SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-KSB

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

/ /
         For the fiscal year ended  March 31, 1999
                                    --------------

                                       OR

         TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934
/ /
         For the transition period from _________________ to ___________________

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

                           UNITED VANGUARD HOMES, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

              Delaware                                   11-2032899
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. employer identification no.)
incorporation or organization)

4 Cedar Swamp Road, Glen Cove, New York                        11542
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip code)

Registrant's telephone number, including area code: (516) 759-1188
                                                    --------------

Securities registered pursuant to Section 12(b) of the Exchange Act:  None

Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.01 par value

         Check  whether  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  Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.    Yes / /   No /X/

         Check if there is no disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-B 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-KSB or any  amendment to
this Form 10-KSB.  /X/

         State   Registrant's   revenues  for  its  most  recent   fiscal  year:
$8,896,000.

         State the aggregate  market value of  Registrant's  outstanding  voting
Common Stock held by non-affiliates of Registrant: $1,000,000.

         As of March 31,  1999,  there  were  3,313,265  shares  outstanding  of
Registrant's Common Stock.

Documents Incorporated by Reference:  None.

Transitional Small Business Disclosure Format:  Yes ____ No  /X/


<PAGE>
                                     PART I
                                     ------

Item 1.   Description of Business
          -----------------------

         THIS REPORT  CONTAINS  CERTAIN  FORWARD-LOOKING  STATEMENTS  WITHIN THE
MEANING OF SECTION 27A OF THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE
COVERED BY THE SAFE  HARBORS  CREATED  HEREBY.  ALL  FORWARD-LOOKING  STATEMENTS
INVOLVE RISKS AND UNCERTAINTY. ALTHOUGH REGISTRANT BELIEVES THAT THE ASSUMPTIONS
UNDERLYING THE FORWARD-LOOKING  STATEMENTS CONTAINED HEREIN ARE REASONABLE,  ANY
OF THE ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE CAN BE NO ASSURANCE
THAT THE  FORWARD-LOOKING  STATEMENTS  INCLUDED  IN THIS REPORT WILL PROVE TO BE
ACCURATE.   IN  LIGHT  OF  THE   SIGNIFICANT   UNCERTAINTIES   INHERENT  IN  THE
FORWARD-LOOKING  STATEMENTS  INCLUDED HEREIN,  THE INCLUSION OF SUCH INFORMATION
SHOULD NOT BE REGARDED AS A  REPRESENTATION  BY  REGISTRANT  OR ANY OTHER PERSON
THAT THE OBJECTIVES AND PLANS OF REGISTRANT WILL BE ACHIEVED.

GENERAL

         United Vanguard Homes, Inc. ("Registrant"), a Delaware corporation, was
originally  organized  on  September  26,  1988 ("Old  UVH") in order to combine
various  activities  relating to the  development,  ownership and  management of
senior  living  facilities  organized  and operated by Vanguard  Ventures,  Inc.
("Vanguard")  and its  principals  beginning in 1980. On March 30, 1993, Old UVH
merged into Coap Systems Inc. ("Coap"),  a relatively  inactive,  publicly-owned
subsidiary  of  Vanguard,  and  simultaneously  Coap  changed its name to United
Vanguard  Homes,  Inc.  Although   Registrant  is  subject  to  the  information
requirements of the Securities Exchange Act of 1934, there are only a few shares
of Registrant's  common stock,  $.01 par value per share ("Common Stock") in the
public float and there is no public market for the Common  Stock.  Registrant is
currently a majority-owned subsidiary of Vanguard.

         Registrant  is  an  owner,  manager  and  developer  of  senior  living
facilities which provide housing and various levels of care and services for the
elderly.
<TABLE>
<CAPTION>

                                       Fiscal Year Ended March 31,
                                       ---------------------------
                                           1998           1999
                                           ----           ----

Statement of Operations Data:

<S>                                    <C>          <C>
   Revenues:
              Resident services          $4,705,000   $4,943,000
              Healthcare services         2,763,000    2,766,000
         Management Fees                    120,000      152,000
              Development fees              186,000    1,035,000
                                        -----------   ----------

                 Total revenues          $7,774,000   $8,896,000
                                         ==========   ==========
</TABLE>

                                       2

<PAGE>

         Senior living facilities provide a combination of housing, personalized
support and healthcare  services  generally  identified as  independent  living,
assisted living and skilled nursing.  Independent living facilities are designed
to enable  residents  to live  independently  yet remain free from the chores of
home  ownership  and  concerns  of  daily  life,  such as  transportation,  meal
preparation,  personal  security and  housekeeping.  Assisted living  facilities
offer a  combination  of  housing  and  personal  care and  healthcare  services
designed to respond to the  individual  needs of those who require help with the
activities  of daily  living  but are not  sick or  bedridden.  Skilled  nursing
facilities are for those residents who require extensive care. A continuing care
retirement community ("CCRC") provides all three levels of services (independent
living, assisted living and skilled nursing) in the same facility, whereas other
facilities, known as congregate care facilities, provide only independent living
and assisted living services.

         As residents of senior living facilities "age-in-place," they generally
require more assistance.  In each of Registrant's currently owned and/or managed
senior living  facilities,  a significant  shift in the needs of residents  from
independent  living services to assisted living services has taken place, and to
accommodate  residents,   Registrant  is  in  the  initial  stages,  subject  to
regulatory approval, of converting a number of its independent living apartments
in certain of its properties to assisted living units.

         Registrant's growth objective is to capitalize on the experience of its
management  team in the senior  living  industry  and on the growing  demand for
senior living facilities as an increasingly  preferred lifestyle for the elderly
by (i)  providing a full range of  high-quality  personalized  resident care and
services;  (ii) pursuing  development  opportunities  for itself or on behalf of
others;  and  (iii)  acquiring  properties  in the open  market or  through  the
exercise of purchase options obtained in the development process.

         Registrant  believes that its business will benefit in the  foreseeable
future from significant trends affecting the long-term care industry,  including
an increase in the demand for senior care  resulting  from the aging of the U.S.
population,  efforts to contain  healthcare costs by both the public and private
sector and the  increasing  financial net worth of the senior  population  which
makes the  senior  living  facility  an  available  option to a broader  market.
Registrant  believes  that these  trends  will result in  increasing  demand for
senior  living  facilities  that  generally  offer a more  secure,  trouble-free
environment and improved quality of life.

BUSINESS STRATEGY

         General. Registrant's business strategy is based upon the experience of
its management  team in the senior living industry and on the growing demand for
senior  living  facilities  as an  increasingly  preferred  life  style  for the
elderly.  Registrant intends to capitalize on these two factors by (i) providing
a full range of  high-quality  personalized  resident  care and  services;  (ii)
pursuing development  opportunities for itself or on behalf of others; and (iii)
acquiring  properties  in the open  market or through  the  exercise of purchase
options obtained in the development process.

                                       3

<PAGE>

         PERSONALIZED  RESIDENT  CARE AND  SERVICES.  Registrant  believes  that
income  qualified  elderly would choose  residential  CCRCs and assisted  living
facilities  over skilled nursing  facilities  when given the choice.  Registrant
believes that the elderly would choose the residential  assisted living facility
alternative  because of the significant  quality of life  advantages  which they
offer.  Consequently,  providing a high  quality of life for its  residents in a
safe, healthy and secure environment is the foundation of Registrant's  business
strategy.

         In furtherance  of this strategy,  Registrant has structured its senior
living  facilities  to offer  residents a  supportive,  "home-like"  setting and
availability  of  assistance  with  activities  of daily  living  ("ADLs").  Its
facilities are, in many respects,  similar to conventional apartment living with
enhanced  services  allowing  residents a more  independent and social lifestyle
than they would  receive in a skilled  nursing  facility  or, in most cases,  at
home.  At the same time,  support is  provided  in a manner  sufficient  to meet
residents' requirements. General services in Registrant's residences include the
provision  of  three  meals  per day,  laundry,  housekeeping  and  maintenance.
Available support services include personal and routine nursing care, social and
recreational services and transportation. Personal care includes assistance with
activities such as bathing, dressing, personal hygiene, grooming, and eating and
ambulating. Registrant also provides or makes available routine nursing services
(in addition to its skilled nursing facility services),  entertainment,  banking
and  shopping.  Generally,  however,  Registrant  is able to tailor the changing
needs of its  residents  through the use of  individual  service  contracts  and
flexible staffing patterns.

         DEVELOPMENT  OPPORTUNITIES.  Operating revenues and management fees are
generally  stable once a facility is fully  occupied.  At that point,  growth in
revenue of Registrant  becomes  dependent upon  development  and management fees
received  through the  development  and  management of additional  senior living
facilities on behalf of others.  Consequently,  the second part of  Registrant's
business  strategy  is to increase  the number of senior  living  facilities  it
develops  and  manages  for  itself or on behalf of  others,  in part  through a
strategy  whereby  Registrant may enter into an agreement  with an  unaffiliated
third-party  entity,  which may be a  not-for-profit  organization  exempt  from
federal income taxes under ss.  501(c)(3) of the Internal  Revenue Code of 1986,
as amended (the "Code") (a "501(c)(3) organization"), to develop a senior living
facility  for such  entity.  Registrant  would  generally  attempt  to  obtain a
management  agreement to operate the facility  upon its  completion as well as a
fair market value option to purchase the facility at a future time. Through this
type  of  transaction,  if  the  unaffiliated  entity  is  adequately  financed,
Registrant would not incur the start-up  development  costs and operating losses
typically  associated  with the  development  and initial  operation of a senior
living facility  because  Registrant would not be the owner.  However,  prior to
entering into such  agreement,  Registrant  may incur certain  initial  expenses
associated with its site selection process.  Registrant would earn a development
fee for the  development of the senior living  facility and a management fee for
its  operation  and might  exercise  its option,  if any, to purchase the senior
living facility.  The unaffiliated  third-party entity would benefit through the
attainment of a turnkey senior living facility.

                                       4

<PAGE>

         Registrant's development program will initially focus on site selection
and  residence  size,  both of which  Registrant  believes are  essential to the
success of its  development  projects.  In evaluating a prospective  development
site,  Registrant will consider  primarily the strength of the market demand and
the ability to maximize the efficiency of its management resources in a specific
market or "cluster." Accordingly,  Registrant intends to select sites so that it
can strategically place three to five senior living facilities within a 200-mile
radius,  creating a regional  cluster of senior  living  facilities.  Registrant
believes  that the  clustering  concept will allow it to reduce costs by sharing
certain  management,  marketing and  operational  resources  within the regional
cluster.  Registrant  intends  to  locate  its  assisted  living  facilities  in
well-established  residential  neighborhoods in communities where the population
typically ranges from 40,000 to 100,000 people.  The size of a typical community
for a CCRC would  generally  be somewhat  larger,  ranging  between  100,000 and
500,000  people.  Registrant  intends to pursue the development of senior living
facilities in communities that show a strong need for senior living services and
a higher than average  percentage of middle-aged or elderly  individuals.  Other
factors that are considered in the site selection  process  include the level of
competition,  the local  labor  market,  the state  and  local  legislative  and
regulatory  environment and the presence of strong community  support for senior
living facilities.

         Once a site is selected,  Registrant  may either  advance  funds to the
unaffiliated  third-party owner of the facility, which funds would be secured by
the assets of the  unaffiliated  third-party  entity  acquired with the advanced
funds,  principally the land for the proposed facility,  or expend funds itself,
on behalf of the third  parties.  To the extent such advances are not secured by
land, they will be reserved as uncollectible  until the unaffiliated  entity can
repay the advances.  While these  advances may at times consist of  Registrant's
working capital,  Registrant may also seek to arrange, through Vanguard or other
sources,   short  term  financing  to  satisfy  the  project's  initial  funding
requirements.  Registrant may set up a special purpose  wholly-owned  subsidiary
which would issue the debt, which debt may then be convertible into Registrant's
Common  Stock.  It is  intended  that these  advances  would be repaid  from the
proceeds  of  construction  financing  arranged by  Registrant  on behalf of the
unaffiliated third-party entity.  Registrant may be restricted from recording as
a receivable any advances to the unaffiliated  third-party  entity under certain
circumstances.   Registrant   would  then,   pursuant  to  project   development
agreements,  act  as  the  project  developer  for  what  would  typically  be a
development  fee of 7.5 percent of the project's  soft and hard costs.  Once the
project is completed, Registrant may act as the manager of the facility pursuant
to a management  agreement,  which would provide for a management fee of between
four and five percent of the facility's gross revenue,  depending on the type of
facility.

         ACQUISITION  OF  PROPERTIES.   In  addition  to  the   development  and
management of senior living facilities for third parties, Registrant may acquire
existing senior living  facilities.  These  acquisitions  may be effected either
through  the  exercise  of  a  purchase  option  obtained  on  properties  which
Registrant had developed for third parties or through  acquisitions  in the open
market.

                                       5

<PAGE>

         When a facility managed by Registrant  attains a level of profitability
after the payment of debt service and management fees (usually after  stabilized
occupancy  in excess of 90% and at times  lower  depending  on the level of debt
service) and  Registrant  has a purchase  option,  the exercise of  Registrant's
option will be considered.

