U.S. SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                 FORM 10-KSB/A
(Mark One)


/X/      QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934

For the year ended March 31, 1998
                   --------------

/ /      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________ to ________

Commission file number 0-5097
                       ------

                           UNITED VANGUARD HOMES, INC.
--------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)


            Delaware                                    11-2032899
-----------------------------------            ---------------------------------
(State or Other Jurisdiction of                (IRS Employer Identification
 Incorporation or Organization)                            Number)


                  4 Cedar Swamp Road, Glen Cove, New York 11542
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)


                                 (516) 759-1188
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)


         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days.
 Yes / / No / /

         State the number of shares  outstanding of each of the issuer's classes
of common equity,  as of the latest  practicable  date: At March 31, 1999, there
were outstanding  3,313,265 shares of the  Registrant's  Common Stock,  $.01 par
value.

              Transitional Small Business Disclosure Format:

                                 Yes / / No /X/
<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  on the 10th day of
August 1999.

                                         UNITED VANGUARD HOMES, INC.
                                         (Registrant)

                                         By: /S/ CARL G. PAFFENDORF
                                             -----------------------------------
                                             Name:   Carl G. Paffendorf
                                             Title:  Chairman of the Board and
                                                     Chief Executive Officer



     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.


    SIGNATURES                        TITLE                      DATE


/S/ PAUL D'ANDREA             Vice President - Finance        August 9, 1999
-------------------------     (Principal Financial
Paul D'Andrea                 Officer and Principal
                              Accounting Officer)

           *                  Director                        August 9, 1999
-------------------------
Benjamin Frank


           *                  Director                        August 9, 1999
-------------------------
Francis S. Gabreski


/S/ CARL G. PAFFENDORF        Chairman of the Board           August 9, 1999
-------------------------     and Chief Executive
Carl G. Paffendorf            Officer


/S/ ROBERT S. HOSHINO, JR.    Director                        August 9, 1999
-------------------------
Robert S. Hoshino, Jr.


           *                  Director                        August 9, 1999
-------------------------
James E. Eden



*By: /S/ CARL G. PAFFENDORF
     ----------------------
     Attorney-in-fact

<PAGE>
                                 C O N T E N T S


                                                                            Page


Report of Independent Certified Public Accountants                          F-2


Financial Statements

      Consolidated Balance Sheets                                           F-3

      Consolidated Statements of Operations                                 F-5

      Consolidated Statement of Stockholders' Deficiency                    F-6

      Consolidated Statements of Cash Flows                                 F-7

      Notes to Consolidated Financial Statements                      F-8 - F-31



                                      F-1

<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




Board of Directors
     United Vanguard Homes, Inc.

We have audited the accompanying  consolidated balance sheets of United Vanguard
Homes,  Inc.  and  Subsidiaries  as of March 31,  1997 and 1998 and the  related
consolidated statements of operations,  stockholders' deficiency, and cash flows
for the years then ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
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 financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of United Vanguard
Homes, Inc. and Subsidiaries as of March 31, 1997 and 1998, and the consolidated
results of their operations and their consolidated cash flows for the years then
ended, in conformity with generally accepted accounting principles.





Melville, New York
October 1, 1998 (except for Note E,
   as to which the date is May 6, 1999)

                                      F-2
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                    March 31,


<TABLE>
<CAPTION>


                                  ASSETS                       1997              1998
                                                               ----              ----


CURRENT ASSETS
<S>                                                         <C>              <C>
     Cash                                                   $  202,924       $  256,188
     Accounts receivable, less allowance for doubtful
         accounts of $40,000 in 1997 and 1998                  547,812          620,627
     Development fees and advances                                              981,000
     Due from affiliates, net                                  267,607          179,552
     Prepaid expenses and other                                518,393          177,123
                                                            ----------       ----------

               Total current assets                          1,536,736        2,214,490






PROPERTY AND EQUIPMENT, NET                                  2,276,651        2,110,610






OTHER ASSETS
     Development fees and advances                             795,500
     Restricted assets                                          99,600          108,352
     Deferred income taxes
     Other assets                                              176,437          203,161
                                                            ----------       ----------

                                                             1,071,537          311,513
                                                            ----------       ----------

                                                            $4,884,924       $4,636,613
                                                            ==========       ==========
</TABLE>




                                      F-3


The accompanying notes are an integral part of these statements.


<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                    March 31,

<TABLE>
<CAPTION>

                             LIABILITIES AND
                        STOCKHOLDERS' DEFICIENCY                    1997                1998
                                                                    ----                ----

CURRENT LIABILITIES
<S>                                                          <C>                 <C>
     Current portion of long-term debt                       $    264,918        $    661,466
     Accounts payable                                             487,758             350,244
     Accrued expenses                                             660,084             568,511
     Public offering costs                                        587,000             328,641
     Income taxes payable                                         190,749             156,316
                                                             ------------        ------------

               Total current liabilities                        2,190,509           2,065,178


RESIDENT SECURITY DEPOSITS                                        284,526             282,300


LONG-TERM DEBT, less current portion                            6,334,265           5,946,281


COMMITMENTS AND CONTINGENCIES


STOCKHOLDERS' DEFICIENCY
     Preferred stock $.001 par value; 1,000,000 shares
         authorized; none issued and outstanding
     Common stock  $.01 par value;  authorized,
         14,000,000 shares;  issued and outstanding,
         3,320,950 shares and 3,309,890 shares in
         1997 and 1998, respectively                               33,210              33,099
     Additional paid-in capital                                 7,043,226           6,998,957
     Accumulated deficit                                      (11,000,812)        (10,689,202)
                                                             ------------        ------------

                                                               (3,924,376)         (3,657,146)
                                                             ------------        ------------

                                                             $  4,884,924        $  4,636,613
                                                             ============        ============
</TABLE>






The accompanying notes are an integral part of these statements.

