
                                  ------------------------ ------------------------ ------------------------
<S>                               <C>                      <C>                      <C>     
  Homes delivered
      Units                                          321                     309                      257
      Home sales revenue                        $ 42,102                $ 40,282                 $ 32,326
      Average sales price                       $  131.2                $  130.4                 $  125.8
  Homes sold
      Units                                          346                     322                      268
      Sales value                               $ 46,244                $ 41,839                 $ 33,955
      Average sales price                       $  133.7                $  129.9                 $  126.7
</TABLE>

The increase in home sales revenues for the year ended March 31, 1998 compared
to the year ended March 31, 1997 and the increase in home sales revenues for the
year ended March 31, 1997 compared to the year ended March 31, 1996 both result
from a combination of an increase in the number of units delivered and an
increase in the average sales price of the units delivered. The increase in the
number of units delivered results generally from a greater number of operating
communities. The increase in the average sales price results from a wider
product range and price increases.

The Company realized an increase in the number of homes sold during the year
ended March 31, 1998 compared to the year ended March 31, 1997 and an increase
during the year ended March 31, 1997 compared to the year ended March 31, 1996.
The increases are attributable to an increase in the number of communities in
which the company builds and a greater number of sales in each community.

The increase in the average sales price of homes sold during the year ended
March 31, 1998 compared to the year ended March 31, 1997 and the increase during
the year ended March 31, 1997 compared to the year ended March 31, 1996 results
from higher average sales price and a wider sales price range.

                                     Page 14

<PAGE>

The following table sets forth certain information with respect to homes sold
under contract but not delivered ("backlog") at the dates shown (dollars in
thousands). For comparative purposes the information has been restated to
eliminate the results from restructured operations (i.e. the exiting from the
Washington D.C. market).

<TABLE>
<CAPTION>
                                                 Year Ended March 31,
                               ----------------------------------------------------------
                                     1998                 1997               1996
                               ------------------  ------------------  ------------------
<S>                            <C>                 <C>                 <C>    
  Backlog
      Units                                  107                  82                69
      Sales value                        $14,676             $10,372           $ 8,692
      Average sales price                $ 137.2             $ 126.5           $ 126.0
</TABLE>

There are no contingent contracts in the backlog.

The Company realized an annual increase in the number of its backlog of sales
contracts. This increase is attributable to a greater number of communities in
which the company builds homes as well as an increase in the number of sales per
community.

The increase in the average sales price results from a wider product range and
price increases.

                                     Page 15

<PAGE>

Year Ended March 31, 1998 Compared to the Year Ended March 31, 1997.

Results of Operations

The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands). Operations for the
year ended March 31, 1998 are not comparable to the year ended March 31, 1997
because of the restructuring of operations (i.e. the exiting from the
Washington, D.C. market).

<TABLE>
<CAPTION>
                                                                         Year Ended March 31,
                                                   -----------------------------------------------------------------
                                                                 1998                             1997
                                                   --------------------------------- -------------------------------
                                                       Dollars             %            Dollars            %
                                                   ----------------- --------------- --------------- ---------------
<S>                                                <C>               <C>             <C>             <C>  
  Home sales revenues                                       $54,401           100.0         $66,156           100.0
  Cost of home sales                                         47,359            87.1          57,712            87.2
  Gross profit                                                7,042            12.9           8,444            12.8
  Selling, general and administrative expenses                6,137            11.3           7,455            11.3
  Restructuring provision                                     1,840             3.4               -               -
  (Loss) income before income taxes                         (1,084)           (2.0)             930             1.4
</TABLE>

Interest and Other Income

Interest and other income includes $423,000 and $483,000 and interest expense
includes $416,000 and $471,000 for the years ended March 31, 1998 and March 31,
1997, respectively, from wholly-owned finance subsidiaries established in prior
years to sell collateralized mortgage obligations through participation in
various multi-builder bond programs. The decrease in both income and expense
results from decreases in mortages receivable due to payoffs which reduces the
related debt.

Income Taxes

For the year ended March 31, 1998 a net income tax benefit of $380,000 was
recorded. For the year ended March 31, 1997 a provision for income taxes of
$280,000 was recorded. The effective tax rates for years ended March 31, 1998
and 1997 were 35% and 30%, respectively. The change in the effective tax rate
was the result of a reversal of a prior year tax reserve.

Restructuring Provision

The year ended March 31, 1998 includes a restructuring charge of $1,840,000
associated with the termination of home-building operations in Metropolitan
Washington, D.C.. The year ended March 31, 1997 did not include any
restructuring charge.

                                     Page 16

<PAGE>

The following table sets forth, for the periods indicated, certain information
regarding the Company's remaining Florida operations (dollars in thousands).

<TABLE>
<CAPTION>
                                                                          Year Ended March 31,
                                                   -----------------------------------------------------------------
                                                                 1998                             1997
                                                   --------------------------------- -------------------------------
                                                       Dollars             %             Dollars            %
                                                   ----------------- --------------- --------------- ---------------
<S>                                                <C>               <C>             <C>             <C>  
  Home sales revenues                                       $42,102           100.0         $40,282           100.0
  Cost of home sales                                         35,759            84.9          34,172            84.8
  Gross profit                                                6,343            15.1           6,110            15.2
  Selling, general and administrative expenses                4,677            11.1           4,123            10.2
  Income before income taxes                                  1,497             3.6           1,874             4.7
</TABLE>

While gross profit increased for the year ended March 31, 1998 compared to the
year ended March 31, 1997, gross profit as a percentage of home sales revenue
decreased slightly. The percentage decrease is not deemed to be material.

Selling, general and administrative expenses for the year ended March 31, 1998
increased in both amount and percentage when compared to the prior comparable
period. The increase in selling, general and administrative expenses is due
principally to higher general and administrative expenses resulting from
increased employment costs. In addition, higher total selling and marketing
expenses were incurred due to the increase in home sales revenues and a small
increase in per unit selling and marketing expenses. The percentage increase in
selling, general and administrative expenses is due to the reasons set forth
above.

The change in pre-tax profit for the year ended March 31, 1998 compared to the
year ended March 31, 1997 is a reflection of the changes in gross profit and in
selling, general, and administrative expenses as discussed above.

                                     Page 17

<PAGE>

Year Ended March 31, 1997 Compared to the Year Ended March 31, 1996.

Results of Operations

The following table sets forth, for the periods indicated, certain information
regarding the Company's operations (dollars in thousands).