SERVICES AND AMENITIES

         Registrant's  senior living  facilities  offer  residents a supportive,
"home-like"  setting and  availability  of assistance  with  assistance in daily
living (ADLs).  The independent and assisted living community is very similar in
many respects to conventional  apartment living with enhanced  services allowing
the residents to live  independently  but yet  socialize in a safe  environment.
Residents are individuals  who, for a variety of reasons,  cannot live alone but
do not  typically  need the 24-hour  skilled  medical  care  provided in skilled
nursing  facilities.  Services  provided or  available  to these  residents  are
designed to respond to their  individual  needs and to improve  their quality of
life. This  individualized  assistance is available 24 hours a day, to meet both
anticipated and unanticipated needs. General services in Registrant's residences
include  the  provision  of three  meals  per  day,  laundry,  housekeeping  and
maintenance.  Available  support services  provided by facility staff or outside
agencies  include  personal and routine  nursing care,  social and  recreational
services,  transportation and special services needed by the resident.  Personal
care includes  assistance with activities  such as bathing,  dressing,  personal
hygiene, grooming, as well as eating and ambulating assistance.  Routine nursing
services,  which are made available and are provided according to the resident's
individual  need and state  regulatory  requirements,  include  assistance  with
taking medication, skin care and injections.  Organized activities are available
for social  interaction and  entertainment.  Special services  available include
banking,  grocery  shopping  and pet care.  Although a typical  package of basic
services  provided  to a resident  includes  meals,  housekeeping,  laundry  and
personal  care,  Registrant  does not have a standard  service  package  for all
residents.  Instead,  it is  able  to  accommodate  the  changing  needs  of its
residents through the use of individual  service contracts and flexible staffing
patterns.

         As Registrant's residents age, the level of care required by particular
residents is expected to increase.  Registrant's multi-tiered rate structure for
the  services  it  provides  is based upon the  acuity of, or level of  services
needed by, each resident.  Supplemental and specialized health and personal care
services for those  residents  requiring  24-hour  supervision or more extensive
assistance  with ADLs is provided to the residents by third-party  providers who
are reimbursed directly by the resident or a third-party payor (such as Medicaid
or Medicare).  In the event that a resident's  acuity  reaches a level such that
Registrant  is  unable  to meet  such  resident's  needs,  Registrant  maintains
relationships  with local hospitals and skilled nursing facilities to facilitate
a  transfer  of  the  resident.  A  resident  of  Registrant's  CCRCs  would  be
transferred  to the skilled  nursing  component  at the  facility,  if there are
available beds at such facility.

         Phoenix  Lifecare  Corp.,  a  501(c)(3)  organization,   provides  home
healthcare  services to residents of Whittier  (which is managed by  Registrant)
and Whitcomb (which is owned and managed by Registrant) facilities.

                                       6


<PAGE>

OPERATIONS

         The day-to-day operations of each senior living facility are managed by
an on-site  administrator  who is responsible  for the overall  operation of the
senior living facility,  including quality of care,  marketing,  social services
and financial  performance.  The  administrator  is assisted by professional and
non-professional  personnel,  some  of  whom  may be  independent  providers  or
part-time personnel, including nurses, personal service assistants,  maintenance
and dietary personnel.  The routine nursing services are provided by a nurse who
is typically employed by Registrant,  subject to state regulatory  requirements.
The nursing hours vary depending on the residents'  needs.  Registrant  consults
with outside  providers,  such as pharmacists  and  dieticians,  for purposes of
medication review,  menu planning and responding to any special dietary needs of
its  residents.  Personal  care,  dietary  services,  housekeeping  and  laundry
services  are  performed  primarily  by  personal  service  assistants  who  are
full-time employees of Registrant.  At The Whitcomb and The Whittier,  which are
not licensed to provide  personal  care or nursing  services,  such services are
provided by Phoenix Lifecare Corp.

         Registrant  provides  management  services to each of its senior living
facilities  which  include  the  development  of  operating  standards  and  the
provision of  recruiting,  training and accounting  services.  It is anticipated
that, if Registrant grows, it will establish  regional offices that will include
a regional manager to oversee six to ten senior living facilities.  The regional
manager  will be  responsible  for  monitoring  and  supervising  all aspects of
operations in the region,  including  reviewing and monitoring  compliance  with
corporate  policies and  procedures  and acting as a liaison  between the senior
living facilities and corporate headquarters.

         Presently,   senior  living  facility  personnel  are  supported  by  a
corporate staff based at  Registrant's  headquarters.  Corporate  personnel work
with the  on-site  administrator  with  respect to the  establishment  of senior
living facility goals and strategies,  quality assurance oversight,  development
of Registrant  policies and procedures,  development and  implementation  of new
programs, cash management and treasury functions,  human resource management and
development.

         Registrant's executive team has been carefully selected based upon each
member's  knowledge and experience in the senior living field and related areas.
Registrant has sought  talented  self-starters  who are capable of handling many
aspects of the senior  living  business.  Registrant  believes that a successful
senior living facility is operationally related to the  hotel/hospitality  field
and programmatically related to the residential/social model of healthcare.

MARKETING

         Registrant's   senior  living  facilities   provide  affordably  priced
housing,  personalized  support and  healthcare  services and  primarily  target
private-pay residents.  By targeting senior living facility development projects
primarily in upper middle  income  communities  and by  maintaining  competitive
pricing,  Registrant  believes it will be able to achieve high occupancy levels.
Registrant  has found an  effective  niche in the  upper  middle  income  market
between the high

                                       7

<PAGE>

income  prospect  who can afford to obtain  services  at home and the low income
prospect who cannot afford to live in Registrant's senior living facilities.

         The  marketing  of  independent  living  facilities  is done  through a
combination of media and direct mail  advertising,  referrals from residents and
various centers of influence (e.g., hospital administrators,  religious leaders,
service  clubs,  attorneys,  accountants,  bankers,  etc.) and various  types of
social  functions  at  a  senior  living  facility.  Marketing  assisted  living
facilities  is  better  accomplished  through  networking  with  major  referral
sources.  During the  rent-up  stage of a project,  the  marketing  staff  would
consist of a Director of  Marketing,  two sales  persons,  and a secretary.  The
senior living facility's administrator would also assist with special events and
market-oriented   social   affairs.   After  the  senior   living   facility  is
substantially  rented,  the  staff  can be  reduced  to a  single  or  part-time
Marketing Director and secretary.

PAYING FOR SENIOR LIVING CARE

         The residents of CCRCs and assisted living facilities or their families
generally pay the cost of care from their own financial resources.  Depending on
the  nature of an  individual's  health  insurance  program  or  long-term  care
insurance  policy,  the  individual may receive  reimbursement  for the costs of
care.

         Government  payments for assisted  living outside of a skilled  nursing
facility have been limited.  Some state or local governments offer subsidies for
rent or services  for low income  elderly.  Others may provide  subsidies in the
form of additional payment for those who receive SSI payments. Medicaid provides
reimbursement for certain financially or medically needy persons,  regardless of
age, and is funded  jointly by federal,  state and local  governments.  Medicaid
reimbursement  varies from state to state.  Only a limited number of states have
Medicaid  Waiver  programs  that allow  them to pay for  assisted  living  care.
Without a Medicaid  Waiver Program,  states can only use federal  Medicaid funds
for care in skilled nursing facilities.

GOVERNMENT REGULATION OF SENIOR LIVING FACILITIES

         In general,  senior  living  facilities  and  healthcare  services  are
subject to extensive government  regulation.  The senior living facilities owned
and managed by the  Registrant  are subject to state  regulation  and  licensing
requirements and to Certificates of Need (CON) or similar statutes under which a
proposed  operator  must  demonstrate  public need for skilled  nursing  beds or
assisted  living  units and  satisfy  other  criteria.  The  operators  of those
facilities  must  also  comply  with  any  cost  reporting  or  other  reporting
requirements  imposed  by the  Medicaid  program  as well  as any  reimbursement
limitations  on  amounts  that  may be  charged  to the  program  or to  program
beneficiaries.  In order to  qualify as a state  licensed  facility  and,  where
applicable,  qualify for Medicaid reimbursement and/or resident SSI supplemental
payments,  the senior living  facilities  owned and managed by  Registrant  must
comply with regulations  that address,  among other things,  staffing,  physical
design, required services and resident characteristics. Such facilities are also
subject to various local building codes and similar  ordinances,  including fire
safety codes.  These  requirements vary from state to state and are monitored by
varying state and local agencies.


                                       8

<PAGE>

         Currently,  assisted living facilities are not regulated as such by the
federal government.  Current state requirements for assisted living providers in
many states are  typically  less  stringent  than the  requirements  for skilled
nursing  facilities.  Management  anticipates that states that regulate assisted
living  facilities,  to the  extent  they do not  already  do so,  will  require
licensure as an assisted living facility and will establish varying requirements
with  respect to such  licensure.  The  facilities  that  Registrant  intends to
develop and manage will apply for appropriate licensure.

         The facilities  owned and managed by Registrant are subject to periodic
survey or  inspection  by  governmental  authorities.  From time to time, in the
ordinary course of business a facility may be cited for one or more deficiencies
which  are  typically  addressed  in a  plan  of  correction  by  the  facility.
Registrant  believes  that  the  properties  managed  by it are  in  substantial
compliance with all applicable  licensing,  reimbursement and similar regulatory
requirements.

         Registrant  and the  facilities  it manages are also subject to various
state  and  federal  "fraud  and  abuse"  laws,  including  "anti-kickback"  and
"physician  self-referral"  laws.  Registrant  believes that  properties that it
manages are in material compliance with such laws and regulations.

         The laws, rules and regulations which govern Registrant,  its owned and
managed  properties and other persons with whom Registrant has relationships are
very broad and are subject to continuing change and interpretation.  Thus, it is
possible  that  certain  of the  past or  present  contractual  arrangements  or
business practices of Registrant might be challenged.  No assurance can be given
that  Registrant or the facilities  managed by Registrant will be able to obtain
or maintain the CONs,  licenses and approvals necessary to conduct their current
or proposed businesses.  Further, no assurance can be given that federal,  state
and local laws,  rules and regulations  will not be amended or interpreted so as
to  require  Registrant  or a  facility  managed  by  Registrant  to change  its
contracts or practices or to obtain  additional  CONs,  approvals or licenses to
conduct its  business as now  conducted  or as proposed to be  conducted or that
Registrant  or such  facility  will be able to obtain  such CONs,  approvals  or
licenses.  The  failure  to obtain  or  maintain  requisite  CONs,  licenses  or
approvals  or to  otherwise  comply  with  existing  or future  laws,  rules and
regulations or  interpretations  thereof could have a material adverse effect on
Registrant's results of operations and financial condition.

COMPETITION

         The  long-term  care  industry  generally  is  highly  competitive  and
Registrant  expects that the assisted  living business in particular will become
more competitive in the future. Registrant will be competing with numerous other
companies  providing  similar  long-term care  alternatives  such as home health
agencies,  lifecare at home,  community-based service programs,  congregate care
communities  and  convalescent  centers.  Providers of senior living  facilities
compete  for  residents  primarily  on the  basis of  quality  of  care,  price,
reputation,  physical  appearance of the facilities,  services  offered,  family
preferences,  physician referrals and location. Some of Registrant's competitors
are  significantly  larger than  Registrant  and have,  or may  obtain,  greater
resources than those of Registrant.

                                       9

<PAGE>

EMPLOYEES

         At March 31, 1999  Registrant had  approximately  250 employees of whom
approximately 145 were full-time employees.



Item 2.   Description of Property.
          -----------------------

         The table below sets forth certain information regarding the properties
owned or managed by Registrant:
<TABLE>
<CAPTION>

                                   Independent  Assisted   Skilled   Occupancy
    Name and Location                Living      Living    Nursing   Rate (%)(a)
    -----------------              -----------  --------   -------   -----------

Properties Owned:

<S>                                <C>         <C>          <C>         <C>
Hillside Terrace, Ann Arbor, MI        63        12(b)        23          95
Olds Manor, Grand Rapids, MI           98        54(b)        44          84
The Whitcomb, St. Joseph, MI          102        34                       86

Managed Only Property:

The Whittier, Detroit, MI             135        58                       65

Properties Under Development:

Camelot Cove (c)
North Bergen, NJ                      270        30           60

Camelot Village(c)                              120
Hicksville, NY

Camelot Village(c)
Huntington, NY                                  120


Orchard Terrace(c)                     64
Ann Arbor, MI

Presidential Place                              104
Hollywood, FL

</TABLE>

(a)  As of March 31, 1999.

(b) These units currently licensed as Homes for the Aged.

(c) Subject to funding being secured.

