================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
   (X)        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  For the fiscal year ending December 31, 1998

                                        OR
   (  )       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                 For the transition period from ______ to _______

                          Commission file number 1-4719

                             THE DELTONA CORPORATION
             (Exact name of registrant as specified in its charter)

                  DELAWARE                             59-0997584
       (State or other jurisdiction of              (I.R.S. Employer
        incorporation or organization)            Identification Number)

         8014 SW 135th Street Road
                 Ocala, FL                               34473
   (Address of principal executive offices)            (Zip Code)

        Registrant's telephone number, including area code (352) 307-8100
          Securities registered pursuant to Section 12(g) of the Act:

                           COMMON STOCK, $1 PAR VALUE
                                (Title of Class)

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

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

     State the aggregate market value of the voting stock held by non-affiliates
of the  Registrant:  $1,085,000  (based upon the average  price of such stock as
traded  over-the-counter ($.31) at December 31, 1998 multiplied by the 3,498,836
shares  of  stock  owned  by  non-affiliates,  excluding  voting  stock  held by
directors,  executive  officers  and  beneficial  owners of more than 10% of the
Registrant's voting stock ; however,  this does not constitute an admission that
any such holder is an "affiliate" for any purpose.)

     Indicate the number of shares  outstanding of the  Registrant's  classes of
common stock, as of the latest  practicable  date:  13,544,277  shares of common
stock,  $1 par value,  as of March 19,  1999,  excluding  12,228  shares held in
treasury.


                       DOCUMENTS INCORPORATED BY REFERENCE
Document                                                    Incorporated Part(s)
  *        Registrant's 1999 Annual Meeting Proxy Statement       Part III
           to  be  filed  with  the Securities and Exchange
           Commission pursuant to Regulation 14A                  
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<PAGE>



                             THE DELTONA CORPORATION

                                      INDEX


Form 10-K                                                                  Page
 Item No.               Section Heading in Attached Material              Number
 ---------              ------------------------------------              ------

PART I
  Items 1 and 2 .....   Business......................................         1
                        General.......................................         1
                        Recent Developments...........................         1
                        Business Segments.............................         3
                        Real Estate...................................         4
                        Other Businesses..............................         9
                        Employees.....................................         9
                        Competition...................................         9
                        Regulation....................................         9
  Item 3 ............   Legal Proceedings.............................        12
  Item 4 ............   Not Applicable

PART II
  Item 5 ............   Price Range of Common Stock and Dividends.....        13
  Item 6 ............   Selected Consolidated Financial Information...        14
  Item 7 ............   Management's Discussion and Analysis of
                         Financial Condition and Results of Operations        15
  Item 8 ............   Index to Consolidated Financial Statements and
                         Supplemental Data ...........................        23
  Item 9 ............   Not Applicable

PART IV
  Item 14 ...........   Exhibits, Financial Statement Schedules and
                         Reports on Form 8-K .........................        45
<PAGE>



ITEMS 1 AND 2

                                    BUSINESS

General

     The  Company  was  founded  in  1962  and  is  principally  engaged  in the
development and sale of Florida real estate,  through the development of planned
communities on land acquired for that purpose.  The Company offers single-family
lots and multi-family and commercial tracts for sale, in communities designed by
the Company.  The Company is the  developer  of eleven  planned  communities  in
Florida, including TimberWalk, which is located in the western portion of Marion
Oaks.  Seven  communities  are  completed  and four  are in  various  stages  of
development.   The  Company  plans,  designs  and  develops  roads,   waterways,
recreational  amenities,  grading and drainage systems within these communities.
Since  1962,  the  Company  has  sold  over  156,000   single-family   lots  and
multi-family  and  commercial  tracts in its  communities,  in  addition to over
13,000 single-family homes and over 4,300 multi-family housing units.

     The   Company's   land   holdings  in  Florida   include  an  inventory  of
approximately  17,500 unsold platted  single-family  and  multi-family  lots and
commercial tracts.  (Platting is the process of recording, in the public records
of the county where the land is located,  a map or survey  delineating the legal
boundaries of the lots and tracts.) See "Real Estate: Land".

     The  Company  also  operates  other  businesses  related to its real estate
activities,  such as a  title  insurance  company  and a real  estate  brokerage
company.  In addition,  the Company has designed and constructed  country clubs,
golf courses and other recreational  amenities at its communities,  and operated
such amenities until their conveyance or sale.

     Historically,  the Company had designed,  constructed and operated  utility
systems  for the  distribution  of water and LP gas and for the  collection  and
treatment of sewage, primarily at the Company's communities. However, on June 6,
1989, Topeka Group  Incorporated  ("Topeka"),  a subsidiary of Minnesota Power &
Light Company ("MPL"), exchanged the Company's Preferred Stock which it acquired
in November,  1985 for the Company's utility  subsidiaries.  The Company entered
into a Developer  Agreement  for each of its  communities,  which  provides  the
policies  for  water  and  sewer  utility  services  to  the  Company  and  it's
purchasers.

     The Company is  incorporated  in Delaware and has its  principal  office at
8014 SW 135th  Street  Road,  Ocala,  Florida  34473.  Its  telephone  number is
(352)307-8100.  The Company,  as used herein,  refers to The Deltona Corporation
and, unless the context otherwise indicates, its wholly-owned subsidiaries.


Recent Developments

     In  September  1998,  the Company  moved its  principal  office from Miami,
Florida to TimberWalk at Marion Oaks in Central Florida. This move signifies the
Company's commitment to Central Florida and its dedication to the success of its
communities.

     On September 29, 1998,  Earle D.  Cortright,  Jr. and the Company agreed to
terms for his resignation as President of the Company effective October 1, 1998.
Mr.  Cortright  received the sum of $400,000 as compensation  for termination of
his  Employment  Agreement:  $200,000 of which was paid in October  1998 and the
remaining $200,000 paid in January 1999.

     On September 29, 1998,  David M. Harden and the Company agreed to terms for
his  resignation  as Senior Vice  President -  Marketing  Administration  of the
Company  effective  October 1, 1998. Mr. Harden will receive the sum of $114,963
as compensation for termination of his Employment Agreement:  $20,663.00,  which
was paid on October 1, 1998 and the balance payable in semi-monthly installments
of $4,100 on the 1st and 15th of each month until paid for in full. In addition,
in February 1999, Mr. Harden received reimbursement for the actual costs paid by
him for closing on the sale of his Miami residence,  $16,000, and is entitled to
receive  reimbursement  for the actual costs paid by him for closing on the sale
of an alternative home (not to exceed the sum of $14,000).


                                       1

<PAGE>




     On October 2, 1998, the Board of Directors appointed Mr. Antony Gram to the
position of  President  of the Company , in addition to his position as Chairman
of the Board and Chief  Executive  Officer.  On October  2,  1998,  the Board of
Directors promoted Sharon J. Hummerhielm from her position as Vice President and
Corporate  Secretary to the position of Executive  Vice  President and Corporate
Secretary.

     During 1998,  the Company  transferred 14 lots and 4 tracts of land to Swan
Development   Corporation   ("Swan"),  an  affiliate  of  Yasawa  Holdings  N.V.
("Yasawa") and Scafholding B.V. ("Scafholding"). In return, Swan built an office
complex  on part of the land for use by the  Company  for a period of 54 months,
renewable  thereafter.  The Company valued the land transferred at approximately
$440,000 and recorded the net present value of the use of the office  complex of
approximately  $375,000 as prepaid rent. The difference  between the net present
value of the rent and the cost of the land of approximately $290,000 is recorded
as deferred profit at December 31, 1998.

     Additionally during 1998, Scafholding advanced the Company $200,000 against
future   administrative   fees  due  the  Company  for  selling  lots  owned  by
Scafholding.  The Company  recorded this advance as a deposit.  During 1998, the
Company earned $27,780 in fees for sold lots.

     On December 9, 1998, the Company announced that they had appointed longtime
community  development  consultant  and  executive  Jim Fleming as  President of
Deltona  Marketing  Corporation,  the Company's sales and marketing  subsidiary.
Fleming,  who began with the Company on January 4, 1999,  has held similar chief
marketing executive positions for other large Florida land development firms.

     As of December 31, 1998, the Company's  outstanding debt to Scafholding was
$1,130,000 , secured by a first lien on the Company's receivables; the Company's
outstanding  debt to  Yasawa  was  $6,670,000  secured  by a second  lien on the
Company's  receivables  and a mortgage on all of the Company's  property.  As of
December 31, 1998, loans  outstanding from Yasawa and Scafholding to the Company
totaled  $7,800,000.  The terms of repayment of this debt have been restructured
to provide for monthly  payments of principal in the amount of $100,000  payable
monthly  in cash or  with  contracts  receivable  at  100% of face  value,  plus
interest payable monthly on the declining  balance at the rate of 9.6% per annum
in  cash  or  with  contracts  receivable  at  65% of  face  value.  Yasawa  and
Scafholding did not require the Company to pay interest for the period September
1, 1998 to December  31,  1998.  As of December  31,  1998,  the total amount of
interest accrued is approximately  $258,000.  Effective  January 1, 1999, Yasawa
and Scafholding  agreed to reduce the annual  percentage rate for their existing
loans to the Company from 9.6% to 6% per annum.

     From  October 9, 1998  through the  present,  Swan has advanced the Company
funds to meet its working capital  requirements.  The Company's outstanding debt
to Swan,  which is  secured by a third lien on the  Company's  receivables,  was
$765,000  and   $5,690,000   as  of  December  31,  1998  and  March  26,  1999,
respectively.  The Company signed a promissory  note to Swan in March 1999 which
provides that funds advanced by Swan will be paid back by the Company monthly in
contracts  receivables  at 90% of face value,  with  recourse.  There will be no
interest  for the first six months  after an advance of money is  received  from
Swan by the  Company;  thereafter  the  interest  shall  be 6% per  annum on the
outstanding balance of the advance. The amount of each monthly payment will vary
and will be dependent  upon the amount of contracts  receivable in the Company's
portfolio,   excluding  contracts   receivable  held  as  collateral  for  prior
receivable  sales.  Pursuant to the terms of the promissory note, the Company is
required to transfer to Swan  monthly as debt  repayment  all current  contracts
receivable  in  the  Company's  portfolio  in  excess  of the  aggregate  sum of
$500,000.  Funds advanced by Swan were used by the Company to pay  approximately
$2,567,000  in  outstanding  real estate  taxes for unsold  properties  with the
balance to meet the Company's working capital requirements.


                                        2

<PAGE>



Business Segments

     The following  table sets forth the total amounts of revenues and operating
profits  (losses)  from  continuing  operations  attributable  to  each  of  the
Company's  business  segments for the years ended as  indicated.  See Note 11 to
Consolidated Financial Statements:
<TABLE>
<CAPTION>
                                                        Years ended
                             December 31, December 31,  December 31,  December 31,  December 31,
                                1998         1997          1996          1995          1994
                             ------------ ------------  ------------  ------------  ------------
                                                        (in thousands)
<S>                          <C>          <C>           <C>           <C>           <C>
Revenues
Real estate:
  Net land sales<F1>.......  $  3,078     $  4,045      $  4,296      $  2,394      $  2,058
  Housing revenues.........     1,622        1,214         1,202         1,382         2,543
  Improvement revenues<F2>.       956        2,366         1,008         1,052         1,214
  Interest income<F3>......       548        1,367         1,464         1,019         1,046
                             --------     --------      --------      --------      --------
    Total real estate......     6,204        8,992         7,970         5,848         6,861
Other<F4>..................       529          617           963         1,030         1,832
Intersegment sales<F5>.....      (245)        (184)         (283)         (190)         (152)
                             --------     --------      --------      --------      --------
    Total..................  $  6,488     $  9,425      $  8,650      $  6,688      $  8,541
                             ========     ========      ========      ========      ========
Operating profits (losses)
Real estate................  $  1,361     $  3,052      $  3,077      $  1,377      $  1,055
Other <F4>.................        33          185           443           341         1,033
General corporate expense..    (3,173)      (3,018)       (2,966)       (2,981)       (4,147)
Interest expense...........      (812)      (1,545)       (1,781)       (1,642)       (1,847)
                             --------     --------      --------      --------      --------
Income (loss) from
 continuing operations
 before income taxes
 and extraordinary items...  $ (2,591)    $ (1,326)     $ (1,227)     $ (2,905)     $ (3,906)
                             ========     ========      ========      ========      ========
<FN>

<F1>     Net land sales consist of gross land sales less estimated uncollectible 
         installment sales and contract valuation discount (see Notes 1, 2 and 7
         to Consolidated Financial Statements).