<TABLE>
<CAPTION>
                                                                          Year Ended March 31,
                                                   -----------------------------------------------------------------
                                                                1997                             1996
                                                   --------------------------------- -------------------------------
                                                       Dollars             %             Dollars            %
                                                   ----------------- --------------- --------------- ---------------
<S>                                                <C>               <C>             <C>             <C>  
  Home sales revenues                                       $66,156           100.0         $55,983           100.0
  Cost of home sales                                         57,712            87.2          48,425            86.5
  Gross profit                                                8,444            12.8           7,558            13.5
  Selling, general and administrative expenses                7,455            11.3           6,541            11.7
  Income before income taxes                                    930             1.4           1,003             1.8
</TABLE>

While gross profit increased for the year ended March 31, 1997 compared to the
year ended March 31, 1996, gross profit as a percentage of home sales revenue
decreased from 13.5% to 12.8%. This percentage decrease results primarily from
the comparative increase in all direct and indirect construction costs. These
costs increases could not be fully recouped through higher sales prices due to
strong competition in the markets where the Company operates.

Selling, general and administrative expenses for the year ended March 31, 1997
increased when compared with the prior comparable period but decreased as a
percentage of the related home sales revenue. The increase in selling, general
and administrative expenses is due to the increase in home sales revenue and
higher total selling and marketing expenses. The percentage decrease in selling,
general and administrative expenses is due to general and administrative
expenses being absorbed over a larger number of units delivered partially offset
by higher per unit selling and marketing expenses.

The change in pre-tax profit for the year ended March 31, 1997 compared to the
year ended March 31, 1996 is a reflection of the changes in gross profit and in
selling, general, and administrative expenses as discussed above.

See "Fresh Start Reporting" appearing under Note 2, "Summary of Significant
Accounting Policies" in Notes to Consolidated Financial Statements of the
Company appearing elsewhere in this report.

                                     Page 18

<PAGE>

Interest and Other Income

Interest and other income includes $483,000 and $647,000 and interest expense
includes $471,000 and $623,000 for the years ended March 31, 1997 and March 31,
1996, respectively, from wholly-owned finance subsidiaries established in prior
years to sell collateralized mortgage obligations through participation in
various multi-builder bond programs. The decrease in both income and expense
results from decreases in mortages receivables due to payoffs which reduces the
related debt.

Income Taxes

The provision for income taxes for the year ended March 31, 1997 of $280,000
includes federal and state income taxes at statutory rates. The provision for
income taxes of $60,000 for the year ended March 31, 1996 is for state income
tax only as a provision for federal income tax was not required for the year
ended March 31, 1996, due to the utilization of net operating loss
carryforwards.

Inflation and Business Cycles

General economic conditions in the United States, and particularly the impact of
inflation, availability of funds, and other factors on interest rates, affect
both the Company's sales and its costs. Inflation can have a long-term impact on
the Company because increasing costs of land, materials, and labor result in
higher sales prices of its homes. In addition, increases in interest rates on
permanent mortgages generally result in reduced sales rates. The Company's
business is also affected by local economic conditions, such as unemployment
rates and housing demand in the market in which it builds homes. Homebuilding is
a cyclical industry in which economic conditions have a substantial impact on
operating performance.

Year 2000

The Company has assessed and continues to assess the impact of the Year 2000
issue on its reporting systems and operations. The Year 2000 issue exists
because many computer systems and applications and other systems using computer
chips currently use two-digit fields to designate a year. As the century date
occurs, date sensitive systems may recognize the year 2000 as 1900 or not at
all. This inability to recognize or properly treat the year 2000 may cause the
systems to process critical financial and operations information incorrectly.

The Company has engaged a programmer at a nominal cost to test and bring its
systems into compliance. It expects this to be completed prior to the year 2000.

Special Note Regarding Forward-Looking Statements

Certain statements in this Section and "Business" and elsewhere in this Annual
Report on Form 10-K constitute "forward-looking statements". Such
forward-looking statements include the discussions of the business strategies of
the Company and expectations concerning future operations, margins,
profitability, liquidity and capital resources. Although the Company believes
that such forward-looking statements are reasonable, it can give no 

                                     Page 19

<PAGE>

assurance that any forward-looking statements will prove to be correct. Such
forward-looking statements involve 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. Such
factors include, among others, the demographic trends and other conditions
impacting the housing market in the areas in which the Company operates,
competition in such areas, the availability of financing, litigation outcomes,
and general economic and business conditions which may impact levels of
disposable income of potential home buyers.

Item 8. Financial Statements and Supplementary Data

The information required under this item is incorporated herein by reference to
the information provided at Pages F-1 through F-21 of this report.

Item 9. Change in and Disagreements with Accountants on Accounting and Financial
        Disclosure

None.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1998 Annual Meeting of Stockholders.

Item 11. Executive Compensation

Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1998 Annual Meeting of Stockholders.

Item 12. Security Ownership by Certain Beneficial Owners and Management

Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1998 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions

Information required to be set forth hereunder has been omitted and will be
incorporated by reference, when filed, from the Company's Proxy Statement for
its 1998 Annual Meeting of Stockholders. See Note 10 in Notes to the
Consolidated Financial Statements of the Company appearing elsewhere in this
report. 

                                     Page 20

<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K

         (a) Financial Statements. The following consolidated financial
             statements are filed as part of this Annual Report on Form 10-K.
             (All other schedules are omitted as the required information is
             inapplicable, or the information is presented in the financial
             statements and related notes thereto):

                                                                            Page
                                                                            ----
               INTERNATIONAL AMERICAN HOMES, INC. AND SUBSIDIARIES

         Report of Independent Public Accountants ...........................F-1

         Consolidated Balance Sheets as of March 31, 1998 and 1997...........F-2

         Consolidated Statements of Operations for the three years 
         ended March 31, 1998................................................F-4

         Consolidated  Statements of Changes in  Stockholders' Equity 
         for the three years ended March 31, 1998............................F-5

         Consolidated Statements of Cash Flows for the three years 
         ended March 31, 1998................................................F-6

         Notes to Consolidated Financial Statements..........................F-7

         (b) Reports on Form 8-K. No reports on Form 8-K were filed by the
             Company during the last quarter of the fiscal year ended March 31,
             1998.

         (c) Exhibits. The following exhibits are filed as part of this Annual
             Report:

Exhibit
Number
------

2.1     -   Second Amended Disclosure Statement dated as of June 29, 1992 and
            Third Amended Joint Plan of Reorganization dated June 29, 1992
            (incorporated by reference to Exhibit 2.4 to Annual Report on Form
            10-K for the fiscal year ended March 31, 1993).

2.2     -   Fourth Amended Joint Plan of Reorganization dated November 17, 1992
            (incorporated by reference to Exhibit 2.5 to Annual Report on Form
            10-K for the fiscal year ended March 31, 1993).

3.1(a)  -   Restated Certificate of Incorporation of Registrant (incorporated by
            reference to Exhibit 4 to Quarterly Report on Form 10-Q for the
            quarter ended September 30, 1989).