                                       10

<PAGE>

         HILLSIDE  TERRACE.  Hillside  Terrace  is a CCRC  located in Ann Arbor,
Michigan, approximately 30 miles from Detroit. The facility is located 1.5 miles
from downtown Ann Arbor,  the main business  district and home to the University
of Michigan,  which  enables  residents to attend  nearby  cultural and athletic
events.  Hillside  Terrace  was  built in 1969 and was  renovated  in 1994.  The
facility  currently has 75 apartment  units and 23 nursing  beds,  and a 64-unit
expansion has been approved by the city of Ann Arbor.  This will  facilitate the
conversion of a majority of the existing  independent  living apartment units to
assisted living units.

         OLDS MANOR.  Olds Manor is a CCRC  located in Grand  Rapids,  Michigan.
Olds Manor was built as a hotel in the 1920s but was  renovated in the 1960s for
use as a retirement center and nursing facility.  Olds Manor borders the central
business  district of Grand  Rapids,  adjacent to the Post Office and across the
street from city and county  administrative  offices.  Registrant estimates that
Olds Manor needs approximately $1 million for deferred maintenance.

         THE  WHITCOMB.  The Whitcomb is an  independent  living  facility  with
assisted living services, as required, provided by the outside homecare agencies
of the residents' choice, located in downtown St. Joseph,  Michigan, which is on
Lake  Michigan at the mouth of the St. Joseph River.  St.  Joseph's  population,
approximately 80,000 residents,  and proximity to four cosmopolitan cities, make
The Whitcomb  accessible to a large population and secondary market.  St. Joseph
is 85 miles from Chicago,  195 miles from  Detroit,  80 miles from Grand Rapids,
Michigan and 35 miles from South Bend, Indiana. The Whitcomb,  formerly a hotel,
was built in 1928. It was renovated in 1973 and in 1989 and has 136 apartments.

         THE  WHITTIER.  The Whittier is an  independent  living  facility  with
assisted  living  services,  as  required,  located in  Detroit,  Michigan.  The
Whittier  was  built in the  1920s and  renovated  in 1972 and 1989.  Registrant
estimates  that The  Whittier  needs  approximately  $1.5  million for  deferred
maintenance.

PROJECTS IN DEVELOPMENT

         To provide the  appropriate  level of  personal  care  efficiently  and
economically,  Registrant  intends to develop,  subject to the  availability  of
additional  capital  resources,  for itself or on behalf of  others,  or acquire
assisted  living  facilities  generally  ranging  in size from 80 to 120  units.
Registrant has developed a prototype assisted living facility. It is anticipated
that the prototype  assisted  living  facility  will be built on the  Properties
under  Development  listed  on the  preceding  page and  other  qualified  sites
presently  being  negotiated.  Each assisted  living  facility will generally be
built on a parcel of land  ranging  in size from 3 to 10 acres and will  contain
approximately  70,000 to 105,000  square feet.  Approximately  40 percent of the
building will be devoted to common areas and amenities, including reading rooms,
family or living rooms and other areas  designed to promote  social  interaction
among residents.  These areas will be located  primarily in a basic central core
structure  which  is  essentially  repeatable  in all of  Registrant's  proposed
facilities.  Modular  wings of  similar  design are added to the  central  core,
depending  upon the size of the  facility.  The building is usually two or three
stories and of either steel frame or masonry construction built to institutional
healthcare standards but strongly residential in

                                       11

<PAGE>

appearance.   The  interior   layout  is  designed  to  promote  a   "home-like"
environment, efficient delivery of resident care and resident independence. Each
residential  unit will be between  approximately  375 to 550 square  feet and is
expected to cost approximately  $60,000 to $90,000 to construct,  depending upon
construction costs which vary from state to state.

         Resident units in Registrant's  prototype  assisted living facility are
functionally  arranged  in eight to  twelve  apartment  clusters  surrounding  a
"neighborhood"  living  area in  order  to  foster  social  interaction  between
residents. Registrant's prototype may be configured with several different types
of  resident  units,  including a mix of one- and  two-bedroom  suites and large
studio or alcove apartments.  All units have a small kitchen and roll-in showers
for easy wheelchair  access.  The ground level typically  contains a kitchen and
common dining area,  administrative offices,  exercise or physical therapy room,
arts and crafts,  beauty salon,  laundry room, a private  dining room,  library,
living room, and TV room. Typically, one floor or one or two wings of a facility
contain resident units and common areas,  including  separate dining facilities,
specifically  designed to serve  residents  with  cognitive  impairments  (e.g.,
Alzheimer's disease) or other special needs.

         CCRCs will generally be built on a parcel of land ranging from 10 to 30
acres and will contain  from 150 to 200 units with an average  size  independent
living unit of between 900 and 1,000 square feet. The cost will average  between
$100,000 and $200,000 per independent living unit. Each CCRC will be tailored to
the specific needs of each site selected.

         In order to increase the number of senior living facilities  Registrant
develops  and  manages for itself or on behalf of others,  Registrant  may enter
into an agreement with an affiliated or unaffiliated  third-party entity,  which
may be a 501(c)(3)  organization,  to develop a senior living  facility for such
entity.  Registrant would generally attempt to obtain a management  agreement to
operate the facility  upon its  completion as well as a fair market value option
to purchase the facility at a future time. Through this type of transaction,  if
the third-party  entity is adequately  financed,  Registrant would not incur the
start-up  development  costs and operating losses typically  associated with the
development and initial operation of a senior living facility because Registrant
would  not be the  owner.  However,  prior  to  entering  into  such  agreement,
Registrant may incur certain initial expenses associated with its site selection
process.  Registrant  would earn a development  fee for the  development  of the
senior living facility and a management fee for its operation and might exercise
its option,  if any, to purchase the senior  living  facility.  The  third-party
entity would benefit through the attainment of a turnkey senior living facility.
To date, neither Registrant nor any of the 501(c)(3) organizations involved with
Registrant  has received any inquiry or comment  from any  regulatory  authority
with respect to its contractual arrangements with 501(c)(3) organizations.

                                       12

<PAGE>

MORTGAGE INDEBTEDNESS

         GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

         As of March 31, 1999, Hillside Terrace, Inc., a wholly-owned subsidiary
of Registrant and the owner of Hillside Terrace, was indebted to Great-West Life
&  Annuity  Insurance  Company  ("GWL")  in the  aggregate  principal  amount of
approximately $2.2 million.  Such indebtedness is secured by a first mortgage on
Hillside  Terrace.  As  of  March  31,  1999,  Whitcomb  Tower  Corporation,   a
wholly-owned  subsidiary  of  Registrant  and the  owner  of The  Whitcomb,  was
indebted to GWL in the aggregate  principal  amount of approximately $2 million.
Such indebtedness is secured by a first mortgage on The Whitcomb. The payment of
principal  and  interest  on each of the  foregoing  first  mortgages  has  been
guaranteed  by Vanguard.  In addition,  as of March 31, 1999,  Whittier  Towers,
Inc., the owner of The Whittier,  was indebted to GWL in the aggregate principal
amount of  approximately  $4 million.  Such  indebtedness  is secured by a first
mortgage on The Whittier.  Each of the foregoing  first  mortgages is due May 1,
2000 and bear interest at 9 percent per annum.  The first  mortgage  encumbering
The Whittier  provides  that a default  under such loan is also a default  under
both of the first  mortgages  encumbering  Hillside  Terrace  and The  Whitcomb.
Consequently,  a default under the first mortgage encumbering The Whittier could
result in the foreclosure of Hillside Terrace and The Whitcomb. The restrictions
and cross collateral  provisions of The Whittier  mortgage will be eliminated if
The Whittier is sold and the GWL mortgage on the property satisfied.

         In the  event  that  any  of  Whittier  Towers,  Inc.,  Whitcomb  Tower
Corporation,  or Hillside Terrace,  Inc. sells, conveys,  transfers,  pledges or
further  encumbers its property  without the prior written  consent of GWL, then
GWL has the right to declare due and  payable  the entire  balance of the unpaid
principal  with accrued and unpaid  interest due  thereon,  plus the  prepayment
premium provided in the promissory note related to its mortgage.

         Olds Manor,  Inc.  has agreed that prior to the date on which the loans
of GWL to Whittier  Towers,  Inc.,  Whitcomb  Tower  Corporation,  and  Hillside
Terrace,  Inc. are repaid in full, Olds Manor,  Inc. will not, without the prior
written  consent of GWL,  sell,  assign,  transfer,  or otherwise  dispose of or
encumber the Olds Manor retirement facility.

         Hillside  Terrace,  The  Whittier,  and The  Whitcomb  are  required to
deposit all net operating  income from the mortgaged  properties  into a reserve
account,  which account is being used to fund property  improvements and certain
other  expenditures.  The  Reserve  Account  also  has  been  pledged  to GWL as
additional security for repayment of the GWL loans.

                                       13

<PAGE>

         OLD KENT BANK

         As of March 31, 1999,  Olds Manor,  Inc., a wholly-owned  subsidiary of
Registrant  and the owner of Olds  Manor,  was  indebted  to Old Kent Bank ("Old
Kent") in the  aggregate  principal  amount of $139,744.  Such  indebtedness  is
secured by a first mortgage lien on Olds Manor. The loan bears interest at prime
rate plus 1 percent per annum and is due in 2001.

         OLDS MANOR MORTGAGE TRUST

         As of March 31,  1999,  Olds  Manor,  Inc.  was  indebted to Olds Manor
Mortgage Trust in the aggregate principal amount of $360,000. Such obligation is
secured by a mortgage on Olds Manor that is subordinate to the first mortgage on
Olds Manor held by Old Kent. The loan bears interest at prime plus 3 percent per
annum,  is  due  in  year  2000,  and  is  convertible  into  51,873  shares  of
Registrant's Common Stock at $6.94 per share. Registrant is the guarantor of the
Olds Manor Note.  The $360,000 Olds Manor Trust  mortgage is  subordinate to the
Old Kent Bank  mortgage.  The Olds Manor Trust  mortgage  has routine  covenants
respecting payment of taxes,  insurance,  repairs, etc., except that Olds Manor,
Inc.  cannot  permit any  increase  of the  principal  of the Old Kent  Mortgage
without the consent of the trustee of the Olds Manor Mortgage Trust. The trustee
is Carl G. Paffendorf, the Chief Executive Officer of Registrant.

         WHITCOMB MORTGAGE TRUST

         As of March 31, 1999,  Whitcomb Tower  Corporation  was indebted to The
Whitcomb  Mortgage  Trust in the aggregate  principal  amount of $850,000.  Such
obligation is secured by a mortgage on The Whitcomb that is  subordinate  to the
first  mortgage on The Whitcomb  held by GWL.  The loan bears  interest at prime
rate plus 3 percent per annum,  is due in 1999 and is  convertible  into 117,729
shares of Registrant's Common Stock at $7.22 per share.  Registrant is guarantor
of the Whitcomb Tower Note. The $850,000  Whitcomb Trust mortgage is subordinate
to GWL's mortgage.  The Whitcomb Trust mortgage has routine covenants respecting
payment  of  taxes,  insurance,   repairs,  etc.,  except  that  Whitcomb  Tower
Corporation  cannot  permit any  increase of the  principal  of the GWL mortgage
without the consent of the trustee of the Whitcomb  Mortgage Trust.  The trustee
is Carl G. Paffendorf.

Item 3.   LEGAL  PROCEEDINGS.  Registrant  is not a party to any material  legal
proceedings.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.  Not applicable.

                                       14

<PAGE>

                                     PART II
                                     -------

Item 5.  Market for Common Equity and Related Stockholder Matters.
         --------------------------------------------------------

         (a) Market  Information.  There is currently  no public  market for the
equity securities of Registrant.

         (b)   Holders.

                                                  Approximate Number of Record
               Title of Class                     Holders (as of March 31, 1999)
               --------------                     ------------------------------

Common Stock, par value $.01 per share                           800

         (c) DIVIDENDS. Registrant has not paid any cash dividends on the Common
Stock  since its  inception,  and the  Board of  Directors  does not  anticipate
declaring  any cash  dividends  on the Common Stock in the  foreseeable  future.
Registrant  currently  intends to utilize  any  earnings  it may achieve for the
development of its business  (including the  acquisition or development of other
senior living  facilities) and working capital  purposes.  In addition,  certain
provisions of existing  indebtedness of Registrant limit future  indebtedness of
Registrant as well as the Registrant's ability to pay cash dividends.

Item 6.  Management's Discussion and Analysis of Plan of Operation.
         ---------------------------------------------------------

Year Ended March 1998 vs. March 1999
------------------------------------

REVENUES

         Net  revenues  of  the  Registrant  represent  its  gross  consolidated
revenues, less charitable and Supplementary Social Security Income discounts.

         Net revenues increased by $1,122,000 or 14 percent,  from $7,774,000 in
the 1998 period to $8,896,000  in the 1999 period.  Development  fees  increased
$849,000,  or 456  percent,  from  $186,000  in 1998 to  $1,035,000  in the 1999
period. The increase was attributable to the partial fees due on two development
projects.

         Resident  services  Revenues  increased  $238,000,  or 5 percent,  from
$4,705,000 in the 1998 period to $4,943,000 in the 1999 period. The increase was
primarily due to rate increases.