<F2>     Improvement revenues consist of revenue recognized due to completion of
         improvements  on  prior  period sales and exchanges from undeveloped to
         developed lots.

<F3>     Interest income  primarily consists of interest earned on contracts and
         mortgages  receivable  and  on  temporary   cash  investments  and  the
         amortization of valuation discounts.

<F4>     Other consists of revenues from sales other than real estate, the major
         portion of which came from the country club operations  in prior years.
         In 1994, the major  portion  consists  of a gain of $1,051,000 from the
         termination of its office lease on its Miami corporate headquarters.

<F5>     Intersegment sales  consist  primarily of sales between the Company and
         its title company subsidiary.

                                       

</FN>
</TABLE>
                                        3
<PAGE>



Real Estate

     The  Company's  principal  business  segment  has  primarily  involved  the
development  and marketing of planned  communities  in Florida  since 1962.  The
following table sets forth certain information about these communities and other
land assets of the Company as of December 31, 1998.  For a detailed  description
of  these  communities,  see  "Existing  Communities"  and  "Other  Properties".
Existing Communities

<TABLE>
<CAPTION>
                                                                      Platted        Unimproved          Improved
                      Acreage      Initial                 Estimated  Lots & Tracts  Unsold Platted      Unsold Platted
                      in           Acquisition    Year     Current    in Masterplan  Lots & Tracts       Lots & Tracts
                      Masterplan   Year           Opened   Population     <F2>          <F2><F3>           <F1><F2>
                      ----------   -----------    ------   ---------- -----------    --------------      --------------
 <S>                  <C>          <C>            <C>      <C>        <C>             <C>                  <C>
 <F1>Deltona Lakes...   17,203      1962           1962      71,500    34,964               -                  6
 <F1>Marco Island<F4>    7,844      1964           1965      41,070     8,657               -                  -
 <F1>Spring Hill<F5>.   17,240      1966           1967      74,400    32,909               -                  6
 <F1>Citrus Springs<F6> 15,954      1969           1970       6,710    33,783               -                  8<F9>
     St. Augustine
        Shores .......   1,985      1969           1970       7,610     3,130               -                  -<F9>
     Sunny Hills......  17,743      1968           1971       1,410    26,251          12,457                696
 <F1>Pine Ridge.......   9,994      1969           1972       3,300     4,833               -                  3
     Marion Oaks<F6><F7>14,644      1969           1973       8,370    27,537           3,592<F7>            492<F7><F9>
 <F1>Seminole Woods..    1,554      1969           1979         510       262               -                  -

     There is no unplatted acreage in any community.

     Joint Venture Community:

 <F1>Tierra Verde....      666      1976           1977       5,100     1,036               -                  -
                       -------                              -------   -------        --------              -----
     Total............ 104,827                              219,980   173,362          16,049              1,139
                       =======                              =======   =======        ========              =====

     <CAPTION>
                                Other Properties
      
                                                            Initial
                                                            Acquisition
                                                            Year           Acres
                                                            -----------    -----
 <S>                                                        <C>            <C>

     Other Land Assets:
     Other land adjacent to existing communities<F8>...     Various        92
                                                                           -- 
         Total.........................................                    92
                                                                           ==

<FN>
----------------------
<F1> Development completed.

<F2> Excluded from these lots and tracts are  approximately  110 improved and 89
     unimproved  lots and tracts that are  required  for  drainage and cannot be
     sold, and  approximately  141 improved and 334  unimproved  lots and tracts
     that have  been  removed  from sale for  encumbrances  or  additional  site
     development,  which can only be sold when these issues are  resolved.  Also
     excluded are amenities  consisting of 2  administration  facility  sites, 2
     recreational  facility sites and 1 unimproved  golf course site, as well as
     approximately   427  tracts  reserved  for  community  usage  such  as  for
     greenbelts, buffer areas, church and school sites.

<F3> "Unimproved Unsold Platted Lots & Tracts" and "Improved Unsold Platted Lots
     & Tracts",  when added to lots and tracts  sold,  as described in "Existing
     Communities",  may not  equal  "Platted  Lots & Tracts in  Masterplan"  for
     various reasons, such as the subdivision of tracts into two or more parcels
     for sale to different purchasers.

<F4> Excludes permit denial areas; reflects seasonal population.

<F5> Includes the South Hernando U.S. # 19 Commerce Center.

<F6> Excludes 83 Citrus  Springs and 63 Marion  Oaks  improved  lots deeded to a
     purchaser of the Company's contracts receivable as exchange inventory to be
     available  for  customers  who  pre-pay  their   contracts   prior  to  the
     installation  of water service lines within one mile of their  homesite and
     who wish to commence  immediate  construction.  Unused exchanged  inventory
     will be  reconveyed  to the Company  when all  purchased  receivables  have
     matured and are paid in full.

                                       4
<PAGE>

<F7> Includes TimberWalk.

<F8> Excludes  3,637 acres of unplatted  natural  preserve in Washington  County
     restricted  for  recreational,  open space/ park use which can only be sold
     subject to the underlying land use restrictions

<F9> Not included are 585 improved lots deeded to a collateral trustee on behalf
     of a purchaser of the Company's contract receivables so they may be sold by
     the Company to create additional  receivables for the Company's replacement
     obligation.  These lots are  comprised of 483 lots in Citrus  Springs,  101
     lots in Marion Oaks and 1 lot in St. Augustine Shores.

</FN>
</TABLE>

  Land

     In  selecting  sites for its  communities,  the  Company  examined  various
demographic and economic factors,  the regulatory  climate,  the availability of
governmental services and medical,  educational and commercial  facilities,  and
estimated  development  costs.  Its communities are accessible to major highways
and Florida's major  metropolitan  areas and are near at least one large body of
water that can be used for  recreational  purposes.  Other  criteria used by the
Company  in site  selection  are the  suitability  of the  land for  natural  or
engineered drainage and the availability of a sufficient supply of potable water
to support the community's anticipated population.

     The master plans of the Company's communities have been designed to provide
for amenities  such as golf courses,  greenbelt  areas,  parks and  recreational
areas, as well as for the basic infrastructure,  such as roads and water, and in
selected  development  areas,  sewer  lines.  Sites are set  aside for  shopping
centers,  schools, houses of worship, medical centers and public facilities such
as libraries and fire stations.

     In its major planned communities, the Company offers for sale lot and house
"packages" situated on paved streets.  In other areas of these communities,  the
Company historically has sold single-family lots and multi-family and commercial
tracts on an  installment  basis.  Prior to 1991,  the  Company  sold such land,
subject to a future development obligation, accepting down payments as low as 5%
of the sales price,  with the balance  payable over periods ranging from 2 to 15
years,  depending on the payment plan selected.  When the applicable  rescission
period  expired and the Company  received at least 10% of the  contracted  sales
price,  a substantial  portion of the revenue and related profit on the sale was
recognized,  with the remaining  revenue and profit  deferred and  recognized as
land improvements such as street paving occurred.

     Due to various  factors,  since 1986,  the Company had  utilized a deed and
mortgage  format  for  effecting  certain  sales in its  communities.  Beginning
September 29, 1990, the Company changed its method of recognizing  land sales by
recording the sale of lots,  subject to a future development  obligation,  under
the deposit method; since January 1, 1991, no sale has been recognized until the
Company  receives at least 20% of the contracted  sales price;  and beginning in
the fourth quarter of 1991, the Company  limited the sale of lots to those which
front on a paved  street  and are ready for  immediate  building.  See Note 1 to
Consolidated Financial Statements.

     A portion of the  contract  purchase  price is  discounted  and  treated as
interest  income to be amortized over the life of the contract.  Interest income
is also earned in accordance  with the interest  rate stated in the  installment
land sales  contract  or  promissory  note.  The  Company  further  provides  an
allowance for contract  cancellations based on the historical  experience of the
Company for such cancellations.

     Substantially  all of the Company's  single-family lot and multi-family and
commercial  tract  sales  have been made on an  installment  basis.  Of the over
156,000 lots and tracts sold since the Company's inception, contracts receivable
presently  exist with  respect  to  approximately  425 lots and  tracts  with an
outstanding balance of approximately  $4,296,000 at December 31, 1998, excluding
contracts  receivable  of which the Company is a  guarantor.  See  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
Note 2 to Consolidated Financial Statements.

  Housing

     Historically, the Company has been involved in the design, construction and
marketing  of  single-family  homes and  multi-family  housing,  including  both
condominium apartment complexes and a vacation ownership  (timesharing) project.
Since  commencing  operations,  the Company has constructed and sold over 13,000
single-family homes and over 4,300

                                        5

<PAGE>



multi-family  housing  units  in  its  communities,  with  much  of  the  actual
construction performed by subcontractors. Revenues, as well as related costs and
expenses,  from  single-family home and vacation ownership sales are recorded at
the time of closing.

     Single-Family Housing

     Two, three and four bedroom  moderately-priced  homes are being constructed
by  independent  builders  at the  Company's  Marion Oaks  Community,  including
TimberWalk  located in the western portion of Marion Oaks.  Houses are sold with
the lot included in the sales price;  however,  the Company also offers build on
your own lot program for those  purchasers who have  previously  acquired a lot.
The FeatherNest Housing Village in Marion Oaks, where the lot is included in the
price of the home, is owned by Conquistador Development Corporation and marketed
by the Company.  All housing  sales are made within the local market and through
the Company's  independent  dealer  network.  See  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations".

     The Company is directing a greater portion of its marketing  efforts to the
sale of lots with homes or lots with compulsory  building  obligations to offset
the negative cash effects of installment land sales,  where the price of the lot
is paid for over several years and there is no commitment to build.

     Multi-Family Housing

     The Company has designed,  constructed and sold more than 4,300 condominium
apartment  units at its  communities  in  buildings  ranging  from  garden-style
apartment  complexes  to luxury  high-rise  towers.  Every  condominium  complex
constructed  by the  Company  includes  at least one pool and patio  area;  many
feature tennis courts and other recreational amenities.

     The Company's limited inventory of multi-family  housing is at its vacation
ownership complex, The Surf Club, located on the Gulf of Mexico at Marco Island.
The bulk of its inventory at The Surf Club was sold prior to 1990.

  Marketing

     The  Company  has  historically  sold land and  housing on a  national  and
international basis through independent dealers in the United States, Canada and
overseas, as well as through Company-affiliated  salespeople. For the year ended
December 31, 1998,  sales by independent  dealers in the United States accounted
for  approximately  99% (in dollar  volume) of new land sales  contracts;  while
overseas dealers accounted for approximately 1% of such contracts.

   Existing Communities

     Deltona Lakes

     Deltona  Lakes is located 26 miles  northeast of Orlando,  with its popular
tourist  attractions  of Disney  World and Sea  World,  and is  bordered  on the
northwest by Interstate 4. Opened in 1962, Deltona Lakes now has a population of
approximately  71,500.  Over  30,000  lots and tracts and over 4,500  single and
multi-family housing units have been sold at this community.

     Recreational  amenities constructed by the Company include tennis courts, a
golf course and  country  club  (which  were sold in 1983),  and a  recreational
complex on the shores of Lake Monroe.  A 133-room motel,  an industrial  park, a
medical complex,  several shopping centers,  numerous houses of worship,  a fire
station, a public library and schools are located in the community.  The Company
has completed development of this community.

                                        6

<PAGE>



     Marco Island

     The Company's resort community of Marco Island is located 104 miles west of
Miami and approximately 17 miles south of Naples,  Florida.  Over 8,500 lots and
tracts and over 4,200 single and  multi-family  housing  units have been sold in
this community.

     More than 41,000  persons  reside at Marco  Island,  including a population
which more than triples during the winter season. It is the largest of Florida's
Ten  Thousand  Islands and is known for its  recreational  amenities  which,  in
addition  to its 3 1/2  mile  white  sand  beach,  sport  fishing,  sailing  and
shelling,  include golf, tennis, swimming and other recreational activities. The
island  community has several major shopping  centers,  banks and savings & loan
associations, and medical and professional centers.