                                      F-4
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                              Year ended March 31,

<TABLE>
<CAPTION>

                                                         1997                1998
                                                         ----                ----


Operating revenues
<S>                                                 <C>                <C>
     Resident services                              $ 4,999,025        $ 4,704,992
     Health care services                             2,682,928          2,763,104
     Management fees                                     60,000            120,000
     Development fees                                   220,480            185,500
                                                    -----------        -----------

                                                      7,962,433          7,773,596

Operating expenses
     Residence operating expenses                     6,156,088          6,196,474
     General and administrative                         881,784          1,076,327
     Depreciation and amortization                      277,096            273,463
     Provision for (recovery of) loss
        on advances to affiliates                       218,146           (351,396)
                                                    -----------        -----------

                                                      7,533,114          7,194,868
                                                    -----------        -----------

            Income from operations                      429,319            578,728

Other income (expense)
     Interest expense, net                             (592,552)          (560,163)
     Other income                                       123,489             99,109
     Debt conversion expense                           (156,466)              --
     Public offering costs                           (1,170,344)              --
     Adjustment of public offering costs                                   265,818
                                                    -----------        -----------

                                                     (1,795,873)          (195,236)
                                                    -----------        -----------

            (Loss) income before income taxes        (1,366,554)           383,492

Income taxes                                            668,000             71,882
                                                    -----------        -----------

            NET (LOSS) INCOME                       $(2,034,554)       $   311,610
                                                    ===========        ===========

Net (loss) income per common share
            Basic                                   $      (.81)       $       .09
                                                    ===========        ===========

            Diluted                                        (.81)               .09
                                                    ===========        ===========

Weighted-average common shares and
  common equivalent shares outstanding
            Basic                                     2,506,511          3,307,214
                                                    ===========        ===========

            Diluted                                   2,506,511          3,341,414
                                                    ===========        ===========
</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY

                       Years ended March 31, 1997 and 1998

<TABLE>
<CAPTION>

                                                                                 Additional
                                                                                   paid-in           Accumulated
                                              Shares            Amount             capital             deficit           Total

<S>                                        <C>              <C>                <C>                <C>                 <C>
Balance, April 1, 1996                     1,827,833        $    18,278        $ 5,619,905        $ (8,966,258)       $(3,328,075)

Shares issued upon conversion
   of debt                                   347,996              3,480          1,386,918                             1,390,398
Exercise of warrants                          62,121                622            206,452                               207,074
Shares issued as compensation                  3,000                 30              2,751                                 2,781
Shares reissued to VVI
   previously cancelled
   conditional on completion of
   public offering                         1,080,000             10,800            (10,800)
Allocation of Federal tax
   attributed to Parent company                                                   (162,000)                             (162,000)
Net loss                                                                                            (2,034,554)       (2,034,554)
                                          ----------        -----------        -----------        ------------        -----------

Balance, March 31, 1997                    3,320,950             33,210          7,043,226         (11,000,812)        (3,924,376)

Shares purchased and simultaneously
   retired                                   (19,600)              (196)           (69,804)                               (70,000)
Shares issued as compensation                  8,540                 85             25,535                                 25,620
Net income                                                                                             311,610            311,610
                                          ----------        -----------        -----------        ------------        -----------

Balance, March 31, 1998                    3,309,890        $    33,099        $ 6,998,957        $(10,689,202)       $(3,657,146)
                                          ==========        ===========        ===========        ============        ===========
</TABLE>





The accompanying notes are an integral part of this statement.

                                      F-6
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                              Year ended March 31,
<TABLE>
<CAPTION>

                                                                                           1997             1998
                                                                                           ----             ----

Cash flows from operating activities
<S>                                                                                    <C>                <C>
     Net (loss) income                                                                 $(2,034,554)       $ 311,610
     Adjustments to reconcile net (loss) income to net
         cash (used in) provided by operating activities
              Depreciation and amortization                                                277,096          273,463
              Debt conversion expense                                                      156,466
              Common stock issued for services                                               2,781           25,620
              Income taxes                                                                 669,000
              Changes in operating assets and liabilities
                  Accounts receivable, advances and other
                     receivables                                                           256,837           22,957
                  Prepaid expenses and other                                              (243,739)         357,836
                  Development fees and advances                                             50,381         (185,500)
                  Other assets                                                             (25,591)          (7,358)
                  Accounts payable                                                          52,001         (137,514)
                  Accrued expenses and public offering costs                               780,041         (357,649)
                  Income taxes payable                                                    (251,622)         (34,433)
                  Resident security deposits                                               (30,179)          (2,226)
                                                                                       -----------        ---------
            Net cash (used in) provided by operating
               activities                                                                 (341,082)         266,806
                                                                                       -----------        ---------
Cash flows from investing activities
     Purchases of property and equipment                                                  (129,851)         (47,339)
                                                                                       -----------        ---------

            Net cash used in investing activities                                         (129,851)         (47,339)
                                                                                       -----------        ---------
Cash flows from financing activities
     Proceeds from borrowings on mortgages and
        notes payable                                                                      450,000          225,000
     Principal repayments of mortgages and notes payable                                  (270,214)        (312,451)
     Decrease (increase) in restricted cash financing                                       76,752           (8,752)
     Proceeds from exercised warrants                                                      207,074
     Common stock purchased and simultaneously retired                                                      (70,000)
                                                                                       -----------        ---------
            Net cash provided by (used in) financing activities                            463,612         (166,203)
                                                                                       -----------        ---------
            NET (DECREASE) INCREASE IN CASH                                                 (7,321)          53,264
Cash at beginning of year                                                                  210,245          202,924
                                                                                       -----------        ---------
Cash at end of year                                                                    $   202,924        $ 256,188
                                                                                       ===========        =========
Supplemental disclosures of cash flow information:
     Cash paid during the year for
         Interest                                                                      $   612,000        $ 529,529
                                                                                       ===========        =========
         Income taxes                                                                  $   112,000        $  85,138
                                                                                       ===========        =========
</TABLE>

Schedule of noncash investing and financing activities:
   During  1997and 1998,  the Company  entered into capital leases for furniture
   and equipment  aggregating  $47,591 and $48,136,  respectively.  During 1997,
   debt of $1,390,398 was converted to equity.

The accompanying notes are an integral part of these statements.

                                      F-7
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             March 31, 1997 and 1998



NOTE A - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
                        ACCOUNTING POLICIES

      1.    Business

            United  Vanguard Homes,  Inc.  ("UVH") (the "Company") is a Delaware
            corporation  which was originally formed in New York in 1964 as Coap
            Systems Inc. ("Coap") and is a majority-owned subsidiary of Vanguard
            Ventures,  Inc.  ("VVI").  UVH owns and operates  three  residential
            retirement centers in the State of Michigan,  which provide assisted
            living  services  for  residents  on  a  month-to-month  basis.  The
            facilities  are known as Olds Manor,  Hillside  Terrace and Whitcomb
            Tower. In addition, UVH, through wholly-owned subsidiaries, provides
            management and development  services for affiliated and unaffiliated
            companies.