         Healthcare  services remained  relatively flat with less than 1 percent
increase.

         Management fees increased $32,000, or 26 percent,  from $120,000 in the
1998 period to $152,000 in the 1999 period.  The increase was  primarily  due to
recovery of fees fully reserved.

                                       15

<PAGE>

RESIDENCE OPERATING EXPENSES

         Residence  operating  expenses  include all  retirement  and healthcare
center  operating  expenses,   including,   among  other  things,   payroll  and
employments  costs, food,  utilities,  repairs and maintenance,  insurance,  and
property taxes.

         Residence operating expenses increased by $248,000,  or 4 percent, from
$6,197,000 in the 1998 period to $6,445,000 in the 1999 period.  The increase is
mainly attributable to salary increases.

GENERAL AND ADMINISTRATIVE EXPENSES

         General and  administrative  expenses  include all marketing  costs, as
well as the general and  administrative  expenses  incurred at the  Registrant's
principal executive offices.  General and administrative expenses include, among
other things,  administrative salaries, rent, utilities,  insurance, and related
expenses.

         General and administrative  expenses declined $265,000,  or 25 percent,
from $1,076,000 in the 1998 period to $811,000 in the 1999 period, due primarily
to staff reductions.

PROVISION FOR RECOVERY ON ADVANCES TO AFFILIATES

         During  Fiscal  1999  Registrant  recorded  a net loss on  Advances  to
Affiliates  aggregating  $226,000  compared  to a Net  Recovery  of  Advances of
$351,000  in Fiscal  1998.  The  variance is a function of net funds paid out or
received from Registrant's  parent (Vanguard) and affiliated  companies.  Future
recoveries are anticipated as Vanguard plans to liquidate some of its assets.

INTEREST EXPENSE, NET

         Interest  expense,  net,  decreased  by  $39,000,  or 7  percent,  from
$560,000  in the 1998 period to $521,000  in the 1999  period.  The  decrease is
primarily due to a reduction in Notes and Mortgage payable.

OTHER INCOME

         Other income increased  $413,000,  or 417 percent,  from $99,000 in the
1998 period to $512,000 in the 1999 period.  The increase is attributable to the
sale of Registrant's Management Contract, forfeitures of deposits on the sale of
Registrant's assets, and fire insurance proceeds.

                                       16


<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         During fiscal 1999 operating activities provided cash of $1,165,000, an
increase of $898,000 over fiscal 1998. The increase in cash flows from operating
activities was principally due to the collection of development  fees receivable
and the Registrant's increase in net profit in fiscal 1999.

         During  fiscal  1999  Registrant   required  $1,116,000  for  investing
activities  compared to $47,000 in the 1998 period.  The increase was  primarily
due to the purchase of land for development.

         During fiscal 1999  Registrant  provided  $126,000 cash from  financing
activities  compared to requiring  $166,000 for  financing  activities in fiscal
1998.  The increase in cash flow was due to the financing of land  purchased for
development.

         Registrant is presently pursuing various strategies to increase working
capital,  including  (i)  refinancing  a  substantial  portion  of  Registrant's
mortgage  indebtedness  and (ii)  negotiating  the  sale of some of its  assets.
Although  there can be no  assurance  that any of the above  strategies  will be
successful, Registrant believes that the underlying value of its properties will
allow it to successfully implement its strategies.

PUBLIC OFFERING COSTS

         During  fiscal  1997,  Registrant  recorded  a charge  to  earnings  of
$1,170,344  representing  the  total  estimated  costs  of  its  aborted  public
offering.  During  fiscal  1999 and 1998,  Registrant  revised  its  estimate to
reflect actual costs incurred and, accordingly, recorded other income of $42,920
and $265,818, respectively.


Item 7.   FINANCIAL STATEMENTS.  See  page  F-1  for   Registrant's   financial
statements.

Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
         In  July  1999,   Registrant   dismissed  Grant  Thornton  LLP  as  its
independent  accountants.  Grant Thornton's accountant's report on the financial
statements  of  Registrant  for the past two years did not  contain  an  adverse
opinion or a  disclaimer  of opinion  and was not  qualified  or  modified as to
uncertainty,  audit  scope,  or  accounting  principles.  There  were  no  other
reportable events or disagreements  with Grant Thornton to report in response to
Item 304(a) of Regulation S-B.

         Holtz  Rubenstein  & Co.  LLP  has  been  engaged  as  new  independent
accountants  to the  Registrant  with respect to the fiscal year ended March 31,
1999.

                                       17

<PAGE>

                                    PART III
                                    --------

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act of Registrant.
-----------------------------------------------------------------------

         The following table sets forth information  regarding the Directors and
executive officers of Registrant as of March 31, 1999:

          Name                         Age                     Positions(s)
          ----                         ---                     ------------

Carl G. Paffendorf.............       66     Chairman of the Board and Chief
                                                  Executive Officer
Paul D'Andrea..................       66     Vice President - Finance
Craig M. Shields...............       57     Vice President and
                                                  General Counsel
Theresa A. Govier..............       NA     Vice President - Administration and
                                                  Secretary
Alan Guttman...................       49     Treasurer
James E. Eden..................       61     Director
Benjamin Frank.................       65     Director
Francis S. Gabreski............       79     Director
Robert S. Hoshino..............       52     Director


         CARL G.  PAFFENDORF has been Chairman of the Board and Chief  Executive
Officer  of  Registrant  since 1988 as well as a Director  of  Registrant  since
inception.  Mr.  Paffendorf  has been involved in the  development,  management,
acquisition  and/or  financing  of 12  retirement  communities  since 1979.  Mr.
Paffendorf  has been  president of Vanguard  since 1979 and chairman of Vanguard
since 1972.  Vanguard is a real estate  holding  company.  Mr.  Paffendorf is an
attorney and a member of the Florida and Ohio Bars and holds a Masters degree in
Tax Law (LLM).

         PAUL D'ANDREA has been Vice  President--Finance of Registrant since May
1994.  From 1991 to 1994,  Mr.  D'Andrea  was vice  president/controller  of ODA
Environetics International, Inc., a company engaged in architectural design, and
from  1975  through  1991 was  vice  president/treasurer  of Apco  Merchandising
Corporation,  a jewelry manufacturer and retailer.  Mr. D'Andrea received a B.S.
in accounting from New York University.

         CRAIG M.  SHIELDS  has been  Vice  President  and  General  Counsel  of
Registrant since 1992. From 1992 through 1995 Mr. Shields was of counsel/partner
of the law firm of Quinn & Suhr, LLP, White Plains,  New York. From 1983 through
1991 he was founder/partner of the law firm of Collier,  Cohen,  Shields & Bock,
New York,  New York.  He was educated at Fordham  University  School of Law, New
York, New York, LL.B, and Lafayette College, Easton, Pennsylvania, B.A.

                                       18


<PAGE>

         THERESA A. GOVIER has been Vice President--Administration and Secretary
of Registrant  since 1991.  Ms. Govier has also been employed by Vanguard  since
1977 as executive  assistant to the president and director of employee benefits.
Ms. Govier attended Nassau Community College from 1988 to 1992.

         ALAN GUTTMAN has been Treasurer of Registrant  since 1991 and Treasurer
of Vanguard since 1985. Prior to joining Vanguard,  he was controller of Brittan
Corporation,  a real estate property owner and management  company.  Mr. Guttman
has a B.A. degree in accounting from the City University of New York.

         JAMES E. EDEN has been a Director of  Registrant  since June 1996.  Mr.
Eden has been  President  of James E. Eden &  Associates,  Inc.  since  1992,  a
consulting  business  active  in both  the  senior  living  and  long-term  care
industries.  Since 1992,  Mr. Eden has also been Chairman of the Board and Chief
Executive  Officer of Oakwood  Living  Centers,  Inc., a private  long-term care
company  which owns and operates  geriatric and  rehabilitative  nursing beds in
Massachussets. In 1996 Mr. Eden became Chairman of the Board and Chief Executive
Officer of Senior Living Properties, LLC, a private long-term care company which
owns and operates  nursing  homes and assisted  living  facilities  in Texas and
Illinois.  From 1988 to 1992, Mr. Eden was employed by Marriott Corporation,  as
Executive Vice President and General Manager,  Senior Living Services  Division,
which acquired and developed senior living facilities.  Mr. Eden is a trustee of
the  Alliance  for  Aging  Research  and a  director  of both  Omega  Healthcare
Investors,  Inc. and Omega Worldwide,  Inc., public companies serving the senior
living and long-term care industries.

         BENJAMIN FRANK has been a Director of Registrant  since 1991. Mr. Frank
is an attorney and real estate  developer.  He holds a J.D. degree from New York
University School of Law and a B.Sc.  degree in Business  Management from Boston
University.  Prior to 1988 he was an executive  with Allied  Stores  Corporation
("Allied")  for 16 years.  His last position with Allied was that of senior vice
president with overall  responsibility  for real estate,  legal and governmental
affairs.

         FRANCIS  S.  GABRESKI  is a  Director  of both  UVH and  Vanguard.  Mr.
Gabreski is retired. He has a B.S. degree from Columbia  University.  He was the
top  American  Air Ace in the  European  Theater  during World War II and in the
Korean  conflict.  Upon  retirement  from the Air Force in 1962,  he  accepted a
position as  Assistant  to the  President of Grumman  Aerospace  Corporation,  a
position  he held  until  1978 when he was named  President  of the Long  Island
Railroad.  During his military career, Mr. Gabreski was awarded 17 United States
decorations  and  awards.  He was also  presented  with  decorations  from Great
Britain, Poland, France, the Republic of Korea, and Belgium.

         ROBERT S. HOSHINO,  JR. has been a Director of  Registrant  since 1996.
Mr. Hoshino has been assistant  general counsel,  EBASCO Services  Incorporated,
New  York,  New  York,  an   international   company   engaged  in  engineering,
construction and  environmental  services,  since 1981. Mr. Hoshino holds a J.D.
degree from Columbia University School of Law, a B.A. from

                                       19

<PAGE>

Colgate  University  and  continued  his  education  at the  Wharton  School  of
Business, University of Pennsylvania, in its Advanced Management Program.

         Messrs.  Paffendorf,  D'Andrea,  Frank,  Gabreski,  and Shields and Ms.
Govier are also officers and/or directors of Vanguard.

BOARD OF DIRECTORS COMPENSATION

         Outside  Directors are to be compensated at the rate of $6,000 per year
(payable in shares of Common Stock valued at fair market  value) plus $1,000 for
each meeting attended.  In addition,  each non-employee  Director is eligible to
participate  in the  Registrant's  1996  Outside  Directors'  Stock Option Plan.
Registrant  also has an Audit  Committee  composed  of Messrs.  Eden,  Frank and
Hoshino.  Audit Committee  members will be compensated at the rate of $1,000 per
meeting,  when such meeting is not held in conjunction with a Board of Directors
meeting and $500 per meeting  when such  meeting is held in  conjunction  with a
Board of Directors meeting.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires  Registrant's officers and Directors and persons who own more than five
percent of a registered class of Registrant's equity securities, to file reports
of  ownership  and  changes  in  ownership  with  the  Securities  and  Exchange
Commission.  Officers,  directors and greater than five percent stockholders are
required by the  Commission's  regulations to furnish  Registrant with copies of
all Section 16(a) forms they file.



                   Number of Late Reports             Number of Transactions Not
                   In Fiscal 1999                     Reported on a Timely Basis
                   ----------------------             --------------------------






Item 10.  Executive Compensation
          ----------------------

         The following table sets forth the total  compensation for Registrant's
Chief Executive  Officer during the fiscal years ended March 31, 1999, 1998, and
1997.

                                       20

<PAGE>
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                   Fiscal Year Ended         Annual Compensation
Name and Principal Position            March 31,                    Salary
---------------------------        -----------------         -------------------

<S>                                  <C>                           <C>
Carl G. Paffendorf                      1999                          $100,000
 Chief Executive Officer                1998                           100,000
                                        1997                           100,000
</TABLE>

         No stock options were granted to the Chief Executive Officer during the
fiscal year ended March 31, 1999.

         The   following   table  sets  forth  certain   information   regarding
unexercised  stock options held by the Chief  Executive  Officer as of March 31,
1999.  No options  were  exercised  by such person  during the fiscal year ended
March 31, 1999.



                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES


                                                         Number of Unexercised
                                                       Options at March 31, 1999
Name                                                   Exercisable/Unexercisable
----                                                   -------------------------

Carl G. Paffendorf..................................          17,600/5,400


LONG-TERM INCENTIVE AND PENSION PLANS

         Registrant  does not have any  long-term  incentive or defined  benefit
pension plans.