     Since the community's  opening in January,  1965, the Company has built and
operated a yacht club and marina,  the Marco  Beach  Hotel & Villas,  and a golf
course and  country  club,  all of which have been sold.  The  Company  has also
constructed  and sold over  3,300  condominium  units on the island and The Surf
Club, a 44 unit vacation ownership  complex.  In 1990, the Company completed the
sale of substantially all of its remaining  vacation ownership weeks at The Surf
Club.

     Spring Hill

     Spring Hill,  with an estimated  population  of over 74,000,  is located 45
miles north of Tampa-St.  Petersburg. Over 32,000 lots and tracts and over 4,000
single-family  homes  have  been  sold  in  this  community.   The  Company  has
constructed a recreation  complex,  a country club, and two golf courses,  which
have been sold. Several shopping centers and medical centers,  schools, numerous
houses of worship and fire  stations are located in the  community.  The Company
has completed the development of this community.

     Citrus Springs

     Citrus Springs,  with an estimated  population of over 6,700, is located 28
miles southwest of Ocala and 25 miles from the Gulf of Mexico.  Over 30,000 lots
and tracts and over 700 single-family homes have been sold at this community.  A
golf  course and a  clubhouse  (sold in 1990) and a  community  center have been
completed by the Company.  Several churches,  schools and a convenience shopping
area are located in the  community.  In 1992,  most of the  Company's  remaining
inventory  at  this  community  was  sold  to  Citony  Development   Corporation
("Citony") for  approximately  $6,500,000.  The Company  provides  miscellaneous
administrative assistance and loan servicing to Citony for a fee.

     In February 1997, the Company finalized the sale of the undeveloped  second
Citrus  Springs Golf Course to a third party,  which  completed  the golf course
("El Diablo") in 1998.  See  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations" .

     St. Augustine Shores

     St.  Augustine  Shores,  with a population  estimated to be over 7,600,  is
located seven miles south of St.  Augustine,  between the Intracoastal  Waterway
and U.S.  Highway 1. Over 2,000 single and  multi-family  housing units and lots
and  tracts  have been sold.  In  December  1997,  the  Company  sold all of its
remaining  inventory at St.  Augustine  Shores to Swan  Development  Corporation
("Swan").  As part of the purchase,  Swan assumed the  liability for  completing
improvements within St. Augustine Shores.

     Certain common areas of the community, such as parks and swale
areas,  are  maintained  by the St.  Augustine  Shores  Service  Corporation,  a
non-profit corporation, of which all property owners are members. Several houses
of worship,  shopping facilities, a recreational building and a golf and country
club are also located in the community.

                                        7

<PAGE>



     Sunny Hills

     Sunny Hills,  with a population of over 1,400 residents,  is located in the
Florida  Panhandle,  45 miles  north of the Gulf of Mexico and 35 miles north of
Panama City. Over 12,000 lots and tracts and 300  single-family  homes have been
sold at this community.  The community  includes a golf course and country club,
which  was sold by the  Company,  several  houses  of  worship  and  convenience
shopping.

     Pine Ridge

     Pine Ridge,  with a population of approximately  3,300, is located 34 miles
southwest of Ocala.  The community's  facilities  include an equestrian club and
tennis  courts.  The  Company  sold over  3,500 lots and tracts and more than 53
single-family  homes in Pine Ridge prior to the sale of its remaining  inventory
in 1987.

     Marion Oaks

     Marion Oaks, with a population of over 8,300 residents, is located 18 miles
south of Ocala. Over 23,000 lots and tracts have been sold in the community. The
community  includes  playgrounds,  two golf courses  (both of which are owned by
third parties),  several  recreation  buildings,  community shopping centers and
several houses of worship. In addition,  this community is home to the Company's
corporate headquarters.

     Two, three and four bedroom  moderately-priced  homes are being constructed
by  independent  builders  at the  Company's  Marion Oaks  Community,  including
TimberWalk  located in the western portion of Marion Oaks.  Houses are sold with
the lot included in the sales price;  however,  the Company also offers build on
your own lot program for those  purchasers who have  previously  acquired a lot.
The FeatherNest Housing Village in Marion Oaks, where the lot is included in the
price of the home, is owned by Conquistador Development Corporation and marketed
by the Company.  All housing  sales are made within the local market and through
the Company's independent dealer network.

     Revenues in 1999 will be generated  from the sale of land  inventory,  from
housing  sales,  from the  recognition of deferred  revenue as land  development
proceeds,  from  collections  on  existing  contracts  receivable  and  from the
Company's real estate brokerage and title company subsidiary operations.

     Seminole Woods

     Seminole Woods,  with a population of over 500, is comprised of 1,554 acres
of property located 20 miles north of Orlando. The community's 262 single-family
lots,  each  with a  minimum  of five  acres,  have  been  sold and  development
completed.

      Tierra Verde

     Tierra  Verde,  with a population of over 5,000,  is a 666-acre  waterfront
subdivision  located eight miles south of St.  Petersburg.  It was developed and
marketed  pursuant to a 50% joint  venture,  which no longer  exists,  between a
wholly-owned  subsidiary  of the Company and an  unaffiliated  corporation.  The
community has been sold out and development completed.

     Other Land Assets

     The Company also owns 92 acres of land in Florida  adjacent to its existing
communities.

  Other Businesses

     The Company's title  insurance  subsidiary was established in 1978 in order
to reduce title  insurance,  legal and certain related closing costs incurred by
the Company in transferring title of its land and housing to its purchasers. The


                                        8

<PAGE>



subsidiary serves as an agent for TICOR Title Insurance  Company,  Chicago Title
Insurance  Company and other title  insurers.  The Company's  realty  subsidiary
performs real estate  brokerage and rental services at the Company's Marion Oaks
and Sunny Hills communities.

  Employees

     At  December  31,  1998,  the  Company  had 35  employees,  of whom 33 were
involved  in  executive,   administrative,   sales  and  community  development/
maintenance  capacities and 2 were involved with the title insurance subsidiary.
Certain  of  the   Company's   development   activities   are   carried  out  by
subcontractors  who separately employ additional  personnel.  For the most part,
the Company's  marketing  activities are carried out by independent  dealers and
marketing personnel employed by the Company and its subsidiaries.

  Competition

     The  Company  faces  competition  in the  sale of its lots  primarily  from
property owners in the Company's  communities  seeking to resell their land. The
Company is also facing competition, on a regional level, from other builders and
developers in the sale of single-family  housing.  Such competition is generally
based upon location, price, reputation,  quality of product and the existence of
commercial and recreational facilities and amenities.

   Regulation

     The  Company's  real estate  business is subject to  regulation  by various
local, state and federal agencies.  The communities are increasingly  subject to
substantial regulation as they are planned, designed and constructed, the nature
of such regulation extending to improvements,  zoning, building,  environmental,
health and related matters. Although the Company has been able to operate within
the  regulatory  environment  in the past,  there can be no assurance  that such
regulations  could not be made more restrictive and thereby adversely affect the
Company's operations.

     Community Development

     In Florida, as in many growth areas, local governments have sought to limit
or control population growth in their communities  through  restrictive  zoning,
density reduction,  the imposition of impact fees and more stringent development
requirements.  Although the Company has taken such factors into consideration in
its master  plans by  agreeing,  for example,  to make  improvements,  construct
public  facilities and dedicate  certain  property for public use, the increased
regulation  has  lengthened  the  development  process and added to  development
costs.

     The implementation of the Florida Growth Management Act of 1985 (the "Act")
precludes  the issuance of  development  orders or permits if public  facilities
such  as  transportation,  water  and  sewer  services  will  not  be  available
concurrent  with  development.  Development  orders have been  issued  for,  and
development  has  commenced  in,  the  Company's   existing   communities  (with
development  being  completed  in  certain  of  these  communities).  Thus,  the
Company's  communities  are  less  likely  to be  affected  by  the  new  growth
management policies than future communities. Any future communities developed by
the Company will be strongly impacted by new growth management  policies.  Since
the Act and its implications are  consistently  being  re-examined by the State,
together  with  local  governments  and  various  state and  local  governmental
agencies,  the Company  cannot  further  predict the timing or the effect of new
growth management policies,  but anticipates that such policies may increase the
Company's permitting and development costs.

     Environmental

     To varying  degrees,  certain  permits and  approvals  will be necessary to
complete the development of all of the Company's  communities.  Despite the fact
that  the  Company   has   obtained   substantially   all  of  the  permits  and
authorizations  necessary to proceed with its  development  work on  communities
presently  being  marketed,  additional  approvals  may be  required  to develop
certain platted properties in certain  communities to be marketed in the future.
Although the Company cannot predict the impact of such requirements,  they could
result  in  delays  and  increased  expenditures.  In  addition, the

                                        9

<PAGE>



continued  effectiveness  of  permits  and  authorizations  already  granted  is
subject to many factors, some of which, including changes in policies, rules and
regulations and their  interpretation and application,  are beyond the Company's
control.

     The Company is aware of studies indicating that prolonged exposure to radon
gas may be hazardous to one's health.  Such studies further  indicate that radon
gas  is  apparently   associated  with  mining  and  earth  moving   activities,
particularly in phosphate-bearing  geological formations. Since phosphate mining
has,  over the years,  constituted a  significant  industry in Florida,  various
state and local  governmental  agencies  are in the  process  of  attempting  to
determine  the nature and extent of indoor radon gas  intrusion  throughout  the
state. Similar studies undertaken by the Company at its Citrus Springs community
indicate that less than 1% of its property in that  community may be affected by
radon gas; studies conducted at the Company's Marion Oaks community  revealed no
indications of potential indoor radon gas problems. None of the other properties
owned by the Company are situated over geological formations which are suspected
of causing  radon gas  problems.  Consequently,  the  existence  of radon gas in
Florida is not expected to materially affect the business or financial condition
of the Company.

     The  Company  owns and  operates  above  ground fuel  storage  tanks at its
communities.  The Florida  Department  of  Environmental  Regulation  ("DER") is
responsible  not  only  for  regulating  these  tanks,  but for  developing  and
implementing  plans and programs to prevent the  discharge of pollutants by such
facilities.  The  Company  has  registered  its  storage  tanks  with  the  DER,
constructed  containment devices around above ground storage tanks,  replaced or
properly  abandoned faulty tanks or equipment and conducts periodic  inspections
and monitoring of all facilities.

     In December,  1988,  the Company  surveyed all of its fuel  facilities  and
reported any facility which exhibited  evidence of potential soil  contamination
to the DER  prior  to the  deadline  for  acceptance  into the  Early  Detection
Incentive ("EDI") Program.  The EDI Program provides for the State to assume the
financial  responsibility for any necessary  clean-up  operations when suspected
contamination  has been voluntarily  reported by the facility owner and accepted
into the  program  by the DER.  The  Company's  sites  have been  inspected  and
reviewed  under  the  EDI  program  and  are  in  compliance  with  current  DER
regulations.

     Marketing

     The Company is also subject to a number of statutes imposing  registration,
filing and disclosure  requirements  with respect to homesites and homes sold or
proposed to be sold to the public.  On the state level, the Company's land sales
activities  are subject to the  jurisdiction  of the  Division  of Florida  Land
Sales,   Condominiums   and  Mobile  Homes  (the   "Division")   which  requires
registration  of  subdividers  and  subdivided  land;  regulates the contents of
advertising  and other  promotional  material;  inspects the Company's  land and
development work; exercises jurisdiction over sales practices; and requires full
disclosure to prospective  purchasers of pertinent  information  relating to the
property offered for sale.

     Other Obligations

     As a result of the delays in completing  the land  improvements  to certain
property  sold in certain of its  Central  and North  Florida  communities,  the
Company fell behind in meeting its contractual  obligations to its customers. In
connection  with these delays,  in 1980 the Company entered into a Consent Order
with the Division  which  provided a program for notifying  affected  customers.
Since  1980,  the  Consent  Order  was  restated  and  amended   several  times,
culminating in the 1992 Deltona Consent Order.

     On December 30, 1997, the Division approved the formation of a Lot Exchange
Trust into which the Company conveyed  sufficient  exchange inventory to provide
exchanges  to  customers  with  undeveloped  lots.  Concurrently,  the  Division
released its lien on the Company's contracts receivable,  satisfied its mortgage
on the  Company's  property and approved a settlement  of all  remaining  issues
under  the 1992  Deltona  Consent  Order.  The 1992  Deltona  Consent  Order was
formally terminated on April 13, 1998.