      2.    Liquidity

            As of March 31, 1998, the Company had a deficiency in  Stockholders'
            Equity of $3,657,146 and has limited working  capital.  In addition,
            approximately  $5,000,000  of mortgage  debt is due  November  1999.
            Further,  the  Company's  lack of working  capital  has  limited the
            Company's ability to pursue its development projects. The Company is
            presently  pursuing various strategies to increase available working
            capital,  including (i)  refinancing  a  substantial  portion of the
            Company's  mortgage  indebtedness  and (ii) a sale of a  substantial
            portion of the Company's  operating and  development  projects which
            would allow the Company to pursue other  development  opportunities.
            The  Company  has  received  a letter  of intent  to  refinance  the
            Company's  mortgage  indebtedness and has received several offers to
            purchase a substantial portion of the Company's properties. Although
            there can be no assurance that any of the above  strategies  will be
            successful,  the Company  believes that the underlying  value of its
            properties  will allow the  Company to  successfully  implement  its
            strategies.


                                      F-8
<PAGE>

                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE A (continued)

      3.    Principles of Consolidation

            The consolidated  financial  statements  include the accounts of UVH
            and  its  wholly-owned  subsidiary  corporations.   All  significant
            intercompany  balances  and  transactions  have been  eliminated  in
            consolidation.

      4.    Restricted Assets

            Restricted  assets at March 31,  1998  consists  of cash of $108,352
            that collateralizes an insurance bond required by Michigan State law
            for resident  security  deposits.  In addition,  restricted use cash
            accounts totaling  approximately  $107,000 and $151,000 and included
            in other assets at March 31, 1997 and 1998, respectively,  have been
            segregated  pursuant to the terms of certain mortgage  indebtedness,
            which requires the net operating income of the Company's residential
            retirement   centers,  as  defined,  to  be  used  to  fund  capital
            improvements and the related mortgage indebtedness.

      5.    Property and Equipment

            Property  and  equipment   are  stated  at  cost  less   accumulated
            depreciation.  Depreciation  is  computed  using  the  straight-line
            method over the  estimated  useful lives of the related  assets,  as
            follows:

                     Buildings and improvements           10 to 30 years
                     Equipment                            12-1/2 years
                     Vehicles                             3 years
                     Furniture and office equipment       5 to 7 years

      6.    Income Taxes

            The  Company is  included  in the  consolidated  Federal  income tax
            return of VVI. It is the policy of VVI to allocate  income  taxes to
            the  Company  pro  rata on a  separate  return  basis,  charging  or
            crediting  the Company  with its  proportionate  share of expense or
            reduction in taxes.


                                      F-9
<PAGE>

                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE A (continued)

            Deferred  income  taxes are  recognized  for  temporary  differences
            between  financial  statement  and  income  tax bases of assets  and
            liabilities and loss carryforwards for which income tax benefits are
            expected to be realized in future years.  A valuation  allowance has
            been  established  to reduce the deferred tax assets,  as it is more
            likely than not,  that a portion or all of such  deferred tax assets
            will not be  realized.  The effect on deferred  taxes of a change in
            tax rates is  recognized  in income in the period that  includes the
            enactment date.

      7.    Per Share Information

            In June 1996,  the Company  approved a  1-for-1.6667  reverse  stock
            split and all share and per share  amounts  have been  retroactively
            restated.  In addition,  as a result of the Company  terminating its
            proposed public offering,  certain shares  previously  excluded from
            earnings per share have been retroactively reinstated.

            Basic  earnings  (loss)  per  common  share is  computed  using  the
            weighted  average  number of common  shares  outstanding  during the
            period.  Diluted  earnings  per common  share is computed  using the
            combination of dilutive  common share  equivalents  and the weighted
            average  number of common  shares  outstanding  during  the  period.
            Incremental  shares of 24,200  during the year ended  March 31, 1998
            were used in the  calculation of diluted  earnings per common share.
            Diluted  loss per common  share for the year ended March 31, 1997 is
            based  only  on  the  weighted   average  number  of  common  shares
            outstanding  during the period,  as the  inclusion of 27,792  common
            share equivalents would have been antidilutive.

      8.    Stock-Based Compensation

            Statement  of  Financial  Accounting  Standards  No.  123 ("SFAS No.
            123"),  "Accounting for Stock-Based  Compensation," has been adopted
            and  allows  for a  choice  of the  method  of  accounting  used for
            stock-based  compensation.  Entities may use the  "intrinsic  value"
            method  currently based on APB No. 25 or the new "fair value" method
            contained  in SFAS No. 123.  The Company  accounts  for  stock-based
            compensation  under APB No. 25. As required by SFAS No. 123, the pro
            forma  effects on net income and earnings  per share are  determined
            and  disclosed in the notes to the  financial  statements  as if the
            fair value based method had been applied.


                                      F-10

<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE A (continued)

      9.    Revenue Recognition

            Revenues from services provided to residents, including, among other
            things,   room  and   board  and   health   care,   are   recognized
            contemporaneously  with the providing of said services and are shown
            in  the  accompanying   consolidated  financial  statements  net  of
            charitable and Supplemental Security Income discounts.

            Charitable  discounts result from the reduction of occupancy charges
            for qualified  residents to an amount equal to their ability to pay.
            Supplemental  Security  Income  ("SSI")  discounts  result  from the
            reduction of occupancy  charges for  qualified  residents to the net
            amount paid by the SSI program.  The discount amount is equal to the
            difference between the standard apartment rental fee (including meal
            and  housekeeping  charges)  and the amount  that is paid by the SSI
            program.

            Management  fee  revenues  are  recognized  monthly,  based  upon  a
            contractual rate of compensation.

            Fee income to which the Company is entitled in  connection  with the
            development  of  residential  retirement  centers it does not own is
            recognized  on  the  percentage-of-completion   basis.  The  Company
            accrues in full, as soon as determinable, any losses that arise from
            contracts for project development.