3.1(b)  -   Certificate of Amendment to the Restated Certificate of
            Incorporation of Registrant dated September 8, 1994 (incorporated by
            reference to Exhibit 3.1(b) to Annual Report on Form 10-K for the
            fiscal year ended March 31, 1995).

                                     Page 21

<PAGE>

3.1(c)  -   Certificate of Amendment to the Restated Certificate of
            Incorporation of Registrant dated May 22, 1995 (incorporated by
            reference to Exhibit 3.1(c) to Annual Report on Form 10-K for the
            fiscal year ended March 31, 1995).

3.2     -   By-laws of Registrant (incorporated by reference to Exhibit 3.2 to
            Annual Report on Form 10-K for the fiscal year ended March 31,
            1989).

10.1    -   Key Employee Agreement dated August 12, 1992 of Robert J. Suarez
            (incorporated by reference to Exhibit 10.17 to Annual Report on Form
            10-K for the fiscal year ended March 31, 1993).

10.2    -   Non-Qualified Stock Option Agreement dated August 12, 1992 between
            Robert J. Suarez and the Registrant (incorporated by reference to
            Exhibit 10.19 to Annual Report on Form 10-K for the fiscal year
            ended March 31, 1993).

10.3    -   Guaranty dated as of January 20, 1993 by Robert J. Suarez to First
            Florida Bank, N.A. (incorporated by reference to Exhibit 10.23 to
            Annual Report on Form 10-K for the fiscal year ended March 31,
            1993).

10.4    -   Indemnity Agreement dated as of January 20, 1993 by Suarez Housing
            Corporation, the Registrant, and Robert J. Suarez to and for the
            benefit of First Florida Bank, N.A. (incorporated by reference to
            Exhibit 10.24 to Annual Report on Form 10-K for the fiscal year
            ended March 31, 1993).

10.5    -   Mortgage Modification Agreement dated as of October 7, 1994 by and
            between Barnett Bank of Tampa and Suarez Housing Corporation
            (incorporated by reference to Exhibit 10.6 to Annual Report on Form
            10-K for the fiscal year ended March 31, 1995).

10.6    -   Consulting Agreement dated as of November 1, 1993 between Peter
            Davis and the Registrant (incorporated by reference to Exhibit 10.1
            to Quarterly Report on Form 10-Q for the quarter ended December 31,
            1993).

10.7    -   Amended and Restated Master Loan Agreement dated as of November 17,
            1995 between Nations Bank of Florida, N.A. and Suarez Housing
            Corporation (filed therewith).

10.8    -   Second Amendment to Amended and Restated Loan Agreement and Partial
            Release of Guaranty Agreement dated as of October 30, 1995 by and
            between Barnett Bank of Tampa and Suarez Housing Corporation (filed
            therewith).

21      -   List of subsidiaries of the registrant (incorporated by reference to
            Exhibit 21 to Annual Report on Form 10-K for the fiscal year ended
            March 31, 1994).

27      -   Financial Data Schedule (filed herewith).

                                     Page 22

<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.

Date: June 24, 1998       INTERNATIONAL AMERICAN HOMES, INC.


                          By: /s/ Robert J. Suarez
                              --------------------
                              Robert J. Suarez
                              Chairman of the Board of Directors and President
                              (Principal Executive Officer)

                          By: /s/ Robert I. Antle
                              -------------------
                              Robert I. Antle
                              Executive Vice President, Secretary,Treasurer, and
                              Chief Financial Officer

                                     Page 23

<PAGE>

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


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

/s/ Robert J. Suarez          Chairman of the Board of
--------------------          Directors and President              June 24, 1998
Robert J. Suarez                         

/s/ Robert I. Antle           Executive Vice President 
-------------------           and Director                         June 24, 1998
Robert I. Antle                                           
                                            
/s/ William D. Aiken          Director                             June 24, 1998
--------------------
William D. Aiken              

/s/ Dionel Cotanda            Director                             June 24, 1998
------------------
Dionel Cotanda                

/s/ Peter A. Davis            Director                             June 24, 1998
------------------ 
Peter A. Davis                

/s/ Robert E. Everett         Director                             June 24, 1998
---------------------    
Robert E. Everett             

/s/ James G. Farr             Director                             June 24, 1998
-----------------        
James G. Farr                 

/s/ Brian Gibney              Director                             June 24, 1998
----------------         
Brian Gibney                

/s/ Jeffrey D. Prol           Director                             June 24, 1998
-------------------      
Jeffrey D. Prol 

                                     Page 24

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of International American Homes, Inc.:

We have audited the accompanying consolidated balance sheets of International
American Homes, Inc. (a Delaware corporation) and subsidiaries (the "Company")
as of March 31, 1998 and 1997, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the three
years ended March 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 financial position of International
American Homes, Inc. and subsidiaries as of March 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years
ended March 31, 1998, in conformity with generally accepted accounting
principles.


                                      ARTHUR ANDERSEN LLP

Washington, D.C.
May 29, 1998

                                       F-1

<PAGE>

Item 14(a) Financial Statements


                       INTERNATIONAL AMERICAN HOMES, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)


                                     ASSETS
<TABLE>
<CAPTION>

                                                                               March 31,                March 31,
                                                                                 1998                     1997
                                                                           -----------------       -----------------
<S>                                                                        <C>                     <C>     
 CASH AND CASH EQUIVALENTS - including $290 and $574 restricted,                   $  1,461                $  2,187
     respectively
 RECEIVABLES                                                                            532                     949
 REAL ESTATE INVENTORY                                                               20,964                  22,654
 COLLATERAL FOR BONDS PAYABLE                                                         4,500                   4,972
 PROPERTY AND EQUIPMENT - less accumulated depreciation of $544 and                      88                     149
     $348, respectively 
 OTHER ASSETS                                                                           638                     846
                                                                           -----------------       -----------------
     TOTAL ASSETS                                                                  $ 28,183                $ 31,757
                                                                           =================       =================
</TABLE>

The accompanying notes are an integral part of these consolidated balance 
sheets.