     As of December 31, 1998, the Company had estimated development  obligations
of approximately  $25,000 on sold property,  an estimated  liability to provide
title  insurance and deeding  costs of $423,000 and an estimated  cost of street

                                       10

<PAGE>


maintenance,  prior to assumption of such  obligations  by local  governments of
$612,000, all of which are included in deferred revenue. As of December 31, 1998
and  December  31,  1997 the  Company  had in escrow  approximately  $7,000  and
$50,000,  respectively,  specifically  for land  improvements  at certain of its
Central and North Florida communities.  The Company's development obligation was
substantially  reduced in 1997 by the consummation of the Agreement  approved by
the  stockholders  on  November  4,  1997.   Approximately   $7,400,000  of  the
development obligation at St. Augustine Shores was assumed by Swan. In addition,
the creation of a Lot  Exchange  Trust  reduced the  development  obligation  at
Marion Oaks and Sunny Hills by approximately $5,800,000.

     On the federal level, the Company's homesite  installment sales are subject
to the Federal Consumer Credit Protection ("Truth-in-Lending") Act. In addition,
the Company's  activities are subject to regulation by the Interstate Land Sales
Registration  Division  ("ILSRD"),  which  administers the Interstate Land Sales
Full  Disclosure  Act. That Act requires that the Company file with ILSRD copies
of  applicable  materials  on  file  with  the  Division  as to  all  properties
registered;  certain  properties  must be  registered  directly  with ILSRD,  in
addition to being registered with the Division.

     The Company has either  complied  with  applicable  statutory  requirements
relative to the  properties  it is  offering or has relied on various  statutory
exemptions  which have relieved the Company from such  registration,  filing and
disclosure requirements. If these exemptions do not continue to remain available
to the  Company,  compliance  with  such  statutes  may  result in delays in the
offering of the Company's properties and products to the public.

     The Company's land sales activities are further subject to the jurisdiction
of the laws of various states in which the Company's  properties are offered for
sale.  In  addition,  Florida  and other  jurisdictions  in which the  Company's
properties  are  offered  for  sale  have   strengthened,   or  are  considering
strengthening,  their regulation of subdividers and subdivided lands in order to
provide  further  assurances  to the public.  The Company has  attempted to take
appropriate steps to modify its marketing programs and registration applications
in the face of such increased regulation,  but has incurred additional costs and
delays in the  marketing  of certain  of its  properties  in certain  states and
countries. For example, the Company has complied with the regulations of certain
states which require that the Company sell its  properties to residents of those
states pursuant to a deed and mortgage transaction,  regardless of the amount of
the down  payment.  The  Company  intends to  continue to monitor any changes in
statutes or regulations  affecting,  or  anticipated to affect,  the sale of its
properties  and intends to take all  necessary and  reasonable  action to assure
that its properties and its proposed  marketing  programs are in compliance with
such regulations, but there can be no assurance that the Company will be able to
timely  comply with all  regulatory  changes in all  jurisdictions  in which the
Company's properties are presently offered for sale to the public.

     Real estate  salespersons must, absent exemptions which may be available to
employees of the property owner,  be licensed in the  jurisdiction in which they
perform their activities. Real estate brokerage companies in Florida, as well as
their  brokers and  salespersons,  must be  licensed by the Florida  Real Estate
Commission.

     Miscellaneous

     Various subsidiaries and divisions of the Company are subject to regulation
by local,  state and federal agencies.  Such regulation extends to the licensing
of operations,  operating areas and personnel;  the  establishment of safety and
service standards; and various other matters.


                                       11

<PAGE>

                                     
ITEM 3

                                LEGAL PROCEEDINGS

     The  Company  is  subject  to  a  lawsuit   entitled   Marco  Island  Civic
Association,  Inc. et al v. The Deltona Corporation, et al, Case No. 98-3758-CA,
which was filed in the Circuit  Court of Collier  County  Florida on October 29,
1998.  The complaint  alleges that the Company  amended  certain  Declaration of
Restrictions for property in Marco Island without having the authority to do so.
The  plaintiff is seeking to overturn the Amendment to the  Declaration  as null
and void and for unspecified  relief. The complaint was amended by the plaintiff
to add claims for breach of warranty and  indemnity and now includes a claim for
attorney's  fees incurred in connection  with prior  litigation.  In the amended
Complaint,  the plaintiff is also seeking  certification  of the case as a class
action based upon an allegation that Deltona received  compensation for granting
amendments.  The case is in the initial  discovery phase. The Company intends to
vigorously  defend itself against the claims and to defeat the effort to convert
the case to a class action.  In the event the plaintiff is successful and if the
class  certification is authorized,  and if the Company is not successful in its
defenses, a substantial claim would be obtained against the Company.

     The  Company  is also a party to  certain  other  legal and  administrative
proceedings arising in the ordinary course of business. The outcome will not, in
the opinion of the Company,  have a material  adverse  effect on the business or
financial condition of the Company.


                                       12

<PAGE>



ITEM 5


                    PRICE RANGE OF COMMON STOCK AND DIVIDENDS

     The  Company's  Common  Stock was traded on the New York and Pacific  Stock
Exchanges  under the ticker symbol DLT. On April 6, 1994,  both the New York and
Pacific Stock  Exchanges  suspended the Company's  Common Stock from trading and
instituted  procedures to delist the Company's  Common Stock.  On June 16, 1994,
the Company's Common Stock was formally removed from listing and registration on
the New York Stock Exchange. As of December 31, 1998, the Company's Common Stock
was traded on a limited basis in the  over-the-counter  markets (on the bulletin
board) under the symbol DLTA. The weighted  average price at which the stock was
traded at the end of the first,  second, third and fourth quarters of 1998 is as
follows:


                  March 31, 1998                 $ .466
                  June 30, 1998                  $ .447
                  September 30, 1998             $ .266
                  December 31, 1998              $ .248

     The  Company  has never  paid  cash  dividends  on its  Common  Stock.  The
Company's loan agreements contain certain  restrictions which currently prohibit
the Company from paying dividends on its Common Stock.


                                       13

<PAGE>



ITEM 6

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION

     The following table summarizes selected consolidated  financial information
and should be read in conjunction  with the Consolidated  Financial  Statements.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations".

 <TABLE>
<CAPTION>

                       Consolidated Income Statement Data
                    (in thousands except per share amounts)

                                                        Years ended
                             December 31, December 31,  December 31,  December 31,  December 31,
                                1998         1997          1996          1995          1994
                             ------------ ------------  ------------  ------------  ------------
                                                        (in thousands)
<S>                          <C>          <C>           <C>           <C>           <C>
Revenues .................   $     6,487  $    9,425    $     8,650   $    6,688    $    8,541
Costs and expenses........         9,078      10,751          9,877        9,593        12,447
                             -----------  ----------    -----------   ----------    ----------
Loss from continuing 
 operations before taxes
 and extraordinary items..        (2,591)     (1,326)        (1,227)      (2,905)       (3,906)
Provision for income taxes           -0-         -0-            -0-          -0-           -0-
                             -----------  ----------    -----------   ----------    ----------
Loss from operations
 before extraordinary
 items....................        (2,591)     (1,326)        (1,227)      (2,905)       (3,906)
Extraordinary items:
Gain on settlement related
 to the Marco refund 
 obligation...............           -0-         -0-            331          702           -0-
                             -----------  ----------    -----------   ----------    ----------
Net income (loss)
 applicable to common
 stock....................   $    (2,591) $   (1,326)   $      (896)  $   (2,203)   $   (3,906)
                             ===========  ==========    ===========   ==========    ==========
Basic earnings per share
 amounts:
    Continuing operations.   $      (.19) $     (.20)   $      (.18)  $     (.43)   $     (.59)
    Extraordinary items...           .00         .00            .05          .10           .00
                             -----------  ----------    -----------   ----------    ----------
Net income (loss).........   $      (.19) $     (.20)   $      (.13)  $     (.33)   $     (.59)
                             ===========  ==========    ===========   ==========    ==========
Weighted average common 
 shares outstanding.......    13,544,277   6,753,587      6,729,648    6,699,923     6,514,988
                             ===========  ==========    ===========   ==========    ==========
<CAPTION>

                        Consolidated Balance Sheet Date
                                 (in thousands)

                                                        Years ended
                             December 31, December 31,  December 31,  December 31,  December 31,
                                1998         1997          1996          1995          1994
                             ------------ ------------  ------------  ------------  ------------
                                                        (in thousands)
<S>                          <C>          <C>           <C>           <C>           <C>


Total assets..............   $   11,915   $   13,560    $    19,422   $   19,180    $   22,109
                             ==========   ==========    ===========   ==========    ==========

Liabilities...............   $   20,175   $   19,174    $    37,301   $   36,193    $   38,930
Stockholders' equity
 (deficiency).............       (8,260)      (5,614)       (17,879)     (17,013)      (16,821)
                             ----------   ----------    -----------   ----------    ----------
Total liabilities and
 stockholders' equity
 (deficiency).............   $   11,915   $   13,560    $    19,422   $   19,180    $   22,109
                             ==========   ==========    ===========   ==========    ==========
</TABLE>


                                       14

<PAGE>



ITEM 7

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


From June 19, 1992 through  November 4, 1997,  the Company had entered into loan
agreements with Selex International B.V., a Netherlands  corporation  ("Selex"),
Yasawa  Holdings,  N.V., a  Netherlands  Antilles  Corporation  ("Yasawa"),  and
related parties.  Since December,  1992, the Company has been dependent on loans
and advances from Selex,  Yasawa and their  affiliates in order to implement its
marketing program and assist in meeting its working capital requirements.

On November  4, 1997 at the 1997  Annual  Meeting,  the  Company's  stockholders
approved  an   Agreement   between  the  Company  and  its  lenders  that  would
substantially reduce the Company's  outstanding debt obligation of $25.3 million
(the  "Agreement").  The  Agreement,  consummated  effective  December 30, 1997,
resulted in a reduction in the Company's outstanding debt obligation through the
conveyance of all remaining land inventory and  obligations in the Company's St.
Augustine  Shores  Subdivision  and the  issuance of  approximately  6.8 million
shares of Common Stock at $1.00 per share (par value). Additionally, the lenders
purchased  $7.5  million in  contracts  receivable  from the Company to generate
working capital and further reduce the debt obligation. Specifically:

     1. Selex sold its remaining debt  ($2,664,736),  including the Empire note,
to Yasawa and the Company owes no further  duty or  obligation  to Selex,  which
provided  the  Company a release.  The debt  purchased  by Yasawa was  satisfied
through  Yasawa's  purchase of  2,664,736  shares of Common  Stock issued by the
Company at a per share conversion price of One Dollar ($1.00), which is equal to
par value.

     2. Swan Development Corporation ("Swan"), an affiliate of Selex and Yasawa,
had  previously  acquired  $5,529,501  of the  Company's  debt from Selex.  This
$5,529,501  was  satisfied  through  the  Company's  conveyance  of  all  of the
Company's  remaining land inventory and obligations in its St.  Augustine Shores
Subdivision  to Swan . The price,  based upon appraised  value,  was adjusted to
take into account the development obligations on sold lots assumed by Swan.

     3.  Scafholding  B.V.  ("Scafholding"),  an  affiliate of Selex and Yasawa,
purchased approximately $7.5 million in contracts receivable from the Company at
seventy-five  percent  (75%) of face  value  with  recourse  for  non-performing
contracts.  This sale generated approximately $5.6 million,  $1,982,457 of which
was used to reduce  outstanding debt to Yasawa. The balance has been used by the
Company to pay a portion of the delinquent  real estate taxes,  to implement its
marketing  programs,  to  initiate  development  of  TimberWalk  and to meet the
Company's working capital requirements.

     4. A  $4,144,602  portion of the  Company's  debt to Yasawa  was  satisfied
through  Yasawa's  purchase of  4,144,602  shares of Common  Stock issued by the
Company at a per share conversion price of One Dollar ($1.00), which is equal to
par value.

Through  Yasawa's  acquisition  of the  6,809,338  shares of Common Stock of the
Company referenced above, Mr. Antony Gram's beneficial  ownership increased from
3,109,703 shares to 9,919,041 shares (73.23% of the outstanding shares of Common
Stock of the Company as of December 31, 1998).

Prior to November 4, 1997 and independent of the Agreement outlined above, Selex
and Yasawa  agreed to forgive  $2,050,818  in accrued  interest on the Company's
debt to them.