      10.   Financial Instruments and Concentrations of Credit Risk

            Financial  instruments  which  potentially  subject  the  Company to
            concentrations  of credit risk are primarily  cash and  receivables.
            The  Company   maintains   its  cash  in  highly   rated   financial
            institutions  and limits the  amount of credit  exposure  to any one
            institution.  The Company has no bank deposits  exceeding  federally
            insured  limits.  Concentration  of  credit  risk  with  respect  to
            accounts  receivable is generally  mitigated as management  believes
            its  acceptance,  billing and  collection  policies  are adequate to
            minimize potential credit risk.

            The Company's  financial  instruments  recorded on the balance sheet
            include  cash,  accounts  receivable,  accounts  payable,  and debt.
            Because of their  short  maturities,  the  carrying  amount of cash,
            accounts  receivable and accounts payable  approximates  fair market
            value. The fair value of the Company's  long-term debt  approximates
            carrying value based on quoted market prices of similar issues or on
            the current rates offered to the Company for debt of similar terms.

            A  concentration  of credit risk exists with respect to  development
            fees and advances and amounts due from affiliates.

                                      F-11

<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE A (continued)

     11.    Use of Estimates and Other Matters

            In preparing  financial  statements  in  conformity  with  generally
            accepted  accounting  principles,  management  is  required  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,  as well as the  reported
            amounts of revenues and expenses during the reporting period. Actual
            results could differ from those estimates.

            During  fiscal  1997,  the Company  recorded a charge to earnings of
            $1,170,344  representing  the total  estimated  costs of its aborted
            public  offering.  During  fiscal  1998,  the  Company  revised  its
            estimate to reflect actual costs incurred and, accordingly, recorded
            other income of $265,818.

      12.   Future Effects of Recently Issued Accounting Pronouncements

            In June  1997,  the  Financial  Accounting  Standards  Board  issued
            Statement  of Financial  Accounting  Standards  No. 130,  "Reporting
            Comprehensive  Income" ("SFAS No. 130"),  and Statement of Financial
            Accounting  Standards  No. 131,  "Disclosures  About  Segments of an
            Enterprise and Related  Information"  ("SFAS No. 131").  The Company
            will  implement  SFAS No. 130 and SFAS No. 131 as required in fiscal
            1999,  which will  require  the  Company  to report  and  display as
            applicable,  certain information related to comprehensive income and
            operating segments, respectively.  Adoption of SFAS No. 130 and SFAS
            No. 131 will not impact the Company's  financial position or results
            of operations.


 NOTE B - PROPERTY AND EQUIPMENT

      Property and equipment at March 31 consist of the following:
<TABLE>
<CAPTION>

                                                   1997              1998
                                                   ----              ----

<S>                                                        <C>              <C>
          Land                                             $  632,408       $   632,408
          Buildings and improvements                        4,492,987         4,522,649
          Equipment                                           940,841         1,006,654
                                                           ----------         ---------

                                                            6,066,236         6,161,711
          Less accumulated depreciation and amortization    3,789,585         4,051,101
                                                            ---------         ---------

          Property and equipment, net                      $2,276,651        $2,110,610
                                                            =========         =========
</TABLE>


                                      F-12
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE C - RELATED PARTY TRANSACTIONS

      Due From Affiliates, Net

      Amounts due from affiliates  consist of cash advances,  unpaid  management
      fees,  interest  income and other revenue  items.  Most of the  affiliated
      companies  have been operating at a loss and their  respective  ability to
      repay the cash  advances and earned fees due to the Company is  uncertain.
      Accordingly,  a reserve  for such  amounts  has been  provided  for by the
      Company,  reducing  revenues,  fees and interest  income and providing for
      losses on cash advances to affiliates.  In the event such advances or fees
      are  remitted  by the  affiliates,  the  reserve is reduced  and income is
      recorded.  The amounts due from  affiliates  at March 31  consisted of the
      following:
<TABLE>
<CAPTION>

                                                              1997              1998
                                                              ----              ----

<S>                                                        <C>              <C>
Due from VVI                                               $2,207,653       $1,552,570
Due from the Whittier, VVI affiliated company               2,793,766        2,978,538
Due from VVI affiliated limited partnerships (VVI is
     general partner)                                       1,219,670          169,171
Management fees and cash advances due from
     affiliated companies                                     770,103          906,300
                                                           ----------       ----------

                                                            6,991,192        5,606,579
Less reserve for losses                                     6,723,585        5,427,027
                                                           ----------       ----------

Due from affiliates, net                                   $  267,607       $  179,552
                                                           ==========       ==========
</TABLE>

      At March 31, 1997 and 1998,  the  unreserved  amounts due from  affiliates
represent development fees and advances from the following:

                                                  1997             1998
                                                  ----             ----

Presidential Care Corp. ("Presidential")       $ 27,646       $ 24,315
Camelot Village at Huntington, Inc.             102,718
Camelot Village at Stroudsburg, LLC             137,243        155,237
                                               --------       --------

                                               $267,607       $179,552
                                               ========       ========

                                      F-13

<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE C (continued)

      1.    Presidential

            The unreserved amount at March 31, 1998 represented development fees
            of $24,315 from Presidential Care Corp. ("Presidential"),  a Florida
            not-for-profit  corporation affiliated with VVI. The Company entered
            into a  development  agreement  on March 24,  1995 to plan,  design,
            develop  and  construct  an  assisted  living   retirement  home  in
            Hollywood,  Florida,  and  to  arrange  for  permanent  and  interim
            financing.  The development  agreement  provides for compensation to
            the Company for locating the land, zoning application work and other
            services of 7 1/2% of the overall project cost (as defined), payable
            upon   commencement   of   construction.   The  Company   recognizes
            development  fees on a  percentage-of-completion  basis  and has not
            recognized  fees in  fiscal  1997 and  1998.  Presidential  received
            interim  financing  through  a  private  placement  and is  awaiting
            approval on its construction financing.

      2.    Camelot Village at Huntington ("Camelot - Huntington")

            During fiscal 1997, advances of $102,718 to Camelot - Huntington,  a
            corporation  affiliated  with the Company,  were fully paid.  During
            fiscal   1998,   additional   advances  of  $53,836  were  made  and
            subsequently  paid.  The  Company  has  entered  into a  development
            agreement  with Camelot -  Huntington  and has obtained an option to
            purchase the underlying  property.  An assisted  living  facility is
            planned for construction, subject to obtaining additional financing.