EMPLOYMENT AGREEMENT

         Effective  April 1, 1996,  Mr.  Paffendorf  entered  into a  three-year
employment  agreement with Registrant,  pursuant to which he serves as its Chief
Executive  Officer.   Mr.   Paffendorf's  annual  cash  compensation  under  the
employment agreement is $100,000.  Mr. Paffendorf has agreed not to compete with
Registrant  during the term of his  employment  and for a period of three  years
thereafter,  and he will not, without Registrant's written consent,  solicit the
residents  of  facilities  owned or  managed  by  Registrant  or any  management
contract  owned or being  negotiated  by Registrant  or its  subsidiaries  for a
period of 24 months  following the end of the term of his employment  agreement.
The agreement  automatically  renews for successive one-year terms unless either
party  terminates the agreement at least 45 days prior to the end of the initial
term or any subsequent term.  Registrant may terminate the agreement for "cause"
(a breach of the terms and  conditions  of the  agreement)  upon 30 days'  prior
written notice to Mr. Paffendorf.

                                       21

<PAGE>

STOCK OPTION PLANS

         1991 Incentive  Stock Option Plan.  Under  Registrant's  1991 Incentive
Stock Option Plan (the  "Incentive  Plan"),  210,000  shares of Common Stock are
reserved for issuance upon the exercise of stock options.  As of March 31, 1999,
options  to  purchase  an  aggregate  of  101,240  shares of Common  Stock  were
outstanding  under the Incentive Plan. The Incentive Plan is designed as a means
to attract,  retain and motivate key employees.  The Stock Option Plan Committee
administers and interprets the Plan.

         The Incentive Plan provides for the granting of incentive stock options
(as defined in Section 422 of the Code). Options are granted under the Incentive
Plan on such terms and at such  prices as  determined  by the Stock  Option Plan
Committee,  except that the per share  exercise  price of options cannot be less
than the fair market value of the Common Stock on the date of grant. Each option
is exercisable  after the period or periods  specified in the option  agreement,
but no option may be exercisable after the expiration of ten years from the date
of grant.  Options granted under the Incentive Plan are not  transferable  other
than  by will or by the  laws of  descent  and  distribution  or  pursuant  to a
qualified  domestic  relations  order as  defined  by the  Code or the  Employee
Retirement Income Security Act.

         1996 OUTSIDE  DIRECTORS' STOCK OPTION PLAN.  Registrant's  1996 Outside
Directors' Stock Option Plan (the  "Directors'  Plan") provides for the grant of
options to purchase  Common Stock of  Registrant  to  non-employee  directors of
Registrant.  The Directors'  Plan authorizes the issuance of a maximum of 90,000
shares of Common Stock.  As of March 31, 1999,  options to purchase an aggregate
of 20,400 shares of Common Stock were outstanding under the Directors' Plan.

         The Directors' Plan is  administered  by the Board of Directors.  Under
the Directors'  Plan each  non-employee  director 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 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  will  be  for a  ten-year  term,  subject  to  earlier
termination in the event of death or permanent disability.

         Prior to the adoption of the Directors'  Plan,  options had been issued
to  outside  directors,   of  which  options  to  purchase  28,800  shares  were
outstanding at March 31, 1999.

BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS

         Carl G. Paffendorf,  Registrant's Chief Executive Officer, participated
in the decisions of Registrant's Board of Directors  concerning executive office
compensation.  However,  Mr. Paffendorf  abstained from decisions concerning his
own compensation.

                                       22

<PAGE>

BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION

         The goal of the  Board of  Directors  is to  establish  a  motivational
compensation  plan for  executives  that will enable  Registrant  to attract and
retain those individuals deemed most qualified to improve and enhance its future
performance. As part of its periodic review of executive compensation, the Board
of Directors  considers  such factors as level of  responsibility,  Registrant's
general  growth,  improved  financial  condition,  compensation of executives at
comparable companies and other relevant factors. The Board of Directors strongly
believes that by providing those persons who have substantial responsibility for
the  management  and growth of Registrant  with an opportunity to increase their
ownership of Registrant stock, the best interests of stockholders and executives
will be closely aligned.  Therefore,  the Board of Directors included executives
as eligible employees under Registrant's  Incentive Plan, whereby executives are
eligible to receive stock options that give them the right to purchase shares of
Common Stock of Registrant at specified prices in the future.

         The Board of Directors believes executive  compensation  should be tied
to benefits  directly  accruing to stockholders  from positioning  Registrant to
grow  through  acquisitions,  increases  in  stockholders'  equity and  improved
operating results.  As indicated in the discussion above, the Board of Directors
believes that Registrant's  executive  compensation should be first and foremost
based on financial  performance  and returns to  stockholder.  The  compensation
levels of Registrant's officers are based on these two factors.

         The  Board  of  Directors  will  continue  to  monitor  the  level  and
effectiveness of executive compensation.

PERFORMANCE GRAPH

         There has not been a public  market for  Registrant's  Common Stock for
the past five years. Consequently, no performance graph is being filed with this
report.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.
          --------------------------------------------------------------

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership of the  Registrant's  Common Stock as of March 31, 1999 by
(i) each person who is known by  Registrant to be the  beneficial  owner of more
than 5% of  Registrant's  Common Stock,  (ii) each  director and each  executive
officer  (including shares owned by spouse or in trust), and (iii) all directors
and  executive  officers  as a group.  Except as  otherwise  noted,  each person
maintains a business  address at c/o United Vanguard Homes,  Inc., 4 Cedar Swamp
Road, Glen Cove, New York 11542,  and has sole voting and investment  power over
the shares shown as beneficially owned.

                                       23

<PAGE>

                                                                      Percent of
                                                                     Outstanding
                                               Shares Beneficially     Common
                                                       Owned            Stock
                                               -------------------   -----------

Vanguard Ventures, Inc....................         2,703,862             82%
Carl G. Paffendorf........................         2,754,843 (1)         83%
Benjamin Frank    ........................            23,932 (2)          *
Francis S. Gabreski.......................            39,860 (3)          *
Robert S. Hoshino, Jr.....................            31,067 (4)          *
James E. Eden     ........................             6,050 (5)          *
Directors and Executive Officers,
as a group (9 Persons)....................         2,890,932 (6)         87%

------------------------
*    Less than 1%.

(1)  Mr.  Paffendorf  is an officer,  director and  controlling  stockholder  of
     Vanguard.  Consequently,  Mr. Paffendorf may be deemed to be the beneficial
     owner of all shares of Common  Stock  owned by  Vanguard.  Includes  17,600
     shares of Common Stock  issuable upon  exercise of options and  convertible
     securities exercisable within 60 days of March 31, 1999.

(2)  Includes  14,760  shares of Common Stock  issuable upon exercise of options
     and convertible securities exercisable within 60 days of March 31, 1999.

(3)  Includes  28,610  shares of Common Stock  issuable upon exercise of options
     and convertible securities exercisable within 60 days of March 31, 1999.

(4)  Includes  11,000  shares of Common Stock  issuable upon exercise of options
     and convertible securities exercisable within 60 days of March 31, 1999.

(5)  Includes 3,800 shares of Common Stock issuable upon exercise of options and
     convertible securities exercisable within 60 days of March 31, 1999.

(6)  Includes  110,950  shares of Common Stock issuable upon exercise of options
     and convertible securities exercisable within 60 days of March 31, 1999.


Item 12. Certain Relationships and Related Transactions.
         ----------------------------------------------

DUE FROM AFFILIATES

         Registrant is owed by Vanguard and  affiliates  cash  advances,  unpaid
management  fees,  interest and other revenues.  These amounts  consisted of the
following as of March 31, 1999:

                                       24

<PAGE>

Due from Vanguard                                       $3,835,393
Due from Whittier Towers, Inc.                             374,951
Due from Vanguard Affiliated Limited
Partnerships (Vanguard is General Partner)                 166,871
Management fees and cash
  advances due from affiliated
  companies                                              2,976,917
                                                        ----------

                                                        $7,354,132
                                                        ==========

         See Footnote 3 to  Registrant's  financial  statements  for  additional
information.  Registrant  anticipates  that  these  types of  transactions  will
continue in the future.

GUARANTEES

         Registrant and affiliates guaranteed certain debt as of March 31, 1999,
as follows:
<TABLE>
<CAPTION>

                                                                            Amount As of
  Guarantor(s)                 Maker(s)            Lender/Obligee           March 31, 1999
-----------------------   ---------------------  -------------------------  --------------
<S>                                                                                <C>
Registrant                CBF Building Company   Apple Savings Bank                $38,731
Registrant, Vanguard,     Camelot Village at     State Bank of Long Island         271,900
Phoenix Lifecare Corp.    Huntington, Inc.
and Paffendorf
Vanguard and Paffendorf   Registrant             State Bank of Long Island          62,500
Vanguard                  Hillside Terrace, Inc. Great-West Life                 2,182,092
Vanguard                  Whitcomb Tower Corp.   Great-West Life                 2,036,475
</TABLE>


         The  Great-West  mortgage on The Whittier was  $3,962,640  at March 31,
1999.  A default  under The  Whittier  mortgage is a default  under the Hillside
Terrace and Whitcomb mortgages.  See Item 2, "Description of Property - Mortgage
Debt."

         In November 1999 CBF Building Company closed a $1,200,000 mortgage loan
with State Bank of Long Island,  which loan is secured by CBF Building Company's
Glen Cove  property (in which  Registrant  has its offices)  and  guaranteed  by
Vanguard, Mr. Paffendorf, and Registrant. At the closing, the Apple Savings Bank
loan  referred  to in the above  chart  was  satisfied.  Registrant  anticipates
increasing this mortgage to $1,500,000 in December 1999 with the same collateral
and guarantees.

         See also "Camelot  Village at Huntington,  Inc.,"  discussed below, for
information regarding additional guarantees of Registrant.

                                       25

<PAGE>

LEASE OF CORPORATE OFFICE

         Registrant  leases its  offices in Glen Cove,  New York,  2,500  square
feet, from CBF Building Company, a limited  partnership in which Vanguard is the
general partner.  Annual calendar year base rent is $39,784 in 1999,  $40,977 in
2000.  The lease expires on December 31, 2000.  Registrant has sublet 550 square
feet of its space to Vanguard on the same terms as Registrant's lease with CBF.

WHITTIER TOWERS, INC.

         Whittier  Towers,  Inc.,  owned by Phoenix  Lifecare  Corp.  (discussed
below)  has agreed to pay to  Registrant  a  management  fee of 5 percent of the
gross operating  income of The Whittier.  The term of the agreement is 60 months
(until March 31, 2001) and will continue on a month-to-month  basis  thereafter.
The  agreement  may be  terminated  by either party upon 30 days' prior  written
notice.

         Registrant has an option to purchase The Whittier from Whittier Towers,
Inc. at a purchase  price equal to the appraised  fair market value but not less
than the  current  outstanding  balance of the first  mortgage.  In Fiscal  1998
Registrant agreed to relinquish its option rights effective upon the sale of The
Whittier  facility  to an  unaffiliated  buyer and  payment to  Registrant:  (i)
payment of accrued but unpaid  management  fees since  April 1, 1996,  (ii) sums
paid by Registrant on or after April 1, 1996 to fund capital improvements at the
premises,  (iii)  sums spent by  Registrant  to fund  negative  cash flow of The
Whittier on or after April 1, 1996, and (iv) interest at 12 percent per annum on
the sums referred to in items (1) through (iii). In addition,  50 percent of the
remaining net profit (i.e., net of brokerage fees, closing costs, mortgage debt,
etc.), if any, shall be paid to Registrant.

PHOENIX LIFECARE CORP.

         Certain  officers of Registrant  are also officers of Phoenix  Lifecare
Corp.  ("Phoenix"),  a 501(c)(3)  corporation  which  provides  home health care
services to residents of The Whittier and The  Whitcomb.  No director,  officer,
employee,  or agent  of  Registrant  or  Vanguard,  or any of  their  respective
affiliates, is a director of Phoenix.

         Phoenix employs Registrant for management and  administrative  services
required in connection  with  Phoenix's  home health care  operations  for a fee
equal to 5 percent of the gross operating income of Phoenix.

         Whitcomb Tower  Corporation  ("Whitcomb"),  a subsidiary of Registrant,
leases to Phoenix approximately 450 square feet at The Whitcomb,  located at 509
Ship Street,  St.  Joseph,  Michigan,  for rent of $2,000  (which  includes food
service cost for tenant's staff) per month.

                                       26

<PAGE>

PRESIDENTIAL CARE CORP.

         Presidential Care Corp. is a 501(c)(3) corporation organized to acquire
land in  Hollywood,  Florida,  upon which an assisted  living  facility is being
built. Registrant has the development and management contracts on this property,
for  which  it will  be paid a 7 1/2  percent  development  fee and a 5  percent
management fee.  Registrant has an option to purchase at fair market value.  The
option is  exercisable  at any time  during the period  January 1, 2000  through
December 31, 2005.

         In  consideration  of the  commitment  of  Vanguard  to  advance  up to
$800,000 to fund the  acquisition  and  development  costs of an assisted living
facility to be built on the Hollywood,  Florida site,  Registrant will receive a
sum equal to 50 percent of the net proceeds from the sale of the assisted living
facility.

         In March  1999,  Registrant  agreed to pay  $90,915  to  Presidential's
architect  for  services  rendered in  connection  with the  Hollywood,  Florida
project.