As part of the Agreement,  if the Company elects to do so, Scafholding agreed to
purchase contracts  receivable at 65% of face value, with recourse,  to meet the
Company's  ongoing  capital  requirements.  Scafholding  purchased the following
contracts  receivables  from the  Company to  generate  working  capital for the
Company:



                                       15

<PAGE>



                                              Approximate Contracts
                      Date of Purchase        Receivable Amount Purchased
                      ----------------        ---------------------------
                      June 30, 1998           $200,100
                      July 15, 1998           $115,200
                      July 31, 1998           $179,900
                      August 31, 1998         $250,400
                      September 10, 1998      $153,400
                      September 29, 1998      $497,100

     As of December 31, 1998, the Company's  outstanding debt to Scafholding was
$1,130,000 , secured by a first lien on the Company's receivables; the Company's
outstanding  debt to  Yasawa  was  $6,670,000  secured  by a second  lien on the
Company's  receivables  and a mortgage on all of the Company's  property.  As of
December 31, 1998, loans  outstanding from Yasawa and Scafholding to the Company
totaled  $7,800,000.  The terms of repayment of this debt have been restructured
to provide for monthly  payments of principal in the amount of $100,000  payable
monthly  in cash or  with  contracts  receivable  at  100% of face  value,  plus
interest payable monthly on the declining  balance at the rate of 9.6% per annum
in  cash  or  with  contracts  receivable  at  65% of  face  value.  Yasawa  and
Scafholding did not require the Company to make interest payments for the period
September  1, 1998 to December 31,  1998.  As of December  31,  1998,  the total
amount of interest accrued is approximately $258,000. Effective January 1, 1999,
Yasawa and  Scafholding  agreed to reduce the annual  percentage  rate for their
existing loans to the Company from 9.6% to 6% per annum.

     From  October 9, 1998  through the  present,  Swan has advanced the Company
funds to meet its working capital  requirements.  The Company's outstanding debt
to Swan,  which is  secured by a third lien on the  Company's  receivables,  was
$765,000  and   $5,690,000   as  of  December  31,  1998  and  March  26,  1999,
respectively.  The Company signed a promissory  note to Swan in March 1999 which
provides that funds advanced by Swan will be paid back by the Company monthly in
contracts  receivables  at 90% of face value,  with  recourse.  There will be no
interest for the first six month after an advance of money is received from Swan
by the Company; thereafter the interest shall be 6% per annum on the outstanding
balance of the advance. The amount of each monthly payment will vary and will be
dependent  upon the amount of contracts  receivable in the Company's  portfolio,
excluding  contracts  receivable held as collateral for prior receivable  sales.
Pursuant  to the terms of the  promissory  note,  the  Company  is  required  to
transfer to Swan monthly as debt repayment all current  contracts  receivable in
the  Company's  portfolio  in excess of the  aggregate  sum of  $500,000.  Funds
advanced by Swan were used by the  Company to pay  approximately  $2,567,000  in
outstanding real estate taxes for unsold properties with the balance to meet the
Company's working capital requirements.

     During 1998,  the Company  transferred 14 lots and 4 tracts of land to Swan
Development   Corporation   ("Swan"),  an  affiliate  of  Yasawa  Holdings  N.V.
("Yasawa") and Scafholding B.V. ("Scafholding"). In return, Swan built an office
complex  on part of the land for use by the  Company  for a period of 54 months,
renewable  thereafter.  The Company valued the land transferred at approximately
$440,000 and recorded the net present value of the use of the office  complex of
approximately  $375,000 as prepaid rent. The difference  between the net present
value of the rent and the cost of the land of approximately $290,000 is recorded
as deferred profit at December 31, 1998.

 Results of Operations

  Years ended December 31, 1998 and December 31, 1997

     Revenues

     Total revenues were $6,488,000 for 1998 compared to $9,425,000 for 1997.

     Gross land sales were  $4,155,000 for 1998 versus  $6,093,000 for 1997. Net
land sales (gross land sales less estimated uncollectible  installment sales and
contract  valuation  discount)  decreased to $3,078,000 for 1998 from $4,045,000
for  1997.  The  decrease  reflects  lower  sales by the  Company's  independent
dealers.


                                       16

<PAGE>



     Housing revenues are not recognized from housing sales until the completion
of construction  and the passage of title.  Housing revenues were $1,622,000 for
1998  compared  to  $1,214,000  in 1997.  The  increase  in housing  revenues is
directly  related to the  increase  in the  Company's  housing  advertising  and
promotional programs for housing.

     The following table reflects the Company's real estate product mix for 1998
and 1997 (in thousands):

                                                         Years Ended
                                            ------------------------------------
                                            December 31,            December 31,
                                               1998                    1997
                                            ------------            ------------
Gross Land Sales:
                  Retail sales*.........    $ 4,155                 $ 6,093
                                            -------                 -------
                    Total...............      4,155                   6,093
                                            -------                 -------
Housing Sales:
                  Single Family.........      1,622                   1,214
                                            -------                 -------
                    Total...............      1,622                   1,214
                                            -------                 -------
                    Total Real Estate...    $ 5,777                 $ 7,307
                                            =======                 =======

     * New retail land sales contracts entered into,  including deposit sales on
which  the  Company  has  received  less  than 20% of the  sales  price,  net of
cancellations,  for the years ended December 31, 1998 and December 31, 1997 were
$4,679,000 and $5,359,000,  respectively.  The Company had a backlog of $630,000
and  $1,094,000 in  unrecognized  sales as of December 31, 1998 and December 31,
1997,  respectively.  Such contracts are not included in retail land sales until
the  applicable  rescission  period has expired  and the  Company  has  received
payments  totaling  20%  of  the  contract  sales  price.  See  Note  1  to  the
Consolidated Financial Statements.

     Improvement  revenues  result from  recognition  of revenues  deferred from
prior period  sales.  Recognition  occurs as  development  work  proceeds on the
previously  sold  property  or  customers  are  exchanged  to a  developed  lot.
Improvement  revenues  totaled  $956,000 in 1998 as compared to  $2,366,000  for
1997.  The  decrease  is a result  of the Lot  Exchange  Trust,  which  provided
sufficient developed inventory for exchanges to customers with undeveloped lots,
being executed in 1997.

     Interest income was $548,000 for 1998 compared to $1,367,000 for 1997. This
decrease is the result of lower contracts receivable balances.

     Other  revenues were $284,000 for 1998 compared to $433,000 in 1997.  Other
revenues are generated  principally  by the Company's  title  insurance and real
estate brokerage subsidiaries.

     Costs and Expenses

     Costs and expenses  were  $9,079,000  for 1998 compared to  $10,751,000  in
1997. Cost of sales totaled  $2,562,000 for 1998 versus $2,831,000 for 1997. The
decrease reflects lower sales by the Company's independent dealers.

     Commissions,  advertising and other selling expenses totaled $2,533,000 for
1998 versus $2,517,000 for 1997.  Advertising  decreased to $46,000 in 1998 from
$104,000 in 1997.  Other selling  expenses  increased to $1,124,000 in 1998 from
$623,000 in 1997 as a result of  increased  promotion of the  Company's  housing
line.

     General  and  administrative   expenses  were  $2,144,000  in  1998  versus
$1,680,000  for  1997.  General  and  administrative   expenses  have  increased
primarily  due to  termination  agreements  to officers who  resigned  effective
October 1998.

     The Company recorded a $840,000 provision for recourse obligations in 1997.

     Real estate tax expense was  $1,028,000  in 1998  compared to $1,338,000 in
1997.   Included  in  real  estate  tax  expense  is  delinquent   interest  and
administrative fees on delinquent taxes, which accrue interest at 18% per annum.

     Interest  expense was $812,000 for 1998 as compared to $1,545,000 for 1997.
The  decrease in  interest  expense is the result of the  decrease  in debt.  No
interest was capitalized in 1998 or 1997.


                                       17

<PAGE>



     Net Income

     The Company  reported a net loss of $2,591,000 for 1998,  compared to a net
loss of $1,326,000 for 1997.

  Years ended December 31, 1997 and December 31, 1996

     Revenues

     Total revenues were $9,425,000 for 1997 compared to $8,650,000 for 1996.

     Gross land sales were  $6,093,000 for 1997 versus  $6,816,000 for 1996. Net
land sales (gross land sales less estimated uncollectible  installment sales and
contract  valuation  discount)  decreased to $4,045,000 for 1997 from $4,296,000
for  1996.  The  decrease  in sales  reflects  lower  sales  from the  Company's
independent dealer network.

     The Company re-entered the single-family housing business in
December,  1992.  Revenues  are not  recognized  from  housing  sales  until the
completion  of  construction  and  passage  of  title.   Housing  revenues  were
$1,214,000 for 1997 compared to $1,202,000 in 1996.  Housing  revenues  remained
constant in 1997.

     The following table reflects the Company's real estate product mix for 1997
and 1996 (in thousands):


                                                         Years Ended
                                            ------------------------------------
                                            December 31,            December 31,
                                               1997                    1996
                                            ------------            ------------
Gross Land Sales:
                  Retail sales*.........    $ 6,093                 $ 6,816
                                            -------                 -------
                    Total...............      6,093                   6,816
                                            -------                 -------
Housing Sales:
                  Single Family.........      1,214                   1,188
                  Vacation Ownership....        -0-                      14
                                            -------                 -------
                    Total...............      1,214                   1,202
                                            -------                 -------
                    Total Real Estate...    $ 7,307                 $ 8,018
                                            =======                 =======

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

* New retail land sales contracts entered into, including deposit sales on which
the Company has received less than 20% of the sales price, net of cancellations,
for the years ended December 31, 1997 and December 31, 1996 were  $5,359,000 and
$6,612,000, respectively. The Company had a backlog of $1,094,000 and $2,089,000
in  unrecognized   sales  as  of  December  31,  1997  and  December  31,  1997,
respectively.  Such  contracts  are not  included in retail land sales until the
applicable  rescission  period has expired and the Company has received payments
totaling  20%  of the  contract  sales  price.  See  Note 1 to the  Consolidated
Financial Statements.
 
     Improvement revenues result from recognition of revenues
deferred  from  prior  period  sales.  Recognition  occurs as  development  work
proceeds  on the  previously  sold  property or  customers  are  exchanged  to a
developed lot.  Improvement  revenues totaled  $2,366,000 in 1997 as compared to
$1,008,000 for 1996. The increase is a result of the Lot Exchange  Trust,  which
provided   sufficient   developed  inventory  for  exchanges  to  customer  with
undeveloped lots.

     Interest  income was  $1,367,000  for 1997 compared to $1,464,000 for 1996.
This  decrease is the result of lower  recognition  of the  Company's  valuation
discount.

     Other revenues were $433,000 for 1997 compared to $680,000 in
1996. Other revenues are generated  principally by the Company's title insurance
and real estate brokerage subsidiaries.

     Included in the 1996 results is an extraordinary gain of $331,000 resulting
from the final settlement of the Marco class action litigation.

     In 1996 the Company  evaluated  its  property,  plant and  equipment.  As a
result, the Company wrote off approximately  $1,044,000 of obsolete assets, most
of which were fully  depreciated.  The Company recognized a loss of $40,000 as a
result of this write off.

                                       18

<PAGE>



     Costs and Expenses

     Costs and expenses  were  $10,751,000  for 1997  compared to  $9,877,000 in
1996. Cost of sales totaled $2,831,000 for 1997 versus $2,673,000 for 1996. This
increase is primarily  due to an increase in the cost of  improvements  on prior
period sales.

     Commissions,  advertising and other selling expenses totaled $2,517,000 for
1997  versus  $2,457,000  for 1996.  Advertising  and  promotional  expenditures
decreased  to $104,000 in 1997 from  $118,000 in 1996.  Other  selling  expenses
increased to $623,000 in 1997 from $514,000 in 1996 as a result of  preparations
for the introduction of a new housing line in early 1998.

     General  and  administrative   expenses  were  $1,680,000  in  1997  versus
$1,715,000 for 1996. General and administrative expenses remained constant.

     The Company recorded a $840,000 provision for recourse obligations in 1997.

     Real estate tax expense was  $1,338,000  in 1997  compared to $1,251,000 in
1996.   Included  in  real  estate  tax  expense  is  delinquent   interest  and
administrative fees on delinquent taxes, which accrue interest at 18% per annum.