                                       F-2

<PAGE>

                       INTERNATIONAL AMERICAN HOMES, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)


                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                               March 31,                March 31,
                                                                                 1998                     1997
                                                                           -----------------       -----------------
<S>                                                                        <C>                     <C>     
 LIABILITIES
 MORTGAGE NOTES AND LOANS PAYABLE                                                  $ 11,246                $ 13,967
 BONDS PAYABLE                                                                        4,341                   4,800
 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                             5,968                   5,530
 CUSTOMER DEPOSITS                                                                      194                     326
                                                                           -----------------       -----------------
     Total Liabilities                                                               21,749                  24,623
                                                                           -----------------       -----------------

 COMMITMENTS AND CONTINGENCIES                                                            -                       -

 STOCKHOLDERS' EQUITY
 PREFERRED STOCK - $.01 par value; 4,000,000 shares authorized; none                      -                       -
     issued or outstanding
 COMMON STOCK - $.01 par value;  10,000,000 shares  authorized;  2,960,843               30                      29
     and 2,954,343 shares issued, respectively; 2,790,895 and 2,784,395
     shares outstanding, respectively
 ADDITIONAL PAID-IN CAPITAL                                                           2,381                   2,378
 RETAINED EARNINGS                                                                    4,025                   4,729
 TREASURY STOCK, 169,948 shares                                                         (2)                     (2)
                                                                           -----------------       -----------------
     Total Stockholders' Equity                                                       6,434                   7,134
                                                                           -----------------       -----------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $ 28,183                $ 31,757
                                                                           =================       =================
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

                                       F-3

<PAGE>

                       INTERNATIONAL AMERICAN HOMES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                     Year Ended March 31,
                                                 ----------------------------------------------------------
                                                         1998                1997                1996
                                                 ------------------- ------------------- ------------------
<S>                                              <C>                 <C>                 <C>     
REVENUES
    Home sales                                            $ 54,401            $ 66,156           $ 55,983
    Interest and other income                                  482                 617                792
                                                 ------------------- ------------------- ------------------
                                                            54,883              66,773             56,775
                                                 ------------------- ------------------- ------------------
EXPENSES
    Cost of home sales                                      47,359              57,712             48,425
    Selling, general and administrative                      6,137               7,455              6,541
    Interest                                                   473                 545                747
    Depreciation                                               158                 131                 59
    Restructuring charge                                     1,840                   -                  -
                                                 ------------------- ------------------- ------------------
                                                            55,967              65,843             55,772
                                                 ------------------- ------------------- ------------------
(LOSS) INCOME BEFORE INCOME TAXES                          (1,084)                 930              1,003
(BENEFIT) PROVISION FOR INCOME TAXES                         (380)                 280                 60
                                                 ------------------- ------------------- ------------------
NET (LOSS) INCOME                                           ($704)             $   650            $   943
                                                 =================== =================== ==================
BASIC NET (LOSS) INCOME PER SHARE
    Net (loss) income                                       ($.25)            $    .24        $       .35
                                                 =================== =================== ==================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING            2,785,576           2,765,025          2,724,395
                                                 =================== =================== ==================
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

                                       F-4

<PAGE>

                       INTERNATIONAL AMERICAN HOMES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CHANGES IN
                              STOCKHOLDERS' EQUITY
                  (Dollars in thousands, except share amounts)

<TABLE>
<CAPTION>
                                  Common Stock
                         -------------------------------
                          Shares Issued                      Additional
                               and             Amount          Paid-In         Retained        Treasury          
                           Outstanding                         Capital         Earnings         Stock          Total
                         ---------------     -----------    -------------     -----------     -----------    -----------
<S>                      <C>                 <C>            <C>               <C>             <C>            <C>    
Balance, March 31, 1995       2,724,395            $ 29         $  2,348         $ 3,136           $ (2)        $ 5,511
    Net income                        -               -                -             943               -            943
                         ---------------     -----------    -------------     -----------     -----------    -----------
Balance, March 31, 1996       2,724,395              29            2,348           4,079             (2)          6,454
    Net income                        -               -                -             650               -            650
    Option exercise              60,000               -               30               -               -             30
                         ---------------     -----------    -------------     -----------     -----------    -----------
Balance, March 31, 1997       2,784,395              29            2,378           4,729             (2)          7,134
    Net loss                          -               -                -           (704)               -          (704)
    Option exercise               6,500               1                3               -               -              4
                         ===============     ===========    =============     ===========     ===========    ===========
Balance, March 31, 1998       2,790,895            $ 30          $ 2,381         $ 4,025           $ (2)        $ 6,434
                         ===============     ===========    =============     ===========     ===========    ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

                                       F-5
<PAGE>

                       INTERNATIONAL AMERICAN HOMES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                               Year Ended March 31,
                                                          ---------------------------------------------------------
                                                                 1998                1997               1996
                                                          ------------------  ------------------ ------------------
<S>                                                       <C>                 <C>                <C>   
  Cash flows from operating activities:
      Net (loss) income                                              ($704)              $  650             $  943

  Adjustments to reconcile net (loss) income to net 
  cash provided by (used in) operating activities:
      Depreciation                                                      158                 131                 59
    Changes in operating assets and liabilities:
      Decrease (increase) in receivables                                417                 274              (779)
      Decrease (increase) in real estate inventory                    1,690               (794)            (4,863)
      Decrease (increase) in other assets                               208               (209)               (54)
      Decrease in collateral for bonds payable                          472                 899              1,749
      Increase in accounts payable and accrued                          438                 168                454
      liabilities
      (Decrease) increase in customer deposits                        (132)                  89                 54
                                                          ------------------  ------------------ ------------------
  Net cash provided by (used in) operating activities                 2,547               1,208            (2,437)
                                                          ------------------  ------------------ ------------------
  Cash flows from investing activities:
      Decrease (increase) in restricted cash                            284                (24)               (93)
      Purchase of property and equipment, net                          (97)               (108)              (127)
                                                          ------------------  ------------------ ------------------
  Net cash  provided by (used in)  investing  activities                187               (132)              (220)
                                                          ------------------  ------------------ ------------------
  Cash flows from financing activities:
      Proceeds from exercise of options                                   4                  30                  -
      Proceeds from mortgage notes and loans payable                 26,460              38,156             35,466
      Payments of mortgage notes and loans payable                 (29,181)            (38,003)           (31,374)
      Repayments of bonds payable - finance subsidiaries              (459)               (860)            (1,702)
                                                          ------------------  ------------------ ------------------
  Net cash (used in) provided by financing activities               (3,176)               (677)              2,390
                                                          ------------------  ------------------ ------------------

  Net (decrease) increase in cash and cash equivalents                (442)                 399              (267)
  Cash and cash equivalents at beginning of period                    1,613               1,214              1,481
                                                          ------------------  ------------------ ------------------
  Cash and cash equivalents at end of period                       $  1,171            $  1,613           $  1,214
                                                          ==================  ================== ==================
  Supplemental disclosures of cash flow information: 
      Cash paid during the year for:
        Interest                                                   $  1,704            $  1,886           $  1,860
                                                          ==================  ================== ==================
        Income taxes                                               $    133            $    460           $     64
                                                          ==================  ================== ==================
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

                                       F-6

<PAGE>

                       INTERNATIONAL AMERICAN HOMES, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    YEARS ENDED MARCH 31, 1998, 1997 AND 1996

NOTE 1 - THE COMPANY

International American Homes, Inc. (the "Company") was incorporated under the
laws of the State of Delaware on April 27, 1983. The Company, through its
subsidiary, designs, builds, and sells single-family homes and villas and
develops finished building lots, primarily in middle income communities in
suburban residential areas in Greater Tampa, Florida.