CAMELOT VILLAGE AT HUNTINGTON, INC.

         Camelot  Village  at  Huntington,   Inc.  ("Camelot")  is  a  New  York
corporation organized in 1996 to acquire land in Huntington, New York upon which
an assisted  living facility will be built,  subject to  construction  financing
being obtained.  Registrant has the development and management contracts on this
property,  for  which it will be paid a 7 1/2  percent  development  fee and a 5
percent  management  fee.  Registrant  has an option to  purchase at fair market
value at any time during the five-year  period after  completion of construction
of the facility and issuance of a certificate  of occupancy,  but not before the
facility becomes 85 percent occupied.  In the event Registrant does not exercise
its purchase option, Camelot will have the right to sell the Huntington facility
to the highest  bidder.  Alternatively,  Camelot will have the right to sell the
facility to Registrant and Registrant must purchase the facility, at fair market
value, exercisable for 90 days at the end of the fifth year from the date of the
issuance of the certificate of occupancy on the facility,  but in all events not
later than March 31, 2007.

         Camelot is currently seeking $23,000,000 in construction financing from
the Suffolk County (New York) Industrial Development Agency, for which a project
completion guarantee may be required from Registrant.

         Carl G. Paffendorf,  Registrant's  Chief Executive  Officer,  Robert S.
Hoshino, Jr., and Benjamin Frank, Directors of Registrant, comprise the Board of
Directors of Camelot. Mr. Paffendorf owns 872 shares of Class B stock of Camelot
(out of a total of 2,800 shares issued) for an investment of $872,000,  the same
price paid by unaffiliated persons,  $1,000 per share. Mr. Hoshino owns 70 Class
B shares, also purchased at $1,000 per share.  Camelot shareholders are entitled
to 100 percent of the net cash flow from the  Huntington  facility's  operations
and 50 percent of the net proceeds from the sale of the property.

                                       27


<PAGE>

         Registrant has guaranteed to Camelot investors the payment of dividends
and  distributions  of up to $1,500,000 in the aggregate.  In  consideration  of
Registrant's  guarantee of $1.5 million of the investors'  investment in Camelot
stock,  Registrant  will receive 50 percent of the net proceeds from the sale of
the property.

         Camelot  anticipates  selling  its  Huntington,  New York  property  to
Registrant for $3,800,000, with a closing scheduled for December 30, 1999.

CAMELOT COVE/UNITED VANGUARD HOMES, LLC

         United Vanguard Homes,  LLC ("UVHLLC") is a New York limited  liability
company which plans to build and operate a 360-unit  continuing  care retirement
community on a 5-acre site located in North  Bergen,  New Jersey  between  River
Road and the Hudson River overlooking  Manhattan to the East. Registrant located
the site on behalf of UVHLLC,  and UVHLLC has entered  into a  long-term  ground
lease of the  site,  with  option  to  purchase.  Registrant  will  develop  the
facility,  including  supervision  of  construction,  marketing,  and  arranging
financing.  After  construction  has  been  completed,  Registrant  will  be the
managing agent and will have an option to buy the facility. UVHLLC is controlled
by Carl G.  Paffendorf,  its sole member,  pending the sale of a syndication for
the project, which is anticipated to be named "Camelot Cove."

         Under Ground Lease dated April 19, 1999, as amended, L.P.M. Associates,
L.L.C., an unaffiliated company ("LPM"),  agreed to lease UVHLLC a 5-acre parcel
of land on River Road, North Bergen, New Jersey. UVHLLC has issued LPM a $75,000
promissory note in lieu of a cash security  deposit under the Ground Lease.  The
note becomes due the earlier of:

         1.       Ninety  days of  receipt of final and  unappealable  site plan
                  approval  for the  facility  from  the  Planning  Board of the
                  Township  of North  Bergen and the County of Hudson,  together
                  with all necessary variances and site waivers; or

         2.       December 1, 1999.

         The Promissory Note provided by UVHLLC pursuant to the security deposit
provision  of the  Ground  Lease  has  been  personally  guaranteed  by  Carl G.
Paffendorf.  Registrant has agreed to indemnify and hold Mr. Paffendorf harmless
from any loss he may incur as a result of this personal guarantee.

         Pending  the  funding  of UVHLLC by a private  placement,  the Board of
Directors of  Registrant  has  authorized  loans to UVHLLC for sums  required to
enter into the Ground  Lease and to fund costs of zoning  approval  and  related
costs.

         Registrant will develop the North Bergen,  New Jersey Facility and will
provide services,  including:  oversight of zoning matters,  architectural floor
plans and design, project financing,  marketing,  creation and implementation of
computer programs,  records,  budgets, the Facility's  furnishings and fixtures,
and  rent-up  for  the  period  prior  to the  completion  of  construction  and

                                       28

<PAGE>

occupancy.  Registrant  shall be paid a fee  equal to 7.5  percent  of the total
costs for such development services.

         After the Facility is  constructed,  a subsidiary  of  Registrant  will
manage  the  Facility  for an annual  fee of 5 percent  of gross  revenues  from
operations.

         It is anticipated  that  Registrant  will have an option to acquire the
Facility at fair market value at any time during the  five-year  period after it
attains stabilized occupancy (85 percent). The option price will be at appraised
fair market value,  provided  that in no event shall the purchase  price be less
than mortgage debt on the property,  plus (i) a sum equal to amounts  originally
paid for then  outstanding  Membership  Interests  less any  return  of  capital
previously paid and (ii) all accumulated but unpaid dividends.

                                       29

<PAGE>

                               POWERS OF ATTORNEY

         United  Vanguard  Homes,  Inc.  and each of the  undersigned  do hereby
appoint Paul D'Andrea,  Alan Guttman,  and Carl G. Paffendorf,  and each of them
severally,  its or his true and lawful  attorneys to execute on behalf of United
Vanguard  Homes,  Inc. and the undersigned any and all amendments to this Report
and to file same with all exhibits  thereto and other  documents  in  connection
therewith,  with the Securities and Exchange Commission.  Each of such attorneys
shall have the power to act hereunder with or without the other.

                                   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 9th day of
December 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        December 9, 1999
-------------------------     (Principal Financial
Paul D'Andrea                 Officer and Principal
                              Accounting Officer)

/s/ Benjamin Frank            Director                        December 9, 1999
-------------------------
Benjamin Frank


/s/ Francis S. Gabreski       Director                        December 9, 1999
-------------------------
Francis S. Gabreski


/s/ Carl G. Paffendorf        Chairman of the Board           December 9, 1999
-------------------------     and Chief Executive
Carl G. Paffendorf            Officer

/s/ Robert S. Hoshino, Jr.    Director                        December 9, 1999
-------------------------
Robert S. Hoshino, Jr.


/s/ James E. Eden             Director                        December 9, 1999
-------------------------
James E. Eden


<PAGE>

                                     PART IV
                                     -------

Item 13.  Exhibits and Reports on Form 8-K
          --------------------------------

    (a)  EXHIBITS

         None.


    (b)  REPORTS ON FORM 8-K

         Registrant  filed no reports on Form 8-K during the quarter ended March
31, 1999.


<PAGE>
                  UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
                  --------------------------------------------

              REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS
              -----------------------------------------------------

                       YEARS ENDED MARCH 31, 1999 AND 1998
                       -----------------------------------


<PAGE>
                  UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
                  --------------------------------------------

              REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS
              -----------------------------------------------------

                       YEARS ENDED MARCH 31, 1999 AND 1998
                       -----------------------------------


                                    CONTENTS
                                    --------

                                                                          Page
                                                                          ----

Report of Holtz Rubenstein & Co., LLP, Certified Public Accountants        F-2

Report of Grant Thornton LLP, Independent Certified Public Accountants     F-3

Consolidated balance sheets at March 31, 1999 and 1998                     F-4

Consolidated statements of operations for the
   years ended March 31, 1999 and 1998                                     F-5

Consolidated statement of stockholders' deficiency
   for the years ended March 31, 1999 and 1998                             F-6

Consolidated statements of cash flows for the years
   ended March 31, 1999 and 1998                                           F-7

Notes to consolidated financial statements                            F-8 - F-19


<PAGE>



                          Independent Auditors' Report
                          ----------------------------



Board of Directors
United Vanguard Homes, Inc.

We have audited the  consolidated  balance sheet of United Vanguard Homes,  Inc.
and Subsidiaries as of March 31, 1999 and the related consolidated statements of
operations,  stockholders'  deficiency  and cash flows for the year then  ended.
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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance  about  whether  the  consolidated  financial  statements  are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by management,  as well as evaluating  the overall  consolidated
financial  statement  presentation.   We  believe  that  our  audit  provides  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 United  Vanguard
Homes,  Inc. and  Subsidiaries  as of March 31,  1999,  and the results of their
operations  and their  cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.




/s/ Holtz Rubenstein & Co., LLP

Melville, New York
August 31, 1999 (except for Note 5, as to
   which the date is October 11, 1999)






                                       F-2

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




Board of Directors
United Vanguard Homes, Inc.


We have audited the accompanying  consolidated  balance sheet of United Vanguard
Homes,  Inc. and Subsidiaries as of March 31, 1998 and the related  consolidated
statements of operaitons,  stockholders' deficiency, and cash flows for the year
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 audit 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,  evidencing
supporting the amounts and disclosure 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 audit  provides 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, 1998, and the consolidated  results
of their operations and their  consolidated  cash flows for the year then ended,
in conformity with generally accepted accounting principles.



/s/ Grant Thornton LLP

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

                                      F-3
<PAGE>

                  UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
                  --------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
<TABLE>
<CAPTION>

                                                                                                         March 31,
               ------                                                                   ------------------------------------------
               ASSETS                                                                        1999                       1998
               ------                                                                   ------------------------------------------

<S>                                                                                     <C>                       <C>
CURRENT ASSETS:
   Cash                                                                                 $   430,711               $    256,188
   Accounts receivable, less allowance for doubtful accounts
      of $91,000 and $40,000 in 1999 and 1998, respectively                                 452,042                    620,627
   Development fees and advances (Note 4)                                                      --                      981,000
   Due from affiliates, net (Note 3)                                                        763,952                    179,552
   Prepaid expenses and other                                                               157,514                    177,123
                                                                                        -----------               ------------
         Total current assets                                                             1,804,219                  2,214,490
                                                                                        -----------               ------------

PROPERTY AND EQUIPMENT, net (Note 2)                                                      2,985,652                  2,110,610
                                                                                        -----------               ------------

OTHER ASSETS:
   Restricted assets (Note 1)                                                               166,000                    108,352
   Due from affiliates, net (Note 3)                                                        729,117                       --
   Other assets                                                                             188,271                    203,161
                                                                                        -----------               ------------
                                                                                          1,083,388                    311,513
                                                                                        -----------               ------------

                                                                                        $ 5,873,259               $  4,636,613
                                                                                        ===========               ============

   LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
   Current portion of long-term debt (Note 5)                                           $   482,512               $    661,466
   Accounts payable                                                                         389,711                    350,244
   Accrued expenses                                                                         604,561                    568,511
   Public offering costs                                                                    198,721                    328,641
   Deferred income                                                                            7,200                       --
   Income taxes payable                                                                     131,368                    156,316
                                                                                        -----------               ------------
         Total current liabilities                                                        1,814,073                  2,065,178
                                                                                        -----------               ------------

RESIDENT SECURITY DEPOSITS                                                                  289,870                    282,300
                                                                                        -----------               ------------

LONG-TERM DEBT, less current portion (Note 5)                                             6,308,936                  5,946,281
                                                                                        -----------               ------------

COMMITMENTS AND CONTINGENCIES  (Note 7)

STOCKHOLDERS' DEFICIENCY:  (Note 8)
   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, 3,313,265 shares
      and 3,309,890 shares in 1999 and 1998, respectively                                    33,133                     33,099
   Additional paid-in capital                                                             7,009,048                  6,998,957
   Deficit                                                                               (9,581,801)               (10,689,202)
                                                                                        -----------               ------------
                                                                                         (2,539,620)                (3,657,146)
                                                                                        -----------               ------------

                                                                                        $ 5,873,259               $  4,636,613
                                                                                        ===========               ============
</TABLE>

                 See notes to consolidated financial statements

                                       F-4
<PAGE>
                  UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                                Years Ended
                                                                                                  March 31,
                                                                                  --------------------------------------
                                                                                     1999                         1998
                                                                                  ---------                     -------
<S>                                                                               <C>                       <C>
OPERATING REVENUES:  (Notes 1 and 4)
   Resident services                                                              $ 4,943,342               $ 4,704,992
   Health care services                                                             2,765,919                 2,763,104
   Management fees                                                                    151,562                   120,000
   Development fees                                                                 1,034,585                   185,500
                                                                                  -----------               -----------
                                                                                    8,895,408                 7,773,596
                                                                                  -----------               -----------

OPERATING EXPENSES:  (Note 7)
   Residence operating expenses                                                     6,444,584                 6,196,474
   General and administrative                                                         811,420                 1,076,327
   Depreciation and amortization                                                      258,242                   273,463
   Provision for (recovery of) loss on advances to affiliates                         226,424                  (351,396)
                                                                                  -----------               -----------
                                                                                    7,740,670                 7,194,868
                                                                                  -----------               -----------