     Interest  expense was  $1,545,000  for 1997, as compared to $1,781,000  for
1996.  The  decrease in interest  expense is the result of cessation of interest
accrual as of November, 1997 simultaneous with the stockholder's approval of the
debt  restructuring  at the 1997 annual  meeting.  Total  interest cost (none of
which  represents  capitalized  interest) was  $1,545,000 fr 1997 as compared to
$1,781,000 for 1996. No interest was capitalized in 1997 and 1996.

     Net Income

     The Company  reported a net loss of $1,326,000 for 1997,  compared to a net
loss of $896,000 for 1996. Included in the 1996 results is an extraordinary gain
of  $331,000  resulting  from the final  settlement  of the Marco  class  action
litigation.

Regulatory Developments which may affect Future Operations

     In Florida, as in many growth areas, local governments have sought to limit
or control population growth in their communities  through  restrictive  zoning,
density reduction,  the imposition of impact fees and more stringent development
requirements.  Although the Company has taken such factors into consideration in
its master  plans by  agreeing,  for example,  to make  improvements,  construct
public  facilities and dedicate  certain  property for public use, the increased
regulation  has  lengthened  the  development  process and added to  development
costs.

     The implementation of the Florida Growth Management Act of 1985 (the "Act")
precludes  the issuance of  development  orders or permits if public  facilities
such  as  transportation,  water  and  sewer  services  will  not  be  available
concurrent  with  development.  Development  orders have been  issued  for,  and
development  has  commenced  in,  the  Company's   existing   communities  (with
development  being  completed  in  certain  of  these  communities).  Thus,  the
Company's  communities  are  less  likely  to be  affected  by  the  new  growth
management policies than future communities. Any future communities developed by
the Company will be strongly impacted by new growth management  policies.  Since
the Act and its implications are  consistently  being  re-examined by the State,
together  with  local  governments  and  various  state and  local  governmental
agencies,  the Company  cannot  further  predict the timing or the effect of new
growth management policies,  but anticipates that such policies may increase the
Company's permitting and development costs.

     The Company's land sales activities are further subject to the jurisdiction
of the laws of various states in which the Company's  properties are offered for
sale.  In  addition,  Florida  and other  jurisdictions  in which the  Company's
properties  are  offered  for  sale  have   strengthened,   or  are  considering
strengthening,  their regulation of subdividers and subdivided lands in order to
provide  further  assurances  to the public.  The Company has  attempted to take
appropriate steps to modify its

                                       19

<PAGE>



marketing  programs and registration  applications in the face of such increased
regulation,  but has incurred  additional  costs and delays in the  marketing of
certain of its  properties in certain  states and  countries.  For example,  the
Company has complied with the  regulations  of certain states which require that
the Company sell its properties to residents of those states  pursuant to a deed
and mortgage  transaction,  regardless  of the amount of the down  payment.  The
Company  intends to continue  to monitor any changes in statutes or  regulations
affecting,  or anticipated to affect,  the sale of its properties and intends to
take all necessary and  reasonable  action to assure that its properties and its
proposed marketing  programs are in compliance with such regulations,  but there
can be no  assurance  that the  Company  will be able to timely  comply with all
regulatory  changes in all  jurisdictions in which the Company's  properties are
presently offered for sale to the public.

Liquidity and Capital Resources

  Mortgages and Similar Debt

     Effective  December  30,  1997,  the Company  and its  lenders  consummated
several  transactions that resulted in a reduction in the Company's  outstanding
debt  obligation  through the  conveyance  of all remaining  land  inventory and
obligations in the Company's St. Augustine  Shores  Subdivision and the issuance
of  approximately  6.8  million  shares of Common  Stock at $1.00 per share (par
value).  Additionally,  the lenders purchased $7,500,000 in contracts receivable
from the  Company  to  generate  working  capital  and  further  reduce the debt
obligation.  Selex sold its remaining  debt  ($2,664,736),  including the Empire
note,  to Yasawa and the Company  owes no further duty or  obligation  to Selex,
which  provided  the Company  with a release.  The debt  purchased by Yasawa was
satisfied  through Yasawa's  purchase of 2,664,736 shares of Common Stock issued
by the Company at a per share conversion  price of One Dollar ($1.00),  which is
equal to par value.  Swan had  previously  acquired  $5,529,501 of the Company's
debt from Selex. This $5,529,501 was satisfied through the Company's  conveyance
of all of the Company's  remaining  land  inventory and  obligations  in its St.
Augustine  Shores  Subdivision to Swan . The price,  based upon appraised value,
was  adjusted to take into  account  the  development  obligations  on sold lots
assumed by Swan.  Scafholding  purchased  approximately  $7,500,000 in contracts
receivable  from the Company at  seventy-five  percent  (75%) of face value with
recourse for non-performing  contracts.  This sale generated  approximately $5.6
million,  $1,982,457 of which was used to reduce outstanding debt to Yasawa. The
balance was used by the Company to pay a portion of the  delinquent  real estate
taxes,  to  implement  its  marketing  programs,   to  initiate  development  of
TimberWalk and to meet the Company's working capital requirements.  A $4,144,602
portion of the Company's debt to Yasawa was satisfied  through Yasawa's purchase
of  4,144,602  shares  of Common  Stock  issued  by the  Company  at a per share
conversion price of One Dollar ($1.00), which is equal to par value.

     The  terms of  repayment  of the  Yasawa  and  Scafholding  debt  have been
restructured  to provide for  monthly  payments  of  principal  in the amount of
$100,000  payable  monthly in cash or with contracts  receivable at 100% of face
value,  plus interest  payable  monthly on the declining  balance at the rate of
9.6% per annum in cash or with contracts receivable at 65% of face value. Yasawa
and Scafholding have not required the Company to make monthly interest  payments
for the period September 1, 1998 to December 31, 1998.  As of December 31, 1998,
the total  amount of  interest  accrued  is  approximately  $258,000.  Effective
January 1, 1999,  Yasawa and Scafholding  agreed to reduce the annual percentage
rate on their existing loans to the Company from 9.6% to 6% per annum.

     From  October 9, 1998  through the  present,  Swan has advanced the Company
funds to meet its working capital  requirements.  The Company's outstanding debt
to Swan,  which is  secured by a third lien on the  Company's  receivables,  was
$765,000  and   $5,690,000   as  of  December  31,  1998  and  March  26,  1999,
respectively.  The Company signed a promissory  note to Swan in March 1999 which
provides that funds advanced by Swan will be paid back by the Company monthly in
contracts  receivables  at 90% of face value,  with  recourse.  There will be no
interest  for the first six months  after an advance of money is  received  from
Swan by the  Company;  thereafter  the  interest  shall  be 6% per  annum on the
outstanding balance of the advance. The amount of each monthly payment will vary
and will be dependent  upon the amount of contracts  receivable in the Company's
portfolio,   excluding  contracts   receivable  held  as  collateral  for  prior
receivable  sales.  Pursuant to the terms of the promissory note, the Company is
required to transfer to Swan  monthly as debt  repayment  all current  contracts
receivable  in  the  Company's  portfolio  in  excess  of the  aggregate  sum of
$500,000. Funds advanced
                               
                                      20
 

<PAGE>

by Swan were used by the Company to pay approximately  $2,567,000 in outstanding
real estate taxes for unsold  properties  with the balance to meet the Company's
working capital requirements.

     The  following  table  presents  information  with respect to mortgages and
similar debt (in thousands):

 
                                                           Years Ended
                                                    December 31,    December 31,
                                                      1998             1997
                                                    ------------    -----------
                  Mortgage Notes Payable.....       $ 6,670         $ 6,693
                  Other Loans................         1,895           2,294
                                                    -------         -------
                    Total Mortgages and
                     similar debt............       $ 8,565         $ 8,987
                                                    -------         -------
-----------
  *         Included in Mortgage Notes Payable is the Yasawa loan ($6,670,000 at
            December 31, 1998);  included in Other Loans is the Scafholding loan
            ($1,130,000 as of December 31, 1998) and the Swan loan  ($765,000 as
            of December 31, 1998).

     Indebtedness  under various purchase money mortgages and loan agreements is
collateralized by substantially all of the Company's assets,  including stock of
certain wholly-owned subsidiaries. The Company's outstanding debt to Scafholding
is  secured  by a  first  lien  on  the  Company's  receivables;  the  Company's
outstanding  debt to  Yasawa  is  secured  by a  second  lien  on the  Company's
receivables and a mortgage on all of the Company's  property;  and the Company's
outstanding  debt  to  Swan  is  secured  by  a  third  lien  on  the  Company's
receivables.

  Contracts and Mortgages Receivable Sales

     In June, 1992 and February,  1990, the Company completed sales of contracts
and mortgages  receivable  totaling  $13,500,000 and $17,000,000,  respectively,
which generated approximately  $8,000,000 and $13,900,000  respectively,  in net
proceeds to the Company.  The anticipated  costs of the June,  1992  transaction
were included in the extraordinary  loss from debt  restructuring for 1991 since
the  restructuring  was  dependent on the sale.  The Company  recorded a loss of
$600,000 on the February, 1990 sale. In conjunction with these sales the Company
granted  the  purchaser  a security  interest  in certain  additional  contracts
receivable of approximately $2,700,000 and conveyed all of its rights, title and
interest in the property  underlying such contracts to a collateral  trustee. In
addition,  these  transactions,  among  other  things  require  that the Company
replace or repurchase any receivable  that becomes 90 days  delinquent  upon the
request of the purchaser.  Such  requirement  can be satisfied from contracts in
which the purchaser holds a security  interest  (approximately  $2,328,000 as of
December 31, 1998).  The purchaser of these  receivables  experienced  financial
difficulty  and filed in 1994 for  protection  under  Chapter 11 of the  Federal
Bankruptcy  Code. In November 1995, the purchaser of these  receivables sold the
portfolio to Finova Capital Corporation.  The Company has fully reserved for the
estimated future cancellations based on the Company's historical  experience for
receivables the Company services and believes these reserves to be adequate.  In
1998, the Company did not replace any delinquent receivables. As of December 31,
1998 and  1997,  $1,019,000  and  $1,279,000  in  receivables  were  delinquent,
respectively.

     In March,  1993,  the  Company  transferred  $1,600,000  in  contracts  and
mortgages  receivable  generating  approximately  $1,059,000  in proceeds to the
Company,  which was used for  working  capital  and the  creation  of a holdback
account in the amount of $150,000.  There were no monies in the holdback account
as of December 31, 1998.

     In  December  1997,  Scafholding  purchased  approximately   $7,500,000  in
contracts  receivable  from the Company at  seventy-five  percent  (75%) of face
value  with  recourse  for   non-performing   contracts.   This  sale  generated
approximately  $5.6 million,  $1,982,457 of which was used to reduce outstanding
debt to Yasawa. The balance has been used by the Company to pay a portion of the
delinquent real estate taxes, to implement its marketing  programs,  to initiate
development   of  TimberWalk   and  to  meet  the  Company's   working   capital
requirements.

     During 1998,  Scafholding purchased  approximately  $1,400,000 in contracts
receivable  from the  Company  at  sixty-five  percent  (65%) of face value with
recourse  for  non-performing  contracts.  These sales  generated  approximately
$900,000 used to meet the Company's  working capital  requirements.


                                       21
<PAGE>



     The Company was the  guarantor of  approximately  $12,208,000  of contracts
receivable  sold or transferred  as of December 31, 1998,  for the  transactions
described  above.  There  are  no  funds  on  deposit  with  purchasers  of  the
receivables  as security to assure  collectibility  as of such date. A provision
has been established for the Company's  obligation under the recourse provisions
of which  $3,251,000  remains at  December  31,  1998.  The  Company has been in
compliance with all receivable transactions since the consummation of receivable
sales.

     The  Company  has an  agreement  with  Scafholding  and Citony  Development
Corporation for the servicing of their receivable  portfolios.  During 1998, the
Company received  approximately $82,000 in revenue pursuant to these agreements.

     In the future,  if the Company elects to do so, Yasawa and Scafholding have
agreed to purchase contracts receivable at 65% of face value, with recourse. The
Company has an agreement  with Swan whereby Swan will loan the Company  funds to
be repaid with contracts receivable at 90% of face value, with recourse.