            The purchase price and related costs of the land, at March 31, 1997,
            totaled  approximately  $1,050,000,  of which  $450,000 was borrowed
            from a bank.  The  loan is  secured  by the  property.  The  Company
            advanced  the  remaining  $600,000,  which  was  collected  from the
            proceeds Camelot - Huntington received from private investors in its
            sale of stock.

            Construction of the facility  requires the issuance of a special use
            permit by the Huntington Zoning Board of Appeals.  In the event that
            zoning approval is not received and all appeals have been exhausted,
            each  Camelot - Huntington  investor  will have the right to receive
            the return of his investment  plus 10 percent  annual  dividends (to
            the extent not paid). If Camelot - Huntington's

                                      F-14
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998

NOTE C (continued)

            available  cash and the net  proceeds  from the sale of the land are
            insufficient to pay investors electing this option, then the Company
            will  be  required  to  make  up  the  shortfall.  The  Company  has
            guaranteed  to  Camelot  -  Huntington   investors  the  payment  of
            dividends and distributions of up to $1,500,000 in the aggregate. In
            consideration of the Company's  guarantee,  the Company will receive
            50% of the net  proceeds,  if any,  from the  sale of the  facility.
            Alternatively,  each  investor may exchange his Camelot - Huntington
            stock for shares of the Company's common stock at the lesser of: (a)
            80 percent of its fair market value or (b) $7.00 per share.

            Management  believes  that  Camelot  -  Huntington  is  still in its
            preliminary  phases of obtaining  zoning  approval and any potential
            future loss to the Company under its  commitments  and guarantees is
            not probable or estimable at this time for recognition purposes.

      3.    Camelot Village at Stroudsburg ("Camelot - Stroudsburg")

            The advances of $137,243 made to Camelot - Stroudsburg during fiscal
            1997 were  primarily  for the  purchase of real estate  intended for
            development of an assisted living facility.  Additional  advances of
            $92,994 were made in fiscal  1998.  During  fiscal  1998,  Camelot -
            Stroudsburg  entered into a sales  contract to sell the property and
            has recovered  $75,000 paid by Camelot -  Stroudsburg  from deposits
            received by the buyer. An additional  $50,000 has subsequently  been
            paid, with the balance to be paid when the sale closes.

      4.    Phoenix Lifecare Corp. ("Phoenix")

            Phoenix, a not-for-profit  corporation  affiliated with the Company,
            provides health care services to residents of the Whitcomb Tower and
            the  Whittier (an  affiliate  of VVI) on behalf of the Company.  The
            Company earns a management  fee from Phoenix for services  rendered.
            The amounts due from  Phoenix of $502,496  and $726,748 at March 31,
            1997  and  1998,  respectively,  have  been  fully  reserved  and no
            management fees have been recognized during fiscal 1997 and 1998.


                                      F-15
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE C (continued)

      5.    Receivables From Gateway Communities, Inc. ("Gateway")

            Receivables from Gateway at March 31 were:
<TABLE>
<CAPTION>

                                                                             1997                      1998
                                                                             ----                      ----

                <S>                                                       <C>                       <C>
                Note receivable, including accrued interest
                     at 9%                                                $7,481,953                $        -
                Management fees and advances                               1,076,197                         -
                                                                           ---------                 ---------

                                                                           8,558,150                         -
                Less reserve for losses                                    8,558,150                         -
                                                                           ---------                 ---------

                                                                          $      -                   $       -
                                                                          ==========                 =========
</TABLE>

            Receivables from Gateway, a not-for-profit  and formerly  affiliated
            company and lessee and  operator of Harvest  Village,  a  continuing
            care retirement community, had been fully reserved by the Company as
            Gateway historically  suffered losses and did not have the financial
            resources  to pay this  obligation.  The Company  acquired  the note
            receivable from Gateway through a series of assignments from VVI and
            affiliates.

            The  Company  intended  to acquire  Harvest  Village  from an entity
            indirectly  owned by VVI. In July 1997,  (i) the Company's  right to
            purchase the Harvest Village retirement  facility  terminated,  (ii)
            VVI contributed  substantially all of its equity interest in Harvest
            Village  Partners,  L.P. to the  Company,  (iii) the Company and VVI
            transferred  100  percent  of  Harvest  Village  Partners,  L.P.  to
            unaffiliated  purchasers,  and (iv) the Harvest Village construction
            lenders  assigned their mortgage on the Harvest  Village  retirement
            facility  to a company not  affiliated  with the  Company,  released
            their liens and security  interests in the Company's  properties and
            the stock of the  Company  owned by VVI,  and  released  VVI and the
            Company's  Chief  Executive  Officer  from their  guarantees.  As an
            integral part of this  transaction,  the Company released  Gateway's
            obligation in the amount of $8,558,150 due to the Company. (See Note
            G-3.)


                                      F-16

<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE D - DEVELOPMENT FEES AND ADVANCES

      The Company developed a residential retirement center in the State of Iowa
      known as Cottage  Grove Place,  an  unaffiliated  entity.  Pursuant to the
      development agreement,  the Company was obligated to plan, design, develop
      and construct the property,  arrange financing and supervise  marketing of
      the  retirement  center  for a total fee of  $2,270,000.  During the years
      ended  1997 and  1998,  the  Company  recognized  $220,480  and  $185,500,
      respectively,  of such development fee. An initial installment of $750,000
      was paid upon the bond closing,  which  provided  Cottage Grove Place with
      its  construction  financing in 1995. An  additional  $385,005 was paid in
      monthly  installments during  construction,  and the remaining  $1,135,000
      will be paid upon the later of: (i) 90% occupancy  achieved by the project
      or (ii) the  payment  in full of the  short-term  bonds of  Cottage  Grove
      Place, which mature on or before July 1, 2001, and the satisfaction of the
      Debt  Service  Coverage  Ratio and the Reserve  Ratio (as  defined)  after
      giving effect to the repayment of such short-term bonds. While the Company
      has earned and recognized a majority of the development  fee, the terms of
      the agreement  defer payment.  A related 10% fee payable by the Company is
      netted against the amount due.