During the fiscal year ended March 31, 1998, and in prior years, the Company
also conducted home building activities in Metropolitan Washington, D.C.. Such
activities have been terminated and a plan for the orderly withdrawal from that
market was adopted. During the quarter ended December 31, 1997 the sale of new
homes in Metropolitan Washington, D.C. was discontinued. Homes for which the
Company had entered into non-contingent contracts are being completed and model
homes and excess lot inventories have been sold. It is anticipated that all
construction will be completed by July 31, 1998.

On April 16, 1990, the Company and certain of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11, Title 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
New Jersey (the "Bankruptcy Court"). On August 12, 1992, the Bankruptcy Court
entered an order confirming the Company's Plan of Reorganization (the "Plan" or
"Plan of Reorganization").

Pursuant to the Plan, the Company made cash distributions to creditors of
$4,149,000 through March 31, 1998. In addition, the Company issued 2,043,296
shares of the Company's common stock to the creditors. The issuance of the stock
to the creditors resulted in the dilution of existing shareholders to 25 percent
of the common stock outstanding.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
International American Homes, Inc. and all wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.

Revenue Recognition

Revenues from sales are recognized at the time of closing, i.e., when a
sufficient down payment has been made; financing has been arranged with a third
party lender; title, possession and other attributes of ownership have been
transferred to the buyer; and the Company is not obligated to perform
significant additional activities after the sale.

                                       F-7

<PAGE>

Real Estate Inventory

Real estate inventory is carried at the lower of cost or net realizable value.
Net realizable value is defined as the estimated proceeds upon disposition less
all future costs to complete and expected costs to sell. Construction costs are
accumulated during the period of construction and charged to cost of sales under
specific identification methods. Land and land development costs are charged to
cost of sales under specific identification methods or are amortized to cost of
sales based upon the number of homes to be constructed in each community.

Interest costs related to projects in progress are capitalized during the
construction period and charged to cost of sales as the related inventories are
sold (see Note 5).

Land option costs are capitalized when incurred and either included as part of
the purchase price when the land is acquired or charged to operations to the
extent of any unrecoverable amount when the Company determines it will not
exercise the option.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, receivables, mortgage notes
and loans payable, accounts payable and accrued liabilities, and customer
deposits approximate fair value due to the short-term maturities or variable
interest rates of these instruments.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Depreciation

Depreciation is computed using the straight-line method for all depreciable
assets. Estimated useful lives range from two to five years. Maintenance and
repairs are charged to expense as incurred. Major renewals and improvements are
capitalized and depreciated over their estimated useful lives.

Stock-Based Compensation

The Company adopted Statement of Financial Accounting Standard ("SFAS") No. 123,
"Accounting for Stock-Based Compensation " during fiscal year 1997. The Company
has elected to continue to measure compensation costs using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
therefore the adoption of this statement did not have any effect on the
financial results of the Company (see Note 8).

                                       F-8

<PAGE>

Compensation expense related to common stock options issued to directors and
employees is recognized at the time the options are granted in an amount equal
to the excess of the current trading price of the common shares over the
option's exercise price.

Earnings per Share

In the fourth quarter of fiscal year 1998, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 128, "Earnings per Share". This
statement requires the computation and reporting of both "basic" and "diluted"
earnings per share.

"Basic earnings per share" is computed as net income divided by the weighted
average number of shares outstanding.

The following table provides a reconciliation between the weighted average
number of shares outstanding-basic and the weighted average number of shares
outstanding-diluted.

<TABLE>
<CAPTION>
                                                                                    Year Ended      
                                                                                     March 31,
                                                                   ---------------------------------------------
                                                                       1998            1997            1996
                                                                   -------------   -------------   -------------
<S>                                                                <C>             <C>             <C>      
Weighted average number of shares outstanding- basic                  2,785,576       2,765,025       2,724,395
Effect of dilutive equivalent shares                                        N/A          23,009          37,517
                                                                   =============   =============   =============
Weighted average number of shares outstanding-diluted                 2,785,576       2,788,034       2,761,912
                                                                   =============   =============   =============

Diluted net (loss) income per share                                      ($.25)            $.23            $.34
</TABLE>

The effect of dilutive equivalent shares is not applicable in 1998 because the
Company showed a net loss for this year. Potentially dilutive options and
warrants are described in Note 8.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company generally considers
all highly liquid instruments purchased with an original maturity of three
months or less to be cash equivalents.

New Accounting Pronouncements

During fiscal year 1998, the Company adopted the provisions of SFAS No. 129,
"Disclosure of Information about Capital Structure". The adoption of SFAS No.
129 did not have a material effect on the Company's financial statements.

                                       F-9

<PAGE>

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", which is effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for reporting and
display of comprehensive income and its components. The Company plans to adopt
SFAS No. 130 in fiscal year 1999 and the impact is not expected to be
significant.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which is
effective for fiscal years beginning after December 15, 1997. The Company plans
to adopt SFAS No. 131 in fiscal year 1999 and the impact is not expected to be
significant.

Fresh Start Reporting

The American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code". Pursuant to the guidance provided by SOP 90-7, the Company
adopted fresh start reporting as of August 12, 1992, and all assets and
liabilities were restated to reflect their reorganization value which
approximated their fair value at the date of reorganization. Due to these
adjustments combined with adjustments to write-down real estate inventory which
were recorded in prior periods, cost of home sales was $266,000 lower for the
year ended March 31, 1995, than it would have been had it been based on
previously recorded cost, and there are no differences for the years ended March
31, 1998, 1997 and 1996.

NOTE 3 - REAL ESTATE INVENTORY

Real estate inventory consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                            March 31, 1998         March 31, 1997
                                                                        ---------------------- ----------------------
<S>                                                                     <C>                    <C>     
  Accumulated costs of construction completed and in progress                        $ 10,286               $ 11,096
  Land and land development costs                                                      10,510                 10,822
  Land options and deposits                                                               168                    736
                                                                        ---------------------- ----------------------
                                                                                     $ 20,964               $ 22,654
                                                                        ====================== ======================
</TABLE>

From time to time as part of the normal operations of the business, the
subsidiaries of the Company have bought lots or land which the other subsidiary
of the Company was obligated to buy from a third party seller or which the other
subsidiary of the Company owned. Such transactions were at prices approximating
fair market value and were not material to the financial statements taken as a
whole.