Other Obligations

     As of December 31, 1998, the Company had estimated development  obligations
of  approximately  $25,000 on sold property,  an estimated  liability to provide
title  insurance and deeding  costing  $423,000 and an estimated  cost of street
maintenance,  prior to assumption of such obligations by local  governments,  of
$612,000, all of which are included in deferred revenue. As of December 31, 1998
and  December  31,  1997,  the  Company had in escrow  approximately  $7,000 and
$50,000,  respectively,  specifically  for land  improvements  at certain of its
Central and North Florida communities.  The Company's development obligation was
substantially  reduced in 1997 by the consummation of the Agreement  approved by
the  stockholders  on  November  4,  1997.   Approximately   $7,400,000  of  the
development obligation at St. Augustine Shores was assumed by Swan. In addition,
the creation of the Lot Exchange  Trust  reduced the  development  obligation at
Marion Oaks and Sunny Hills by approximately $5,800,000.

  Liquidity

     Retail land sales have  traditionally  produced  negative cash flow through
the  point  of  sale as a  result  of a  regulatory  requirement  to sell  fully
developed  lots and the  additional  requirement  to pay  marketing  and selling
expenses prior to or shortly after the point of sale. In an effort to offset the
negative cash flow effects of installment land sales, the Company is directing a
greater portion of its marketing  efforts to the sale of lots with homes and has
just begun  offering  lots for sale in  compulsory  building  areas  where a lot
purchaser  must  complete  payments  for the lot and  construct  a home within a
limited period of time.

     The Company has been dependent on its ability to sell or otherwise  finance
its  contracts  receivable  and/or  secure  other  financing  to meet  its  cash
requirements.  Since 1992, the Company has been largely  dependent on Yasawa and
related  parties for the financing of its operations.  Although  Scafholding has
purchased contracts receivables at the rate of 65% of face value, with recourse,
and Swan has loaned the Company  additional funds to be paid back with contracts
receivable  at the rate of 90% of face  value,  with  recourse,  there can be no
guarantee  that the Company will be able to generate  sufficient  receivables to
obtain sufficient financing in the future or that Yasawa, Scafholding,  Swan and
other related parties will continue to make loans to the Company.

  Year 2000

     The Company  utilizes a number of software  systems in conjunction with its
community  development,  contract processing and contract servicing  operations.
The Company has  received  assurances  from third  party  servicing  agents that
systems being used in  conjunction  with the  Company's  business are or will be
Year 2000 compliant on a timely basis. The Company has and will continue to make
certain  investments  in its  software  systems and  applications  to ensure the
Company is Year 2000  compliant.  The  financial  impact of  becoming  Year 2000
compliant  has not been and is not  expected  to be  material  to the  Company's
financial position or the results of operations in a given year.

                                       22

<PAGE>



ITEM 8

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                              AND SUPPLEMENTAL DATA

                                                                          Page

Independent Auditors' Report....................................            24

Consolidated Balance Sheets as of December 31, 1998 and
   December 31, 1997............................................            26

Statements of Consolidated Operations for the years ended
   December 31, 1998, December 31, 1997 and December 31, 1996...            28

Statements of Consolidated Stockholders' Equity (Deficiency)
   for the years ended December 31, 1998, December 31, 1997 and
   December 31, 1996............................................            29

Statements of Consolidated Cash Flows for the years ended
   December 31, 1998, December 31, 1997 and December 31, 1996...            30

Notes to Consolidated Financial Statements......................            32

Supplemental Unaudited Quarterly Financial Data.................            44



                                       23

<PAGE>



                          INDEPENDENT AUDITORS' REPORT



TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
THE DELTONA CORPORATION:


     We have audited the consolidated  balance sheet of The Deltona  Corporation
and  subsidiaries  (the  "Company")  as of  December  31,  1998 and the  related
statements  of  consolidated  operations,   consolidated   stockholders'  equity
(deficiency)  and  consolidated  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 financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion,  such consolidated  financial  statements referred to above
present fairly, in all material respects,  the financial position of the Company
at December  31, 1998 and the results of its  operations  and its cash flows for
the year then ended in conformity with generally accepted accounting principles.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the  consolidated   financial  statements,   the  Company  incurred  substantial
operating  losses and has  continued  to  experience  problems  with  liquidity,
causing the Company to be unable to meet certain contractual obligations and has
a stockholders' deficiency at December 31, 1998. These matters raise substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans  concerning  these  matters  are  described  in Note 1.  The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


JAMES MOORE & CO. P.L.
Certified Public Accountants
Gainesville, Florida
March 26, 1999


                                       24
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
THE DELTONA CORPORATION:

     We have audited the consolidated  balance sheet of The Deltona  Corporation
and  subsidiaries  (the  "Company")  as of  December  31,  1997 and the  related
statements  of  consolidated  operations,   consolidated   stockholders'  equity
(deficiency) and  consolidated  cash flows for the years ended December 31, 1997
and 1996. 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  financial  statements  are free from
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

     In our opinion,  such consolidated  financial  statements referred to above
present fairly, in all material respects,  the financial position of the Company
at December  31, 1997 and the results of its  operations  and its cash flows for
the years ended December 31, 1997 and 1996 in conformity with generally accepted
accounting principles.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the  consolidated   financial  statements,   the  Company  incurred  substantial
operating losses and has continued to experience  liquidity crises,  causing the
Company  to  be  unable  to  meet  certain  contractual  obligations  and  has a
stockholders'  deficiency at December 31, 1997.  These matters raise substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans  concerning  these  matters  are  described  in Note 1.  The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.




DELOITTE & TOUCH LLP
Certified Public Accountants
Miami, Florida
March 25, 1998


                                       25

<PAGE>




                           CONSOLIDATED BALANCE SHEETS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

                                     ASSETS
                                 (in thousands)


                                                      December 31,  December 31,
                                                         1998          1997
                                                      ------------  ------------

Cash and cash equivalents, including escrow deposits
 and restricted  cash of $667 in 1998 and $1,293 in
 1997(Note 7).......................................  $    721      $  1,397
                                                      --------      --------

Contracts receivable for land sales
 (Notes 2, 5 and 8)................................      3,519         4,356

Less: Allowance for uncollectible contracts........       (945)       (1,150)

      Unamortized valuation discount...............       (401)       (  508)
                                                      --------      --------

Contracts receivable - net.........................      2,173         2,698
                                                      --------      --------

Mortgages and other receivables - net
 (Notes 2, 5 and 8)................................        194         1,291
                                                      --------      --------

Inventories, at lower of cost or net realizable
value (Notes 3 and 5):

Land and land improvements.........................      7,579         7,449

Other..............................................         76            99
                                                      --------      --------
      Total inventories............................      7,655         7,548
                                                      --------      --------
Property, plant and equipment- net (Notes 4 and 5).        467           374
                                                      --------      --------
Prepaid expenses and other.........................        705           252
                                                      --------      --------
      Total........................................   $ 11,915      $ 13,560
                                                      ========      ========




   The accompanying notes are an integral part of the consolidated financial
                                  statements.


                                       26

<PAGE>



                           CONSOLIDATED BALANCE SHEETS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
                        (in thousands except share data)


                                                      December 31,  December 31,
                                                         1998          1997
                                                      ------------  ------------

Mortgages and similar debt (Note 5):

    Mortgage notes payable .......................    $  6,670      $  6,693
    Other loans ..................................       1,895         2,294
                                                      --------      --------
          Total mortgages and similar debt........       8,565         8,987

Accounts payable - trade .........................         193            75

Accrued interest payable (Note 5) ................         258             0

Accrued taxes, principally real estate taxes .....       2,880         1,917

Accrued expenses and other (Notes 2 and 8) .......       4,459         3,995

Customers' deposits ..............................         996           689

Deferred revenue (Notes 7 and 8) .................       2,824         3,511
                                                      --------      --------
Total liabilities ................................      20,175        19,174
                                                      --------      --------
Commitments and contingencies
 (Notes 1, 2, 5, 7, 8 and 9)

Stockholders' equity (deficiency)
 (Notes 1, 5, and 10):

    Common stock, $1 par value-authorized 
    15,000,000 shares; issued and outstanding:
    13,544,277 shares in 1998 and 1997
    (excluding 12,228 shares held in treasury)....      13,544        13,544

    Capital surplus ..............................      51,440        51,495

    Accumulated deficit ..........................     (73,244)      (70,653)
                                                      --------      --------
Total stockholders' equity (deficiency) ..........      (8,260)      ( 5,614)
                                                      --------      --------

           Total..................................    $ 11,915      $ 13,560
                                                      ========      ========



                  The accompanying notes are an integral part
                   of the consolidated financial statements.
                                 

                                       27

<PAGE>



                      STATEMENTS OF CONSOLIDATED OPERATIONS
                    THE DELTONA CORPORATION AND SUBSIDIARIES
                        (in thousands except share data)

                                                      Years Ended
                                        ----------------------------------------
                                        December 31,  December 31,  December 31,
                                           1998          1997          1996
                                        ------------  ------------  ------------

Revenues

 Gross land sales (Notes 2 and 7)...... $ 4,155       $  6,093      $  6,816
 Less: Estimated uncollectible sales...    (840)        (1,528)       (1,706)
       Contract valuation discount.....    (237)          (520)         (814)
                                        -------       --------      --------
 Net land sales........................   3,078          4,045         4,296
 Sales-housing.........................   1,622          1,214         1,202
 Recognized improvement revenue-prior
   period sales........................     956          2,366         1,008
 Interest income.......................     548          1,367         1,464
 Other ................................     284            433           680
                                        -------       --------      --------
             Total.....................   6,488          9,425         8,650
                                        -------       --------      --------

Costs and expenses

 Cost of sales-land....................     741          1,121         1,212
 Cost of sales-housing.................   1,269            917         1,005
 Cost of improvements-prior period
   sales...............................     302            545           219
 Cost of sales-other...................     250            248           237
 Provision for uncollectible contracts
   and recourse obligations (Note 2)...     -0-            840           -0-
 Commissions, advertising, and other
   selling expenses....................   2,533          2,517         2,457
 General and administrative expenses...   2,144          1,680         1,715
 Real estate tax.......................   1,028          1,338         1,251
 Interest expense......................     812          1,545         1,781
                                        -------       --------      --------
             Total.....................   9,079         10,751         9,877
                                        -------       --------      --------
Loss from operations before income
 taxes and extraordinary items.........  (2,591)        (1,326)       (1,227)
Provision for income taxes (Note 6)....     -0-            -0-           -0-
                                        -------       --------      --------
Loss from operations before
 extraordinary items................... (2,591)         (1,326)       (1,227)

Extraordinary item:
 Gain on settlement related to the
 Marco refund obligation (Note 9).....     -0-             -0-           331
                                       -------        --------      --------
Net income (loss)..................... $(2,591)       $ (1,326)     $   (896)
                                       =======        ========      ========

Basic earnings (loss) per common
 and common equivalent shares from
 (Note 10):
 Operations..........................  $  (.19)       $  ( .20)     $   (.18)
 Extraordinary gain..................      -0-             -0-           .05
                                       -------        --------      --------
             Net income (loss).......  $  (.19)       $  ( .20)     $   (.13)
                                       =======        ========      ========


                   The accompanying notes are an integral part
                    of the consolidated financial statements.