                                      F-17
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE E - MORTGAGES AND NOTES PAYABLE
<TABLE>
<CAPTION>

                                                                                              1997             1998
                                                                                              ----             ----

          1.    Mortgages Payable

<S>                                                                                        <C>             <C>
                Mortgages,  guaranteed by VVI,  bearing interest at 7.5% payable
                     in  monthly  installments  of  principal  and  interest  of
                     $30,429  are due  November  1, 1999,  as extended on May 6,
                     1999; restricted use cash accounts have been pledged
                     as additional collateral (Note A).                                    $4,317,865      $4,275,364
                Convertible mortgages with interest at prime, plus
                     3% (11.50% at March 31,  1998),  payable in  interest  only
                     installments quarterly, maturity
                     dates are April 30, 1999, as extended, and August 2000, net
                     of  original   issue   discount  of  $42,789  and  $26,223,
                     respectively. Convertible into 169,602 shares of UVH common
                     stock, as of March 31, 1998,
                     subject to adjustment, as defined.                                     1,167,211       1,183,777
                Mortgage with interest at prime plus 1% (9.5% at
                     March 31, 1998) payable in monthly installments of
                     $4,700; including interest balance due August 2001.                      217,957         180,947
                                                                                           ----------      ----------

                                                                                            5,703,033       5,640,088
                                                                                           ----------      ----------
</TABLE>



                                      F-18
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE E (continued)
<TABLE>
<CAPTION>

                                                                                                            1997              1998
                                                                                                            ----              ----

          2.    Notes Payable

<S>                                                                                                     <C>                <C>
Note payable in monthly  installments of $5,000 plus interest at
   prime  plus 2% (10.50% at
   March 31, 1998). The note is pursuant to a line of
   credit which expires May 7, 1999                                                                     $  334,000         $274,000
Convertible 7% promissory notes, interest payable
   quarterly,  compounded  annually,  maturity on  December 31,
   2000;  convertible into 19,208 shares of the Company's common
   stock at $8.33
   per share                                                                                               160,000          160,000
Note payable in monthly installments of $12,500
   plus interest until August 1999 at prime plus
   1.5% (10% at March 31, 1998)                                                                            362,500          212,500
Notes payable, with interest only payable monthly
   at prime plus 1-1/2% (10% at March 31, 1998)
   due September 28, 1998                                                                                                    75,000
Equipment notes payable, with interest ranging from
   3% to 15% payable in monthly  installments  of principal  and
   interest of $2,788 until November
   2002                                                                                                     39,650           96,159
Notes payable, with interest at 20%, due June 30,
   1998                                                                                                                     150,000



                                                                                                           896,150          967,659
                                                                                                        ----------       -----------

                                                                                                         6,599,183        6,607,747
Less current portion                                                                                       264,918          661,466
                                                                                                        ----------       -----------

                                                                                                        $6,334,265       $5,946,281
                                                                                                        ==========       ===========
</TABLE>



                                      F-19
<PAGE>

                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998

NOTE E (continued)

      The aggregate maturities of mortgages and notes payable are as follows:


               Fiscal year ending March 31,
                    1999                        $  661,466
                    2000                         5,299,801
                    2001                           559,150
                    2002                            55,830
                    2003                            31,500
                                                ----------

                                                $6,607,747
                                                ==========

NOTE F - INCOME TAXES

      The  consolidated  provision  (benefit)  for income taxes  consists of the
following at March 31:

                                                  1997               1998
                                                  ----               ----
          Current
                Federal                         $(162,000)       $      -
                State and local                  (151,000)         71,882
                                                ---------        --------

                                                 (313,000)         71,882
                                                ---------        --------

          Deferred
                Federal                           760,000               -
                State and local                   221,000               -
                                               ----------         -------

                                                  981,000               -
                                               ----------        --------

                                                $ 668,000        $ 71,882
                                               ==========        ========


                                      F-20
<PAGE>



                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998

NOTE F (continued)

      The  Company  files its Federal  consolidated  tax return with its parent,
      VVI. To the extent the Company's  Federal tax  attributes  are utilized by
      VVI,  the Company  records the result as either an increase or decrease to
      additional paid-in capital.

      The Company's  effective  income tax rate differs from the statutory  U.S.
      Federal income tax rate as a result of the following:

                                                  1997           1998
                                                  ----           ----

Statutory Federal tax rate                     (34.00%)       34.00%
State income taxes, net of Federal
     income tax benefit                         (6.50)        18.74
Other                                            4.5
Reduction in valuation allowance                             (34.00)
Losses for which no future tax benefit
     has been recorded                          84.88            --
                                                -----         -----

Effective tax rate                              48.88%        18.74%
                                                =====         =====

      Temporary  differences  which  give rise to  deferred  tax  assets  are as
      follows:

                                       1997               1998
                                       ----               ----

Net operating loss carryover       $1,047,000       $  641,000
Due from affiliates                 5,296,000        2,171,000
Fixed assets                          902,000          895,000
Accrued expenses and other            190,000          190,000
                                   ----------       ----------

                                    7,435,000        3,897,000
Valuation allowance                 7,435,000        3,897,000
                                   ----------       ----------

                                   $        -       $        -
                                   ==========       ==========



                                      F-21
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE F (continued)

      The Company has net operating  loss  carryforwards  for Federal income tax
      purposes  as of  March  31,  1998 of  approximately  $1,603,000.  Such net
      operating loss carryforwards are subject to several statutory  limitations
      which  limit  their  utilization.   Accordingly,   no  benefit  from  such
      utilization  has been provided for. Any ownership  changes could limit the
      use of some or all of the net operating loss  carryforwards.  During 1997,
      the Company  increased its deferred tax valuation  allowance due to losses
      incurred in 1997 and  uncertainty  as to the Company's  ability to realize
      future tax  benefits.  During 1998,  the Company  reduced its deferred tax
      valuation  allowance to reflect deductions utilized by its parent Company,
      VVI, and to recognized utilization of net operating loss carryforwards.


NOTE G - COMMITMENTS AND CONTINGENCIES

      1.    Operating Leases

            Aggregate  rental expense under operating  leases was  approximately
            $66,900  and  $33,000  for the years  ended March 31, 1997 and 1998,
            respectively.  UVH rents its  administrative  office facilities from
            CBF Building  Company,  an affiliate of VVI,  under a lease expiring
            December 31, 2000, at an annual rental as follows:

            Fiscal year ending March 31,
                 1999                               $  38,526
                 2000                                  39,209
                 2001                                  39,727
                                                    ---------

                                                    $117,462
                                                    ========

      2.    Purchase Commitment

            The Company could have been required to purchase a parcel of land at
            the Cottage Grove Place retirement  facility in Cedar Rapids,  Iowa,
            for $450,000 plus interest and taxes if Cottage Grove Place fails to
            exercise its option to the property.  In August 1998,  Cottage Grove
            Place exercised its options and purchased the land.