                                      F-10

<PAGE>

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following (in
thousands):

<TABLE>
<CAPTION>

                                                                       March 31, 1998         March 31, 1997
                                                                    ---------------------  ---------------------
<S>                                                                 <C>                    <C>    
  Accounts payable - trade                                                       $ 2,488                $ 2,082
  Accrued liabilities                                                              2,158                  2,126
  Accrued estimated future cash distribution to creditors                          1,322                  1,322
                                                                    ---------------------  ---------------------
                                                                                 $ 5,968                $ 5,530
                                                                    =====================  =====================
</TABLE>

Accounts payable and accrued liabilities as of March 31, 1998 and March 31,
1997, include liabilities of approximately $41,000 and $42,000, respectively,
which represent cash to be distributed to the creditors pursuant to the Plan of
Reorganization (See Note 7) and accrued expenses related to the bankruptcy. The
accrued estimated future cash distribution to creditors is an estimate of future
cash distributions to creditors as defined by the Plan of Reorganization.

                                      F-11

<PAGE>

NOTE 5 - MORTGAGE NOTES AND LOANS PAYABLE

Mortgage notes and loans payable consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                             March 31, 1998       March 31, 1997
                                                                          -------------------- --------------------
<S>                                                                       <C>                  <C>     
  Acquisition and construction loans payable secured by real estate
    inventory, with interest at .50% to 1.50% above prime                          $ 11,246             $ 13,967
                                                                          ==================== ====================
</TABLE>

The weighted average principal amount outstanding during the year ended March
31, 1998 was $12,271,000. The maximum principal amount outstanding during the
year ended March 31, 1998 was $13,967,000. The weighted average interest rate
during the year ended March 31, 1998 was 9.10%. The weighted average interest
rate at March 31, 1998 was 9.0%. The prime rate of interest at March 31, 1998
was 8.50%.

Acquisition and construction loans payable at March 31, 1998 are due as follows
(in thousands):

                 Year Ending March 31, 1999            $ 11,246
                                                       ========

The acquisition and construction loans payable are principally payable from
sales proceeds, generally provide for extensions, and are all secured by real
estate inventory. As of March 31, 1998, the Company had $16,547,000 of undrawn
commitments for additional construction and land acquisition financing. Interest
on the acquisition and construction loans payable is payable monthly.

The Company's loan commitments limit the portion of each home that can be
financed to approximately 75% of its value.

The Company capitalized interest of $1,153,000, $1,373,000 and $1,150,000 for
the years ended March 31, 1998, 1997 and 1996, respectively.

NOTE 6 - INCOME TAXES

The Company has adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No.
109 is an asset and liability approach that requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
In estimating future tax consequences, SFAS No. 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.

                                      F-12

<PAGE>

The income tax (benefit) provision consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                      Year Ended March 31,
                                              -------------------------------------------------------------------
                                                      1998                   1997                   1996
                                              ---------------------- ---------------------- ---------------------
<S>                                           <C>                    <C>                     <C> 
Current
    Federal                                                  ($105)                  $ 280                   $  -
    State                                                        73                     69                     60
                                              ---------------------- ---------------------- ---------------------
                                                               (32)                    349                     60
                                              ---------------------- ---------------------- ---------------------
Deferred
    Federal                                                   (348)                   (69)                      -
    State                                                         -                      -                      -
                                              ---------------------- ---------------------- ---------------------
                                                              (348)                   (69)                      -
                                              ---------------------- ---------------------- ---------------------
(Benefit) provision for income taxes                         ($380)                  $ 280                   $ 60
                                              ====================== ====================== =====================
</TABLE>

The (benefit) provision for income taxes at an effective rate of 35% differs
from the Federal statutory corporate tax rate as follows (in thousands):

<TABLE>
<CAPTION>

                                                                      Year Ended March 31,
                                              -------------------------------------------------------------------
                                                      1998                   1997                   1996
                                              ---------------------- ---------------------- ---------------------
<S>                                           <C>                    <C>                    <C> 

  Federal income tax at 34% statutory rate                   ($393)                  $ 316                 $ 341
  State income tax, net of Federal benefit                       48                     37                    40
  Taxes applicable to loss carryforwards                       (51)                   (82)                 (418)
  Changes in temporary differences                              142                     69                    90
  Reduction in valuation allowance                            (257)                   (82)                 (328)
  Other                                                         131                     22                   335
                                              ---------------------- ---------------------- ---------------------
                                                             ($380)                  $ 280                 $  60
                                              ====================== ====================== =====================
</TABLE>

                                      F-13

<PAGE>

Temporary differences and carryforwards which give rise to a significant portion
of deferred tax assets and liabilities for March 31, 1998 and 1997 are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                 Deferred Expense
                                                          March 31, 1997           (Benefit)           March 31, 1998
                                                       ---------------------  --------------------  ---------------------
<S>                                                    <C>                    <C>                   <C>    
  Differences in the tax basis and the book basis of -
  Inventory                                                          $ (39)               $  (15)                $  (54)
  Installment sales                                                     189                  (10)                    179
  Other                                                               (280)                 (117)                  (397)
  Loss carryforwards                                                  (508)                    51                  (457)
  Valuation allowance                                                   569                 (257)                    312
                                                       ---------------------  --------------------  ---------------------
  Net Deferred Tax Asset                                             $ (69)               $ (348)                $ (417)
                                                       =====================  ====================  =====================
</TABLE>

At March 31, 1998, the Company had Federal income tax loss carryforwards of
approximately $1,400,000 that become available at approximately $150,000 per
year through 2008. The Company has provided a valuation allowance on the net
deferred tax assets which primarily results from the restricted use of net
operating loss carryforwards.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The consolidated financial statements for the year ended March 31, 1998 include
a restructuring charge of $1,840,000 ($1,214,000 after benefit for federal
income tax) associated with the termination of home-building operations in
Metropolitan Washington, D.C. The Company believes that it has sufficient cash
flow and cash on hand to absorb the restructuring charge.

At March 31, 1998, the Company had commitments to purchase 297 finished building
lots, providing for an aggregate purchase price of approximately $7,277,000 over
a four-year period. Substantial deposits will be forfeited if the Company is
unable to satisfy these commitments.

Suarez Housing Corporation, a subsidiary of the Company, has an employment
agreement with the Company's Chairman and President expiring August 12, 2001,
currently providing for base compensation of $305,864 per annum.

At March 31, 1998, the Company had open letters of credit and guarantees
totaling approximately $647,000 to secure performance obligations.

The Company currently occupies office space and leases model home furniture
under operating lease agreements expiring at various dates through fiscal year
2000. The Company also leases storage space on a month-to-month basis. The total
rental expense incurred under these leases was $349,000, $299,000, and $275,000
for the years ended March 31, 1998, 1997, and 1996, respectively.