         Income from operations                                                     1,154,738                   578,728
                                                                                  -----------               -----------

OTHER INCOME (EXPENSES):
   Interest expense, net                                                             (521,173)                 (560,163)
   Other income (Note 9)                                                              511,702                    99,109
   Adjustment of public offering costs                                                 42,920                   265,818
                                                                                  -----------               -----------
                                                                                       33,449                  (195,236)
                                                                                  -----------               -----------

         Income before income taxes                                                 1,188,187                   383,492

INCOME TAXES (Note 6)                                                                  80,786                    71,882
                                                                                  -----------               -----------

         NET INCOME                                                               $ 1,107,401               $   311,610
                                                                                  ===========               ===========

NET INCOME PER COMMON SHARE:
   Basic                                                                                  .33                       .09
                                                                                  ===========               ===========

   Diluted                                                                                .33                       .09
                                                                                  ===========               ===========

WEIGHTED AVERAGE COMMON SHARES
   AND COMMON EQUIVALENT SHARES
   OUTSTANDING:
      Basic                                                                         3,311,890                 3,307,214
                                                                                  ===========               ===========

      Diluted                                                                       3,346,090                 3,341,414
                                                                                  ===========               ===========
</TABLE>


                 See notes to consolidated financial statements

                                       F-5
<PAGE>



                  UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
                  --------------------------------------------

               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
               --------------------------------------------------

                       YEARS ENDED MARCH 31, 1999 AND 1998
                       -----------------------------------


<TABLE>
<CAPTION>
                                                                                 Additional
                                                                                   Paid-in
                                                    Shares         Amount          Capital          Deficit              Total
                                                   ---------      --------       ----------       ----------          ---------

<S>                                                <C>            <C>           <C>              <C>               <C>
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)

Shares issued as compensation                          3,375            34           10,091              --             10,125
Net income                                              --            --               --           1,107,401        1,107,401
                                                  ----------      --------      -----------      ------------      -----------

BALANCE, March 31, 1999                            3,313,265      $ 33,133      $ 7,009,048      $ (9,581,801)     $(2,539,620)
                                                  ==========      ========      ===========      ============      ===========

</TABLE>


                 See notes to consolidated financial statements

                                       F-6


<PAGE>

                  UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
                  --------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

<TABLE>
<CAPTION>
                                                                                              Years Ended
                                                                                                March 31,
                                                                                 -----------------------------------
                                                                                         1999              1998
                                                                                 -----------------      ------------
<S>                                                                                 <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                       $ 1,107,401        $ 311,610
   Adjustments to reconcile net income to net
      cash provided by operating activities:
         Depreciation and amortization                                                  258,242          273,463
         Common stock issued for services                                                10,125           25,620
         Changes in operating assets and liabilities:
            (Increase) decrease in assets:
               Accounts receivable                                                      168,585          (65,098)
               Due from affiliates                                                   (1,313,517)          88,055
               Prepaid expenses and other current assets                                 19,609          357,836
               Development fees and advances                                            981,000         (185,500)
               Other assets                                                              (2,256)          (7,358)
            Increase (decrease) in liabilities:
               Accounts payable                                                          39,467         (137,514)
               Accrued expenses and public offering costs                               (93,870)        (357,649)
               Income taxes payable                                                     (24,948)         (34,433)
               Deferred income                                                            7,200             --
               Resident security deposits                                                 7,570           (2,226)
                                                                                    -----------        ---------
         Net cash provided by operating activities                                    1,164,608          266,806
                                                                                    -----------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                                (1,116,138)         (47,339)
                                                                                    -----------        ---------
         Net cash used in investing activities                                       (1,116,138)         (47,339)
                                                                                    -----------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from borrowings on mortgages and notes payable                              750,000          225,000
   Principal repayments of mortgages and notes payable                                 (566,299)        (312,451)
   Decrease (increase) in restricted cash financing                                     (57,648)          (8,752)
   Common stock purchased and simultaneously retired                                       --            (70,000)
                                                                                    -----------        ---------
         Net cash provided by (used in) financing activities                            126,053         (166,203)
                                                                                    -----------        ---------

Net increase in cash                                                                    174,523           53,264

Cash, beginning of year                                                                 256,188          202,924
                                                                                    -----------        ---------

Cash, end of year                                                                   $   430,711        $ 256,188
                                                                                    ===========        =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for:
      Interest                                                                      $   604,991        $ 529,529
                                                                                    ===========        =========

      Income taxes                                                                  $   105,734        $  85,138
                                                                                    ===========        =========
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
   During 1998 the Company entered into capital leases
      for furniture and equipment aggregating $48,000
</TABLE>

                 See notes to consolidated financial statements

                                       F-7


<PAGE>

                  UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
                  --------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                       YEARS ENDED MARCH 31, 1999 AND 1998
                       -----------------------------------


1.       Basis of Presentation and Summary of Significant Accounting Policies:

         a.   Nature of 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 engaged in providing assisted living services.

         b.   Basis of presentation

              As  of  March  31,  1999,   the  Company  has  a   deficiency   in
stockholders'  equity of  $2,540,000  and a deficiency in working  capital.  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  refinancing  a substantial
portion  of  the  Company's  mortgage  indebtedness.  Although  there  can be no
assurance that any of the strategies  will be successful,  the Company  believes
that  the  underlying  value  of  its  properties  will  allow  the  Company  to
successfully implement its strategies.

         c.   Principles of consolidation

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

         d.   Restricted assets

              Restricted  assets at March 31,  1999 and 1998  consist of cash of
$166,000 and $108,352,  respectively,  which  collateralizes  an insurance  bond
required by Michigan  State law for  resident  security  deposits.  In addition,
restricted  use cash accounts  totaling  approximately  $154,000 and $151,000 at
March 31,  1999 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.

         e.   Property and equipment

              Machinery and equipment is stated at cost and is depreciated using
accelerated methods over useful lives established under Federal income tax laws.
Such methods differ from generally accepted accounting principles, however, such
differences are not considered material.  The cost and accumulated  depreciation
for machinery and equipment sold, or otherwise disposed of, is relieved from the
accounts and resulting gains or losses are reflected in income.

              Leasehold  improvements  are  amortized  over the  shorter  of the
remaining life of the lease or the life of the improvements.

                                       F-8


<PAGE>

1.       Basis of Presentation and Summary of Significant  Accounting  Policies:
         (Cont'd)

         f.   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.

              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.

         g.   Per share information

              Basic  earnings  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 34,200  during the year ended March 31, 1999
and 1998 were used in the calculation of diluted earnings per common shares.

         h.   Stock-based compensation

              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 consolidated
financial statements as if the fair value based method had been applied.

         i.   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.

              Under  Medicare  and Medicaid  cost  reimbursement  programs,  the
Company is  reimbursed  for  services  rendered  to covered  patients.  Revenues
derived from these programs are based in part on cost  reimbursement  principles
and  are  subject  to  examination   and  retroactive   adjustment.   Management
continuously  evaluates  the  outcome of these  reimbursement  examinations  and
provides allowances for any potential adjustments. In the opinion of management,
retoactive adjustments,  if any, would not be material to the financial position
or results of operations of the Company.

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


                                       F-9


<PAGE>

1.       Basis of Presentation and Summary of Significant  Accounting  Policies:
         (Cont'd)

         i.   Revenue recognition  (Cont'd)

              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.

         j.   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.  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.

         k.   Use of estimates and other matters

              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 consolidated
financial  statements and 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  1999 and 1998,  the Company  revised its  estimate to
reflect actual costs incurred and, accordingly, recorded other income of $42,920
and $265,818, respectively.

              The  Company   recorded  revenue  for  development  fees  services
provided to affiliates,  based upon a service completion  schedule.  As of March
31, 1999 and 1998,  revenues recorded  amounted to approximately  $1,034,000 and
$186,000, respectively.

              The  Company  is  self-insured  for health  insurance.  Losses are
accrued based upon the Company's estimates of the aggregate liability for claims
incurred   based  on  prior   experience.   As  of  March  31,  1999  and  1998,
self-insurance  liabilities  amounts to  approximately  $143,000  and  $112,000,
respectively.


                                      F-10

<PAGE>
2.       Property and Equipment, Net:

         Property and equipment, at cost, is summarized as follows:
<TABLE>
<CAPTION>
                                                                               March 31,
                                                                    -------------------------------
                                                                     1999                   1998
                                                                    ------                 ------
               <S>                                                  <C>                  <C>
               Land                                                 $1,622,408           $  632,408
               Buildings and improvements                            4,601,776            4,522,649
               Equipment                                             1,053,665            1,006,654
                                                                    ----------           ----------
                                                                     7,277,849            6,161,711
               Less accumulated depreciation and amortization        4,292,197            4,051,101
                                                                    ----------           ----------

                                                                    $2,985,652           $2,110,610
                                                                    ==========           ==========
</TABLE>

3.       Related Party Transactions:

         a.   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>
                                                                                                   March 31,
                                                                                         ---------------------------
                                                                                            1999             1998
                                                                                         ---------        ----------
               <S>                                                                       <C>              <C>
               Due from VVI                                                              $3,835,393       $1,552,570
               Due from the Whittier, Phoenix Lifecare Corp.
                  affiliated company                                                        374,951        2,978,538
               Due from VVI affiliated limited partnership
                  (VVI is general partner)                                                  166,871          169,171
               Management fees and cash advances
                  due from affiliated companies                                           2,976,917          906,300
                                                                                         ----------       ----------
                                                                                          7,354,132        5,606,579
               Less reserve for losses                                                    5,861,063        5,427,027
                                                                                         ----------       ----------

               Due from affiliates, net                                                  $1,493,069       $  179,552
                                                                                         ==========       ==========
</TABLE>
              At March  31,  1999 and  1998,  the  unreserved  amounts  due from
affiliates represent development fees and advances from the following:
<TABLE>
<CAPTION>
                                                                                                    March 31,
                                                                                     ----------------------------------
                                                                                          1999                   1998
                                                                                          ----                   ----
              <S>                                                                    <C>                      <C>
              United Vanguard Homes, LLC                                             $    4,079               $   --
              Presidential Care Corp.                                                   729,117                 24,315
              Camelot Village at Huntington, Inc.                                       759,873                   --
              Camelot Village at Stroudsburg, LLC                                          --                  155,237
                                                                                     ----------               --------
                                                                                      1,493,069                179,552
              Less non-current                                                          729,117                   --
                                                                                     ----------               --------

                                                                                     $  763,952               $179,552
                                                                                     ==========               ========
</TABLE>
                                      F-11


<PAGE>

3.       Related Party Transactions:  (Cont'd)

         a.   Due from affiliates, net  (Cont'd)

              The Company is  currently  providing  development  services to two
related  parties,  Presidential  Care Corp.  and Camelot  Village at Huntington.
Development  fees to be earned on these projects  aggregate  approximately  $2.1
million.  As of March 31, 1999, total  development fees earned  approximate $1.1
million.  Development  fees are earned upon  completion of each contract  phase,
which consists of the following:

<TABLE>
<CAPTION>
              <S>                                                                   <C>
              Forlocating  the land,  securing  an  option  on the site,  zoning
                 application work, architectural, engineering, environmental and
                 decorating
                 matters, and formation of model                                       25%
              For arranging equity financing                                            5
              For obtaining zoning approval
                 for assisted living facility                                          20
              For construction management                                              25
              For marketing and hiring the initial operation staff                     25
                                                                                    -----

                                                                                      100%
                                                                                    ======
</TABLE>

         b.   Presidential

              The  unreserved  amount at March 31, 1999  represents  development
fees of  $729,117  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.  During  fiscal  1999,  the Company  recognized
$367,702 of development fees and made advances of $337,100  primarily related to
the  closing  of  the  construction  financing.  Presidential  received  interim
financing  through  a  private  placement  and had  closed  on its  construction
financing as of March 31, 1999.

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

              During  fiscal 1999,  advances of $133,490  were made to Camelot -
Huntington,  a corporation  affiliated with the Company. The Company has entered
into a  development  agreement  with  Camelot -  Huntington  and has obtained an
option to purchase the underlying  property.  Construction of an assisted living
facility is planned to commence in the  beginning  of fiscal  2000.  The Company
recognized $626,383 of development fees in fiscal 1999.

              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.

              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.


                                      F-12


<PAGE>

3.       Related Party Transactions:  (Cont'd)

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

              Additional  advances of $6,406 were made in fiscal 1999.  The sale
of the property closed during fiscal 1999 and all advances were fully paid.

         e.   Phoenix Lifecare Corp. ("Phoenix")

              Phoenix, a not-for-profit corporation affiliated with the Company,
provides  health care  services to residents of the Whitcomb  Tower on behalf of
the  Company.  The Company  earns a  management  fee from  Phoenix for  services
rendered.  The amounts due from Phoenix of $1,483,848  and $726,748 at March 31,
1999 and 1998,  respectively,  have been fully  reserved and no management  fees
have been recognized during fiscal 1999 and 1998.

         f.   United Vanguard Homes, LLC

              United Vanguard Homes, LLC, a limited liability company affiliated
with the Company,  is  negotiating  to enter into a 99 year ground lease on land
located in North Bergen,  N.J. for the purpose of  developing a continuing  care
retirement community.