                                      F-22

<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998

NOTE G (continued)

      3.    Guarantees

            The Company  guaranteed  a bank loan to CBF  Building  Company.  The
            balance outstanding on this loan is $68,350 at March 31, 1998.

            The Company guaranteed a bank loan to an affiliate with a balance of
            $350,000 at March 31, 1998 (Note C-2).

            On August 20, 1996,  the line of credit was renewed and increased to
            $450,000,  of which $150,000 was used to pay in full the old line of
            credit.  The  Company  is the  borrower  and VVI is  Guarantor.  The
            balance  outstanding  at March 31,  1997 and 1998 was  approximately
            $362,000 and $212,500, respectively.

      4.    Self-insurance

            Effective April 1, 1992, the Company began to partially  self-insure
            for  health  and  medical  liability  costs for up to a  maximum  of
            $300,000 in claims.  The Company has  insurance  coverage for claims
            above the aforementioned  limit. The self-insurance  claim liability
            is determined on a non-discounted basis based on claims filed and an
            estimate of claims incurred but not yet reported. The amount of said
            liability accrued at March 31, 1998 was approximately $112,000.


      5.    Possibility of Cross Default

            An  affiliate  of VVI is  indebted  under  a first  mortgage  in the
            principal  amount of  $4,087,500.  The mortgage  securing  this loan
            provides  that a default  under such loan is a default under each of
            the  Company's   Hillside  Terrace  and  Whitcomb  Tower  Mortgages.
            Therefore,  a VVI default on this  affiliate's  loan could result in
            the foreclosure of Hillside Terrace and Whitcomb Tower.

      6.    Government Regulation

            Health-care and senior living  facilities are areas of extensive and
            frequent   regulatory   change.   Changes   in  the   laws   or  new
            interpretations  of existing laws can have a  significant  effect on
            methods of doing  business,  costs of doing  business and amounts of
            reimbursement from governmental and other payors. The Company at all
            times attempts to comply with all  applicable  fraud and abuse laws;
            however,  there can be no assurance that  administrative or judicial
            interpretation  of  existing  laws or  regulations  will  not have a
            material  adverse  effect on the  Company's  operations or financial
            condition.

                                      F-23
<PAGE>

                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998

NOTE H - STOCKHOLDERS' EQUITY

      1.    Common Stock

            On March 31, 1995, VVI contributed 1,200,000 shares of the Company's
            common stock to the Company,  which the Company then  simultaneously
            retired. As consideration for such contribution, VVI was entitled to
            be issued one share of common  stock for each $5.73  received by the
            Company  in  payment  of  amounts  due from  Gateway.  In 1996,  VVI
            received 120,000 shares as consideration for relinquishing the right
            to receive  such  shares  upon  collection.  As the amounts due from
            Gateway had been fully reserved for by the Company (Note C), the net
            contribution  of shares by the Company has been  accounted  for in a
            manner similar to a recapitalization.  The capital  contribution was
            premised  on the fact that the  Company  was going to  complete  the
            public  offering by  September  30,  1996.  The public  offering was
            terminated  in  October  1996,  and in  December  1996  the  Company
            reissued the remaining 1,080,000 shares of common stock to VVI.

            In March 1996,  the  expiration  date on  outstanding  warrants  was
            extended  from  March 31,  1996 to April 30,  1996 and the  exercise
            price was  adjusted  from $6.66 to $3.33 per share.  In April  1996,
            62,121 shares were issued in  connection  with the exercise of these
            warrants.

            In March 1996, the Company offered the  convertible  mortgageholders
            and  noteholders  the option to convert,  through April 30, 1996, to
            common  shares at a price of $3.75  instead of prices  ranging  from
            $6.67  through  $7.22.  In April 1996,  347,996  common  shares were
            issued in  connection  with the  offer.  As a result  of the  offer,
            167,887 additional shares were issued upon conversion, the estimated
            fair value of which  ($156,466) has been recorded as debt conversion
            expense in 1997.



                                      F-24
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



Note H - continued

      2.    Incentive Stock Option Plan

            The Company has reserved 210,000 shares of common stock for issue to
            key employees  under the Company's  Employee  Incentive Stock Option
            Plan (the "1991 Plan"), as amended. A summary of the activity within
            the 1991 Plan is as follows:
<TABLE>
<CAPTION>

                              Weighted
                            average price  Option price
                              per share     per share           Granted        Available
                              ---------     ---------           -------        ---------

<S>                               <C>     <C>      <C>           <C>            <C>
Balance, April 1, 1996        $   4.07    $1.33 to $6.10         98,580         111,420

Terminated                        4.35    $1.33 to $5.55         (1,260)          1,260
Granted                           4.29    $4.00 to $4.40         40,700         (40,700)
                                                               --------        --------

Balance, March 31, 1997           4.14    $1.33 to $6.00        138,020          71,980

Terminated                        3.81    $1.33 to $5.55         (7,980)          7,980


Balance, March 31, 1998           4.16    $1.33 to $6.00        130,040          79,960
                                                               ========        ========
</TABLE>

            Under the plan,  option exercise prices must be at least 100% of the
            estimated  fair market  value of the common stock at the time of the
            grant.  Exercise  periods  are for ten  years,  but  terminate  at a
            stipulated  period of time after an employee's  death or termination
            of employment  for causes other than  disability or  retirement.  No
            options have been exercised since inception of the plan. The options
            become exercisable at the rate of 20% per year. Accordingly, options
            for an aggregate of 67,576 shares are exercisable at March 31, 1998.

            In June 1996, the Company adopted the 1996 Outside  Directors' Stock
            Option Plan (the "Directors' Plan"), which provides for the granting
            of options to purchase  common  stock of the Company to  nonemployee
            directors  of  the  Company.  The  Directors'  Plan  authorizes  the
            issuance of a maximum of 90,000 shares of common stock.