                                      F-14

<PAGE>

The future minimum rental payments under these operating leases as of March 31,
1998 are as follows:

             Year Ending March 31, 1999                    $106,000
             Year Ending March 31, 2000                      27,000
                                                    ================
             Total                                         $133,000
                                                    ================

The Plan of Reorganization provides for distributions equal to 50 percent of
future cash flows (as defined in the Plan), if any, for the periods ending June
30, 1993 through June 30, 1998. The Company has calculated the cash flow (as
defined in the Plan) for the period ended June 30, 1997 and has determined that
there was no excess cash flow (as defined in the Plan) for that period and
accordingly no distribution to creditors was required. Based on the Company's
preliminary projections, it is anticipated that there will be no excess cash
flow (as defined in the Plan) for the period ending June 30, 1998 and
accordingly no distribution to creditors is expected to be required. During the
year ended March 31, 1993, the Company estimated the initial liability for these
potential distributions in the amount of $1,322,000 and such amount is included
in Accounts Payable and Accrued Liabilities on the accompanying consolidated
balance sheets (See Note 4).

Under the Company's Plan of Reorganization, the payment of dividends is not
permitted during the six-year period beginning August 13, 1992. The Plan also
provides that after August 12, 1998, the Company may not pay any cash dividends
to stockholders until it has first paid an additional $1,250,000 to its
creditors.

The Company's Plan of Reorganization does not permit the subsidiaries of the
Company to pay any dividends to the parent company. The Plan further restricts
the Company and its subsidiaries from acquiring debt securities from or loaning
or advancing any money to any other party except in the ordinary course of
business. The net assets at March 31, 1998 of the Company's two subsidiaries are
as follows (in thousands):

                                                       Net Assets at
                                                      March 31, 1998
                                                        (Unaudited)
                                                   ---------------------
 Porten Sullivan Corporation                                     $  209
 Suarez Housing Corporation                                       5,455

The Company is currently involved in litigation brought by a former officer of
its Washington, D.C. subsidiary. The Company has filed a counterclaim against
the former officer and is vigorously defending all claims. Due to the
uncertainty of the outcome of this litigation, no provision related to either
claim has been made in the accompanying Consolidated Financial Statements.
However, under any circumstances, there would be no material adverse effect on
the Consolidated Financial Statements. The Company believes that the claim is
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's financial position or the results of operations.

                                      F-15

<PAGE>

NOTE 8 - COMMON STOCK AND STOCK OPTIONS

At the 1994 Annual Meeting of Stockholders, which was held on September 13,
1994, the stockholders approved a proposal to adopt certain amendments to the
Company's Restated Certificate of Incorporation (i) to effect a 1-for-10 reverse
stock split of the Company's issued and outstanding common stock and (ii) to
change the number of authorized shares of common stock from 30 million to 10
million. The Amendments did not change the par value of the common stock, which
remained at $.01 per share. The Amendments became effective on May 31, 1995 with
the filing of a Certificate of Amendment with the Secretary of State of Delaware
on May 31, 1995. The effect of the Reverse Stock Split has been retroactively
reflected in the statements for all periods presented.

On February 13, 1997, an option for 100,000 shares of common stock at a purchase
price of $1.31 per share was granted to the Chairman and President of the
Company. The exercise price equals the market price on the date of grant. The
option is exercisable over a four-year period commencing one year after the date
granted on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each
year subsequent to the grant date. All shares must be purchased by February 12,
2007.

On August 11, 1997, an option for 50,000 shares of common stock at a purchase
price of $1.50 per share was granted to the Executive Vice President of the
Company. The exercise price equals the market price on the date of grant. The
option is exercisable over a four-year period commencing one year after the date
granted on a cumulative basis of 10%, 30%, 60% and 100%, respectively, for each
year subsequent to the grant date. All shares must be purchased by August 10,
2007.

The Company has a Non-Qualified Stock Option Plan for which 150,000 shares of
common stock have been reserved for issuance under this plan. All grants of
options pursuant to this plan must be approved by the Board of Directors and the
exercise price equals the market price at the date of grant. On February 9,
1993, pursuant to this plan, certain key employees of the Company were granted
options to purchase 11,000 shares of common stock. These options expired on
February 9, 1998 and 9,000 shares were issued prior to expiration. In addition,
on November 9, 1993, pursuant to this plan, the Company's former Executive Vice
President, who retired on May 12, 1995, was granted options to purchase 10,000
shares of common stock. These options were exercised in full on May 12, 1996.
There are 129,000 shares available to be issued pursuant to the Non-Qualified
Stock Option Plan.

At the 1995 Annual Meeting of Stockholders, which was held on September 12,
1995, the stockholders approved a proposal to adopt a Non-Employee Directors
Stock Option Plan. Pursuant to the Non-Employee Directors Stock Option Plan,
options to purchase 5,000 shares of common stock were granted to each of the
Company's non-employee Directors. Four Directors received options to purchase
5,000 shares each in June 1995, two Directors received options to purchase 5,000
shares each in September 1995 and one Director received an option to purchase
5,000 shares in September 1996 upon election as a Director. These options are
exercisable 33% one year from the date of grant, 33% two years from the date of
grant, and 34% 

                                      F-16

<PAGE>

three years from the date of grant. All options expire 5 years from the date of
grant. All options granted must be approved by the Board of Directors and
exercise price equals market at the date of grant.

A summary of the status of the Company's stock option plans and options granted
at March 31, 1998, 1997 and 1996 and changes during the years then ended is
presented in the table and narrative below:

<TABLE>
<CAPTION>
                                     1998 Fiscal Year                 1997 Fiscal Year                 1996 Fiscal Year
                              -------------------------------- -------------------------------- -------------------------------
                                                  Weighted                         Weighted                         Weighted
                                                  Average                          Average                          Average
                                                  Exercise                         Exercise                         Exercise 
                                  Shares           Price           Shares           Price            Shares          Price
                              ---------------  --------------- ---------------  --------------- --------------- ---------------
<S>                           <C>              <C>             <C>              <C>             <C>             <C>  
Outstanding,
beginning of period                  145,000            $1.30         100,000            $0.82          70,000           $0.52
Granted                               50,000            $1.50         105,000            $1.31          30,000           $1.54
Exercised                            (6,500)           ($.50)        (60,000)          ($0.52)               -               -
Expired                              (3,500)           ($.50)               -                -               -               -
                              ---------------                  ---------------                  ---------------
Outstanding, end of period           
                                     185,000            $1.40         145,000            $1.30         100,000           $0.82
                              ===============                  ===============                  ===============
Exercisable at end of         
period                                41,650            $1.48          29,800            $1.19          75,900           $0.65
Weighted average fair                 
value of options granted              50,000            $1.50         105,000            $1.30          30,000           $1.43
</TABLE>

The 185,000 options outstanding at March 31, 1998 have exercise prices between
$1.00 and $1.81, with a weighted average exercise price of $1.40 and a weighted
average remaining contractual life of 7.79 years. There are 41,650 of these
options exercisable with a weighted average exercise price of $1.48.