4.       Development Fees and Advances:

         The Company developed and completed 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  1999 and  1998,  the  Company  recognized  $45,000  and  $185,500,
respectively,  of such development  fee. All remaining  unpaid  development fees
were fully paid in 1999.

5.       Long-Term Debt:

<TABLE>
<CAPTION>
         a. Mortgages payable                                                                        March 31,
            -----------------                                                         -------------------------------------
                                                                                          1999                     1998
                                                                                      ------------            -------------
             <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 May 1, 2000,  as extended on October 11,  1999;  restricted
                 use cash accounts have
                 been pledged as additional collateral (Note 1).                      $  4,218,567            $   4,275,364
              Convertible mortgages with interest at prime, plus
                 3%  (10.75%  at March  31,  1999),  payable  in  interest  only
                 installments  quarterly,  maturity dates are April 30, 2000, as
                 extended,  and August 2000, net of original  issued discount of
                 $42,789 and  $26,223,  respectively.  Convertible  into 169,602
                 shares of UVH common stock, as of March 31,
                 1999, subject to adjustment, as defined.                                1,200,343                1,183,777
              Mortgage with interest at prime plus 1% (8.75% at
                 March 31, 1999) payable in monthly installments of
                 $4,818 including interest, balance due August 2001.                       139,744                  180,947
              Mortgage, with interest only payable monthly
                 at 7.5% per annum, due July 1, 2000.                                      750,000                       -
                                                                                      ------------            -------------

                                                                                         6,308,654                5,640,088
                                                                                      ------------            -------------
</TABLE>


                                      F-13


<PAGE>
5.       Long-Term Debt:  (Cont'd)

         b. Notes payabl
            ------------
<TABLE>
<CAPTION>
                                                                                                             March 31,
                                                                                          -----------------------------------------
                                                                                                 1999                   1998
                                                                                          ------------------     ------------------
              <S>                                                                                    <C>                    <C>
              Note payable in monthly  installments  of $5,000 plus  interest at
                 prime plus 2% (9.75% at March 31,  1999).  The note is pursuant
                 to a line of credit which expires April 7, 2000.                                    147,470                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% (9.25% at March 31, 1999).                                                      62,500                212,500
              Notes payable, with interest only payable monthly
                 at prime plus 1 1/2% (9.25% at March 31, 1999)
                 due June 1999.                                                                       50,000                 75,000
              Equipment notes payable, with interest ranging from
                 3% to 15%, payable in monthly installments of
                 principal and interest of $1,428 until November 2002.                                62,824                 96,159
              Notes payable, with interest at 20%, due June 30, 1998.                                     -                 150,000
                                                                                          ------------------     ------------------
                                                                                                     482,794                967,659
                                                                                          ------------------     ------------------
                                                                                                   6,791,448              6,607,747
              Less current portion                                                                   482,512                661,466
                                                                                          ------------------     ------------------

                                                                                          $        6,308,936     $        5,946,281
                                                                                          ==================     ==================
</TABLE>
              The  approximate  aggregate  maturities  of  mortgages  and  notes
payable are as follows:

              Fiscal Year
                Ending
               March 31,
              -----------

                 2000                               $          482,000
                 2001                                        6,111,000
                 2002                                          139,000
                 2003                                           58,000
                                                    ------------------
                                                    $        6,790,000
                                                    ==================
6.       Income Taxes:

         The  consolidated  provision for income taxes consists of the following
at March 31:
<TABLE>
<CAPTION>
                                                        March 31,
                                        ---------------------------------------
                                             1999                     1998
                                             ----                     ----
         <S>                            <C>                       <C>
         Current:
            Federal                     $          -              $          -
            State and local                    80,786                    71,882
                                        -------------             -------------
                                               80,786                    71,882
                                        -------------             -------------
         Deferred:
            Federal                                -                         -
            State and local                        -                         -
                                        -------------             -------------
                                                   -                         -
                                        -------------             -------------
                                        $      80,786             $      71,882
                                        =============             =============
</TABLE>
                                      F-14
<PAGE>
6.       Income Taxes:  (Cont'd)

         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:
<TABLE>
<CAPTION>
                                                                                March  31,
                                                                      ---------------------------
                                                                        1999                1998
                                                                      --------             ------
         <S>                                                           <C>                  <C>
         Statutory Federal tax rate                                    34.00%               34.00%
         State income taxes, net of Federal income tax benefit          6.80                18.74
         Valuation allowance                                          (34.00)              (34.00)
                                                                       -----                -----

         Effective tax rate                                             6.80%               18.74%
                                                                       =====                =====
</TABLE>

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

<TABLE>
<CAPTION>
                                                                               March 31,
                                                                    -------------------------------
                                                                       1999                 1998
                                                                    ---------           -----------

         <S>                                                        <C>                <C>
         Net operating loss carryover                               $  507,000         $  641,000
         Due from affiliates                                         2,344,000          2,171,000
         Fixed assets                                                  895,000            895,000
         Accrued expenses and other                                    116,000            190,000
                                                                    ----------         ----------
                                                                     3,862,000          3,897,000
         Valuation allowance                                         3,862,000          3,897,000
                                                                    ----------         ----------

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

         The Company has net operating loss carryforwards for Federal income tax
purposes as of March 31, 1999 of  approximately  $1,268,000.  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 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.

7.       Commitments and Contingencies:

         a.   Operating leases

              Aggregate rental expense under operating leases was  approximately
$33,000  in  both  years  ended   March  31,  1999  and  1998.   UVH  rents  its
administrative office facilities from CBF Building Company, an affiliate of VVI,
under a lease  expiring  December 31, 2000, at an  approximate  annual rental as
follows:

              Fiscal Year
                Ending
               March 31,

                 2000                        $      39,000
                 2001                               40,000
                                             -------------

                                             $      79,000

                                      F-15


<PAGE>

7.       Commitments and Contingencies:  (Cont'd)

         b.   Guarantees

              The Company  guaranteed a bank loan to CBF Building  Company.  The
balance outstanding on this loan is approximately $39,000 at March 31, 1999.

              The Company  guaranteed a bank loan to an affiliate with a balance
of $271,900 at March 31, 1999.

              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, 1999 and
1998 was approximately $62,500 and $212,500, respectively.

         c.   Self-insurance

              The  Company   partially   self-insures  for  health  and  medical
liability costs 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  nondiscounted  basis based on claims filed and an
estimate of claims  incurred but not yet reported.  The amount  accrued at March
31, 1999 was approximately $143,000.

         d.   Possibility of cross default

              An affiliate of Phoenix  Lifecare Corp. was indebted under a first
mortgage in the principal  amount of $3,962,641 at March 31, 1999.  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 Phoenix Life Care Corp.  default on this  affiliate's loan could result in the
foreclosure of Hillside Terrace and Whitcomb Tower.

         g.   Government regulation

              Healthcare 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.

8.       Stockholders' Equity:

         a.   Common stock

              During the  fiscal  year ended  March 31,  1998 there were  19,600
shares of common stock purchased and simultaneously  retired at a price of $3.57
per share.  In June 1997 and January  1998 there were 7,500 and 1,040  shares of
common stock, respectively, issued to investors at a price of $3.00 per share.

              In August 1998 and October 1998, there were 1,875 and 1,500 shares
of common stock, respectively, issued to directors as compensation at a price of
$3.00 per share.



                                      F-16


<PAGE>

8.       Stockholders' Equity:  (Cont'd)

         b.   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>
         Balance, April 1, 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
         Terminated                                        4.77        $3.33 to $6.00            (28,800)            28,800
                                                                                                --------            -------

         Balance, March 31, 1999                           3.98        $1.33 to $6.00            101,240            108,760
                                                                                                ========            =======
</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 72,224 shares are exercisable at March 31, 1999.

              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.

              The  Directors'  Plan is  administered  by the Board of Directors.
Under the Directors' Plan, each nonemployee 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
nonemployee  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 6,400 shares are
exercisable at March 31, 1999.

              A summary of activity within the 1996 Plan is a follows:

<TABLE>
<CAPTION>
                                                               Weighted
                                                              Average Price   Option Price
                                                               Per Share       Per Share        Granted          Available
                                                               ---------       ---------        -------          ---------

         <S>                                                 <C>              <C>                <C>                <C>
         Balance, April 1, 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 to $5.55    18,000              72,000
         Granted                                                 4.00         $4.00              9,000              (9,000)
         Terminated                                              4.70         $4.00 to $5.55    (6,600)              6,600
                                                                                               -------             -------

         Balance, March 31, 1999                                 4.46         $4.00 to $5.55    20,400              69,600
                                                                                               =======             =======
</TABLE>

                                      F-17

<PAGE>

8.       Stockholders' Equity:  (Cont'd)

         b.   Incentive stock option plan  (Cont'd)

              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,  1999.  These
options  were granted in addition to those  outstanding  under the 1991 Plan and
the Directors'  Plan.  Options for an aggregate of 28,920 shares are exercisable
at March 31, 1999.

              The  following  table   summarizes   significant   ranges  of  all
outstanding and exercisable stock options at March 31, 1999:

<TABLE>
<CAPTION>
                                            Options Outstanding                       Options Exercisable
                                  -----------------------------------------     --------------------------------
                                                  Weighted        Weighted-                           Weighted-
             Ranges of                            Average         Average                             Average
             Exercise                            Remaining        Exercise                            Exercise
          Exercise Prices         Shares        Life in Years     Price         Shares                Price
          ---------------         ------        -------------     -----         ------                -----

         <S>                      <C>             <C>          <C>              <C>               <C>
         $1.33                    34,200          3.78         $   1.33         34,200            $   1.33
         $3.33 to $4.40           63,740          5.75             3.97         27,404                3.67
         $5.55 to $6.10           55,500          4.76             5.87         45,940                5.78
</TABLE>

              The weighted-average option fair value on the grant date was $1.02
and $1.11 for options issued during the years ended March 31, 1999 and 1998.

              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 per share would be adjusted to the pro forma amount indicated below:
<TABLE>
<CAPTION>

                                                                                  Year Ended
                                                                                   March 31,
                                                               ------------------------------------------------
                                                                      1999                            1998
                                                               ------------------               ---------------
               <S>                                             <C>                              <C>
               Net income:
                  As reported                                  $        1,107,401               $       311,610
                  Pro forma                                             1,100,014                       309,280
               Net income per common share - basic:
                  As reported                                                $.33                          $.09
                  Pro forma                                                   .33                           .09
               Net income per common share - diluted:
                  As reported                                                $.33                          $.09
                  Pro forma                                                   .33                           .09
</TABLE>

              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 using the  Black-Scholes  pricing  model and 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 1999 and 1998.

9.       Other Income:

         For the year ended March 31, 1999, the Company  recorded  approximately
$512,000 of other income.  This amount  primarily  consists of revenues from the
sale of a management  contract in the amount of $150,000 and the  forfeiture  of
deposits   related  to  the  sale  of  certain   properties  which  amounted  to
approximately   $218,000.   In  addition,   the  Company   received  a  workers'
compensation refund and a fire insurance recovery which aggregated approximately
$82,000.

                                      F-18


<PAGE>

10.      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  nonaffiliated   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:
<TABLE>
<CAPTION>
                                                                                                    Year Ended
                                                                                                     March 31,
                                                                                      ------------------------------------
         <S>                                                                           <C>                      <C>

                                                                                        1999                        1998
                                                                                      -----------              -----------
         Revenues:
            Resident centers                                                          $ 7,709,261              $ 7,468,096
            Management and development companies                                        1,186,147                  305,500
                                                                                      -----------              -----------

                                                                                      $ 8,895,408              $ 7,773,596
                                                                                      ===========              ===========

         Operating profits:
            Resident centers                                                          $ 1,018,579              $ 1,012,106
            Management and development companies                                          362,584                 (784,774)
            (Loss) recovery on advances to affiliates                                    (226,425)                 351,396
                                                                                      -----------              -----------

         Income from operations                                                       $ 1,154,738              $   578,728
                                                                                      ===========              ===========
</TABLE>

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


                                                              March 31,
                                                     --------------------------
                                                          1999          1998
                                                     -----------    -----------
         Identifiable assets are as follows:
            Retirement centers                       $ 2,835,567    $ 3,093,815
            Management and development companies       2,752,836      1,395,170
            Corporate                                    284,856        139,912
                                                     -----------    -----------

                                                     $ 5,873,259    $ 4,628,897
                                                     ===========    ===========


11.      Subsequent Events:

         The Company has listed one of their assisted  living  facilities with a
real estate broker.

         In June 1999,  the Company was awarded  their bid to purchase  property
located in Mineola, New York for approximately $2.7 million.


                                      F-19