                                      F-25
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE H (continued)

            The Directors' Plan is administered by the Board of Directors. Under
            the Directors' Plan, each non-employee  director elected after April
            1, 1996 will  receive  options for 3,000 shares of common stock upon
            election. To the extent that shares of common stock remain available
            for the grant of options  under the  Directors'  Plan,  each year on
            April 1, commencing April 1, 1997, each  non-employee  director will
            be granted an option to purchase  1,800 shares of common stock.  The
            exercise  price  per  share  for  all  options   granted  under  the
            Directors' Plan will be equal to the fair market value of the common
            stock as of the date  preceding the date of grant.  All options vest
            in  three  equal   annual   installments   beginning  on  the  first
            anniversary  of the date of grant.  Each  option  is for a  ten-year
            term,  subject  to  earlier  termination  in the  event  of death or
            permanent  disability.  Options for an aggregate of 3,000 shares are
            exercisable at March 31, 1998.

            A summary of activity within the 1996 Plan is as follows:
<TABLE>
<CAPTION>

                                               Weighted
                                             average price   Option price
                                               per share       per share         Granted          Available
                                               ---------       ---------         -------          ---------

<S>                                             <C>          <C>     <C>          <C>               <C>
                Balance, April 1, 1996              -              -                   -            90,000

                Granted                         $5.55        $5.55                 9,000            (9,000)

                Balance, March 31, 1997         $5.55        $5.55                 9,000            81,000
                                                                                  ------            ------

                Granted                          4.00         4.00                 9,000            (9,000)

                Balance, March 31, 1998         $4.78        $4.00 - $5.55        18,000            72,000
                                                                                  ======            ======
</TABLE>

            In addition,  there are options outstanding,  at prices ranging from
            $1.33 to $6.00, for 31,800 shares of common stock at March 31, 1998.
            These  options were granted in addition to those  outstanding  under
            the 1991 Plan and the Directors'  Plan.  Options for an aggregate of
            26,040 shares are exercisable at March 31, 1998.



                                      F-26
<PAGE>

                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE H (continued)

            The following table summarizes significant ranges of all outstanding
and exercisable stock options at March 31, 1998:

<TABLE>
<CAPTION>

                                                     Options outstanding                         Options exercisable
                                                     -------------------                         -------------------
                                                         Weighted-            Weighted-                           Weighted-
                      Ranges of                           average              average                             average
                      exercise                           remaining            exercise                            exercise
                       prices           Shares           life in years          price         Shares               price
                       ------           ------           -------------          -----         ------               -----

<S>               <C>                   <C>                <C>                  <C>         <C>                     <C>
                  $1.33                 34,200             4.70                 $1.33       34,200                  $1.33
                   3.33 - 4.40          72,540             7.42                  3.77       18,816                   3.62
                   5.55 - 6.10          73,100             5.64                  5.70       43,600                   5.72
</TABLE>

            The  weighted-average  option fair value on the grant date was $4.68
            and $1.11 for options  issued  during the years ended March 31, 1997
            and 1998.

            The Company has adopted the  disclosure  provisions  of Statement of
            Financial  Accounting Standards No. 123, "Accounting for Stock-Based
            Compensation"  ("SFAS No.  123");  it applies  APB  Opinion  No. 25,
            "Accounting   for  Stock   Issued   to   Employees,"   and   related
            interpretations  in accounting  for the Plans and does not recognize
            compensation  expense for such Plans.  If the Company had elected to
            recognize  compensation  expense  based  upon the fair  value at the
            grant  dates  for  awards  under  these  plans  consistent  with the
            methodology  prescribed by SFAS No. 123, the Company's  reported net
            income  (loss) per share would be  adjusted to the pro forma  amount
            indicated below for the years ended March 31:
<TABLE>
<CAPTION>

                                                                       1997                 1998
                                                                       ----                 ----
                Net (loss) income
<S>                                                                <C>                   <C>
                     As reported                                   $(2,034,554)          $311,610
                     Pro forma                                      (2,103,235)           309,280

                Net (loss) income  per common share - basic
                     As reported                                         $(.81)              $.09
                     Pro forma                                            (.84)               .09

                Net (loss) income per common share - diluted
                     As reported                                         $(.81)            $.09
                     Pro forma                                            (.84)             .09
</TABLE>


                                      F-27
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE H (continued)

            These  pro  forma  amounts  may  not  be  representative  of  future
            disclosures   because  they  do  not  take  into  effect  pro  forma
            compensation  expense  related to grants made before 1996.  The fair
            value of options issued was calculated by applying the minimum value
            method,  as  trading  in the  Company's  common  stock is  extremely
            limited.  In applying the minimum value method,  the Company assumed
            an expected  life of five years and an interest rate of 6.7% in 1997
            and 1998.


NOTE J - BUSINESS SEGMENTS

      The Company owns and operates its three residential  retirement centers in
      Michigan to provide  living and extended care services to the elderly.  In
      addition to a room, the Company provides  significant  personal  services,
      including,  among other  things,  meal  preparation  and health care.  The
      Company's  management  provides the requisite  day-to-day  supervision and
      administration   services  to  various   affiliates   and   non-affiliated
      companies. Losses and recoveries have been stated separately.

      Intersegment revenues are not significant.  Operating profit is defined as
sales  and  other  income  directly  related  to a  segment's  operations,  less
operating expenses.

      The following summaries set forth certain financial information classified
as described above:

                                          1997                1998
                                          ----                ----
     Revenues
     Resident centers                  $ 7,681,953        $ 7,468,096
     Management and development
         companies                         280,480            305,500
                                       -----------        -----------

                                       $ 7,962,433        $ 7,773,596
                                       ===========        ===========

Operating profits
     Resident centers                  $ 1,261,079        $ 1,012,106
     Management and development
         companies                        (613,614)          (784,774)
     (Loss) recovery on advances
         to affiliates                    (218,146)           351,396
                                       -----------        -----------

Income from operations                 $   429,319        $   578,728
                                       ===========        ===========



                                      F-28
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                             March 31, 1997 and 1998



NOTE J (continued)

      Corporate  assets are principally  cash, and corporate  office  equipment,
      furnishings and related assets.

                                                          1997            1998
                                                          ----            ----
          Identifiable assets are as follows:
               Retirement centers                      $3,331,635     $3,093,815
               Management and development companies     1,393,615      1,395,170
               Corporate                                  159,674        139,912
                                                       ----------     ----------

                                                       $4,884,924     $4,628,897
                                                       ==========     ==========





                                      F-29