The fair value of each option grant is estimated on the date of grant using the
Black- Scholes option pricing model with the following weighted average
assumptions used for grants in fiscal years 1998, 1997 and 1996, respectively:
risk-free rates of return of 6.36%, 6.42% and 6.00%; expected dividend yields of
0.00%, 0.00%, and 0.00%; expected lives of 10 years, 9.76 years and 5.0 years
and expected volatility of 101.03%, 153.45% and 153.45%.

                                      F-17

<PAGE>

The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had the compensation cost for these plans
been determined consistent with SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:

                                                    Year Ended March 31,
                                             1998           1997         1996
                                             ----           ----         ----

Net (loss) income:        As Reported    ($704,000)      $650,000     $943,000

                          Pro Forma      ($777,000)      $582,000     $917,000

Basic net (loss)          As Reported       ($0.25)         $0.24        $0.35
income per share:
                          Pro Forma         ($0.28)         $0.21        $0.34


NOTE 9 - CONDENSED FINANCIAL STATEMENTS OF CONSOLIDATED FINANCE SUBSIDIARIES

The Company's wholly-owned finance subsidiaries were established to sell
collateralized mortgage obligations through participation in various
multi-builder bond programs. In these sales, which last occurred in 1987, the
Company originated and pooled mortgage loans which were then pledged as
collateral for bonds payable. The interest rates on the mortgage loans which
comprise the collateral for bonds payable, roughly equate with the interest
rates on the related bonds payable.

                                      F-18

<PAGE>

Condensed financial information is as follows (in thousands):

                            Condensed Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        March 31, 1998         March 31, 1997
                                                    ---------------------- ----------------------
<S>                                                 <C>                    <C>    
  Assets:
      Collateral for bonds payable                                $ 4,500                $ 4,972
      Other assets                                                      6                     13
                                                    ---------------------- ----------------------
      Total Assets                                                $ 4,506                $ 4,985
                                                    ====================== ======================
  Liabilities and Equity:
      Bonds payable                                               $ 4,341                $ 4,800
      Equity and intercompany advances                                165                    185
                                                    ---------------------- ----------------------
      Total Liabilities and Equity                                $ 4,506                $ 4,985
                                                    ====================== ======================
</TABLE>

                         Condensed Statements of Income
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       Year Ended March 31,
                                                --------------------------------------------------------------------
                                                        1998                   1997                    1996
                                                ---------------------- ---------------------- ----------------------
<S>                                             <C>                    <C>                    <C> 
  Revenues                                                       $423                   $483                   $647
                                                ====================== ====================== ======================
  Income before income taxes                                     $  7                   $ 12                   $ 17
                                                ====================== ====================== ======================
</TABLE>

                                      F-19

<PAGE>

NOTE 10 - RELATED PARTY TRANSACTIONS

The Company's Chairman and President has personally guaranteed bank loans in the
aggregate maximum amount of $13,700,000 for Suarez Housing Corporation, a
subsidiary of the Company, at a fee of one percent of the amount guaranteed, not
to exceed $80,000 per year. At March 31, 1998, the outstanding principal amount
of loans guaranteed by the Company's Chairman and President was $3,766,000. The
Company has agreed to indemnify the President and Chairman in the event that
this personal guarantee is called.

The Chairman and President of the Company is a one-third partner in a
partnership from which the Company bought 28 finished building lots during the
year ended March 31, 1997 for $764,000, a price which approximates fair market
value.

A member of the Board of Directors is Vice President and Director of a company
which during the year ended March 31, 1998 sold lumber and certain other
building material products in the amount of approximately $3,711,000 to Suarez
Housing Corporation, a subsidiary of the Company. Suarez Housing Corporation
purchases all of its requirements for those products from this company.

Another member of the Board of Directors is Executive Vice President of a
company which during the year ended March 31, 1998 sold heating, ventilating and
air conditioning systems in the amount of approximately $459,000 to Porten
Sullivan Corporation, a subsidiary of the Company. Porten Sullivan Corporation
purchases all of its requirements for heating, ventilating and air conditioning
systems from this company.

Mr. Peter A. Davis, a member of the Compensation Committee of the Board of
Directors, has served as a consultant to the Company since November 1992. The
Company entered into a one-year consulting agreement with Mr. Davis commencing
November 1, 1992. This agreement was subsequently renewed under similar terms
and conditions for four additional one-year terms which expire on November 1,
1998. The agreement provides for Mr. Davis to assist the Company in a broad
range of areas. Mr. Davis receives compensation at the rate of $1,000 per day
with a minimum compensation of $42,000 per year. During the fiscal year ended
March 31, 1998, the Company paid $60,000 to Mr. Davis for his consulting
services.

Mr. James G. Farr, a Director, is the sole stockholder and President and Chief
Executive Officer of Paramount Title Corporation. During the years ended March
31, 1998, 1997 and 1996 Paramount Title Corporation provided settlement and
title insurance services for substantially all the homes sold by Suarez Housing
Corporation.

During the year ended March 31, 1998 an officer of the Company entered into a
contract to purchase 2 lots from Porten Sullivan Corporation at a price which
approximates fair market value.

                                      F-20

<PAGE>

NOTE 11 - RESTRUCTURING CHARGE

During the past several years a competitive housing market in Metropolitan
Washington, D.C., especially in the areas in which the Company conducted home
building operations, resulted in continued operating losses in the Company's
Metropolitan Washington, D.C. subsidiary. Management changes were made and
administrative costs were reduced in order to minimize the loss. In addition,
several communities in which operations had been performing poorly were
abandoned. Notwithstanding those changes, lower operating margins and higher
selling expenses continued to adversely affect the Company's ability to restore
profitability in the Metropolitan Washington, D.C. market. Accordingly during
the quarter ended December 31, 1997 the Board of Directors of the Company
approved management's plan to discontinue the building and sale of homes and
affect an orderly withdrawal from the Metropolitan Washington, D.C. housing
market.

The consolidated financial statements for the year ended March 31, 1998 include
a restructuring charge of $1,840,000 ($1,214,000 after benefit for federal
income tax) associated with the termination of home-building operations in
Metropolitan Washington, D.C.. The restructuring charge of $1,840,000 includes
the following: $701,000 for selling expenses; $277,000 for write-off of deferred
charges; $327,000 for loss on remaining homes; and $535,000 for administrative
and other. $427,000 of the restructuring charge is included in Accounts Payable
and Accrued Liabilities. The Company believes that it has sufficient cash flow
and cash on hand to absorb the restructuring charge.

                                      F-21