                                       28

<PAGE>



          STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIENCY)

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)

 For the years ended December 31, 1998, December 31, 1997 and December 31, 1996
<TABLE>
<CAPTION>
                                                  Common Stock      Capital      Accumulated
                                                  ($1 par value)    Surplus      Deficit          Total
                                                  --------------    -------      ------------     ---------

<S>                                               <C>               <C>          <C>              <C>
Balances, December 31, 1995...................    $ 6,719           $44,699      $(68,431)        $(17,013)
     Issuance of Common Stock for Marco Permit
       Costs..................................         15                15           -0-               30
     Net (loss) for the year..................        -0-               -0-          (896)            (896)
                                                  -------           -------      --------         --------
Balances, December 31, 1996...................    $ 6,734           $44,714      $(69,327)        $(17,879)
     Issuance of Common Stock with Related
       Party..................................      6,810               -0-           -0-            6,810
     Gain from Exchange of Land and Contracts
       Receivables with Related Party.........        -0-             6,781           -0-            6,781
     Net (loss) for the year..................        -0-               -0-        (1,326)          (1,326)
                                                  -------           -------      --------         --------
Balances, December 31, 1997...................    $13,544           $51,495      $(70,653)        $ (5,614)
     Gain (loss)from Exchange
       of Land and Contracts
       Receivable with Related
       Party..................................        -0-               (55)          -0-              (55)
     Net (loss) for the year..................        -0-               -0-        (2,591)          (2,591)
                                                  -------           -------      --------         --------
Balances, December 31, 1998...................    $13,544           $51,440      $(73,244)        $ (8,260)
                                                  =======           =======      ========         ======== 
     
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       29

<PAGE>



                      STATEMENTS OF CONSOLIDATED CASH FLOWS

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                     Years Ended
                                                      ------------------------------------------
                                                      December 31,    December 31,  December 31,
                                                         1998            1997           1996        
                                                      ------------    ------------  ------------
<S>                                                    <C>            <C>          <C>
Cash flows from operating activities:
 Cash received from operations:
  Proceeds from sale of residential units............  $   1,768      $   1,272    $   1,182
  Collections on contracts and mortgages receivable..      1,993          3,245        2,927     
    Down payments on and proceeds from sales
       of homesites and tracts.......................      1,072          1,476        1,517      
      Proceeds from the sale of Contracts Receivables        868          4,625          -0-       
      Proceeds (uses) from other sources.............        240             (8)         425
                                                       ---------      ---------    ---------
              Total cash received from operations....      5,941         10,610        6,051
                                                       ---------      ---------    ---------
  Cash expended by operations:
      Cash paid for residential units................      1,269            917        1,005
      Cash paid for land and land improvements.......      1,047            621          461
      Customer refunds...............................         35             28          931
      Commissions, advertising and other
      selling expenses...............................      2,620          2,414        2,515
     General and administrative expenses.............      1,715          1,803        1,892
      Interest paid..................................        299            -0-          -0-
      Real estate taxes paid.........................        260          2,504        1,314
                                                       ---------      ---------    ---------
              Total cash expended by operations......      7,245          8,287        8,118
                                                       ---------      ---------  
              Net cash provided by (used in) operating
                activities...........................     (1,304)         2,323       (2,067)
                                                       ---------      ---------    ---------
Cash flows from investing activities:
 Proceeds from sale of property, plant
  and equipment......................................        -0-             18            6
 Payment for acquisition and construction of
   property, plant and equipment.....................       (137)            (6)          (4)
                                                       ---------      ---------    ---------
              Net cash provided by (used in) investing
                activities.. .........................      (137)            12            2
                                                       ---------      ---------    ---------

Cash flows from financing activities:
 New borrowings......................................        765            137        2,000
 Repayment of borrowings.............................        -0-         (1,982)         (10)
                                                       ---------      ---------    ---------
              Net cash provided by (used in) financing
                activities............................       765         (1,845)       1,990
                                                       ---------      ---------    ---------
Net increase (decrease) in cash and cash
 equivalents..........................................      (676)           490          (75)
Cash and cash equivalents, beginning of year..........     1,397            907          982
                                                       ---------      ---------    ---------
Cash and cash equivalents, end of year................ $     721      $   1,397    $     907
                                                       =========      =========    =========
               



</TABLE>
               The accompanying notes are an integral part of the
                    consolidated financial statements.




  


                                       30

<PAGE>



               STATEMENTS OF CONSOLIDATED CASH FLOWS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                           Years Ended
                                                            ------------------------------------------
                                                            December 31,   December 31,   December 31,
                                                                1998           1997           1996
                                                            ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>
Reconciliation  of net income (loss) to net cash
 provided by (used in) operating activities:

Net income (loss)........................................   $ (2,591)      $ (1,326)      $   (896)
                                                            --------       --------       --------
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
     Depreciation and amortization.......................         45             46             60
     Provision for estimated uncollectible sales and
      recourse obligations...............................        840          1,528          1,706
     Contract valuation discount, net of amortization....        140            238            279 
     Net (gain) loss on sale of property, plant
       and equipment.....................................        -0-            (18)            35 
     Extraordinary gain on settlement related to the
       Marco refund obligation...........................        -0-            -0-           (331)
     Provision for recourse obligations..................        -0-            840            -0-
(Increase) decrease in assets and increase (decrease) in
   liabilities:
     Gross contracts receivable plus deductions from
      reserves...........................................     (1,689)         2,501         (3,349)
     Mortgages and other receivables.....................        890           (907)            29 
     Land and land improvements..........................       (211)           673            844 
     Housing completed or under construction and other...         23            -0-              5
     Prepaid expenses and other..........................        (87)           115             71 
     Accounts payable, accrued expenses and other........      2,049          1,086          1,461 
     Customers' deposits.................................        243           (103)            38
     Allowance for Marco permit costs....................        -0-            -0-         (1,018)
     Deferred revenue....................................       (956)        (2,350)        (1,001) 
                                                            --------       --------       -------- 
         Total adjustments and changes...................      1,287          3,649         (1,171) 
                                                            --------       --------       --------        
Net cash provided by (used in) operating activities......   $ (1,304)      $  2,323       $ (2,067) 
                                                            ========       ========       ========

Supplemental disclosure of non-cash investing 
     and financing activities:

Reduction of accrued interest as a result of the
  capitalization of interest to principal................   $    -0-       $  1,130       $   -0-       
                                                            ========       ========       =======
Reduction of accrued interest as a result of forgiveness
 of interest.............................................   $    -0-       $  2,050       $   -0-
                                                            ========       ========       =======
Reduction of accrued interest and mortgage notes
  payable as a result of an exchange of
  land, property and common stock........................   $    -0-       $ 11,689       $   -0-
                                                            ========       ========       =======
Reduction of land as a result of an exchange of debt.....   $    -0-       $  1,953       $   -0- 
                                                            ========       ========       =======
Reduction of deferred revenue as a result of assumption
 of the development obligation by a related party........   $    -0-       $  1,901       $   -0- 
                                                            ========       ========       =======
Reduction of accrued expenses as a result of the
  settlement of an obligation with a prior landlord......   $    -0-       $    -0-       $   -0- 
                                                            ========       ========       =======
Common Stock issued for reduction of long-term debt......   $    -0-       $  6,810       $   -0- 
                                                            ========       ========       =======
Common stock issued for Marco permit costs...............   $    -0-       $    -0-       $    30 
                                                            ========       ========       =======
Reduction of notes receivable as a result of payment
  of accrued interest....................................   $    254       $    -0-       $   -0-
                                                            ========       ========       ======= 
Reduction of accrued interest and mortgage notes payable
  through transfer of contracts receivable...............   $  1,233       $    -0-       $   -0-
                                                            ========       ========       ======= 
Sale of land to related party in return for future rent
  credits (see Note 8):

  Increase of Prepaid Expenses sale/lease of office......   $    398       $    -0-       $   -0-
                                                            ========       ========       ======= 
  Reduction of land as a result of sale/lease office.....   $     81       $    -0-       $   -0-
                                                            ========       ========       ======= 
  Increase in deferred revenue sale/lease of office......   $    291       $    -0-       $   -0-
                                                            ========       ========       ======= 


</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       31

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

1.   Basis of Presentation and Significant Accounting Policies

     Basis of Presentation - Going Concern


     The  accompanying  financial  statements  of The  Deltona  Corporation  and
subsidiaries (the "Company") have been prepared on a going concern basis,  which
contemplates  the  realization of assets and  satisfaction of liabilities in the
normal course of business.

     The Company has incurred a loss from operations for 1996 of $1,227,000, for
1997 of  $1,326,000  and for 1998 of  $2,591,000,  resulting in a  stockholders'
deficiency of $8,260,000 as of December 31, 1998.

     Following the  restructuring  of its debt in 1997 (see Note 5), the Company
commenced the  implementation  of its business plan by redirecting  its focus to
single-family  housing with the  development  of TimberWalk and other housing in
Marion Oaks. The transactions described in Note 5 with Selex International, B.V.
("Selex"), Yasawa Holdings N.V. ("Yasawa"), Scafholding B.V. ("Scafholding") and
Swan Development  Corporation  ("Swan"),  provided the Company with a portion of
its financing  requirements  enabling the Company to commence  implementation of
the marketing  program and attempt to accomplish  the objectives of its business
plan.  Selex,  Yasawa,  Scafholding  and Swan are related parties to the Company
either  because  they  are  shareholders  or  as a  result  of  common  control.

     The Company has been dependent on its ability to sell or otherwise  finance
contracts  receivable  and/or  secure other  financing  sources to meet its cash
requirements.  Additional  financing was required in 1998 and was funded through
the sale of additional  receivables to  Scafholding as well as additional  loans
from  Swan.  Additional  financing  will be  required  in the  future.  Although
Scafholding  has  purchased  contracts  receivables  at the  rate of 65% of face
value,  with recourse,  and Swan has loaned the Company  additional  funds to be
paid back  with  contracts  receivable  at the rate of 90% of face  value,  with
recourse,  there can be no  guarantee  that the Company will be able to generate
sufficient  receivables  to finance in the future or that  Yasawa,  Scafholding,
Swan and other related parties will continue to make loans to the Company.  As a
consequence of its liquidity  problems over the last five years, the Company has
been forced to delay payment of certain real estate taxes. (See Notes 5 and 11.)

     The  consolidated  financial  statements  do not  include  any  adjustments
relating to the  recoverability  of asset amounts or the amounts of  liabilities
should the Company be unable to continue as a going concern.

     Significant Accounting Policies

     The Company is principally  engaged in the  development and sale of Florida
real estate through the development of planned  communities on land acquired for
that purpose. 

     The Company's  consolidated financial statements are prepared in accordance
with generally accepted accounting  principles.  Material  intercompany accounts
and transactions are eliminated.

     The Company sells homesites under  installment  contracts which provide for
payments over periods  ranging from 2 to 10 years.  Since the fourth  quarter of
1991, the Company has offered only  developed lots for sale.  Sales of homesites
are  recorded  under  the  percentage-of-completion  method in  accordance  with
Statement of Financial  Accounting  Standards No. 66,  "Accounting  for Sales of
Real Estate" ("FASB No. 66").  Since 1991, the Company has not recognized a sale
until 
                                       32

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



1.   Basis of Presentation and Significant Accounting Policies (continued)

it has  received 20% of the contract  sales price.  During 1998,  1997 and 1996,
approximately 82%, 87% and 94% of sales were through a single independent dealer
in New York.

     At the time of recording a sale the Company  records an  allowance  for the
estimated cost to cancel the related  contracts  receivable  through a charge to
the  provision for  uncollectible  sales.  The amount of this  provision and the
adequacy of the allowance is determined by the Company's  continuing  evaluation
of the portfolio and past  cancellation  experience.  While the Company uses the
best information  available to make such evaluations,  it is at least reasonably
possible  future  adjustments to the allowance may be necessary in the near term
as a result of future national and  international  economic and other conditions
that may be beyond the Company's  control.  Changes in the Company's estimate of
the allowance for  previously  recognized  sales are reported in earnings in the
period in which they  become  estimable  and are  charged to the  provision  for
uncollectible contracts.

     Land improvement costs are allocated to individual homesites based upon the
relationship  that the homesite's  sales price bears to the total sales price of
all homesites in the community.  The estimated costs of improving  homesites are
based upon independent  engineering estimates made in accordance with sound cost
estimation and provide for anticipated cost-inflation factors. The estimates are
systematically  reviewed.  When  cost  estimates  are  revised,  the  percentage
relationship  they bear to deferred  revenues is  recalculated  on a  cumulative
basis to determine future income recognition as performance takes place.

     Sales of houses and vacation  ownership units, as well as all related costs
and expenses, are recorded at the time of closing.

     Interest  costs  directly  related  to, and  incurred  during,  a project's
construction  period are capitalized.  No interest has been capitalized in 1996,
1997 and 1998.

     Property,  plant and equipment is stated at cost.  Depreciation is provided
by the  straight-line  method over the estimated  useful lives of the respective
assets,  which  range  from  5  to  33  years.  Additions  and  betterments  are
capitalized,  and  maintenance  and repairs  are charged to income as  incurred.
Generally,  upon the sale or retirement of assets,  the accounts are relieved of
the costs and related accumulated depreciation and any gain or loss is reflected
in income.

     When property  exchanges and refund  transactions are consummated (see Note
8), any  resulting  loss is charged  against the  allowance  included in accrued
expenses and other.  The Company accrues  interest on its refund  obligations in
accordance with the customer refund programs.

     For the purposes of the statements of cash flows, the Company considers its
investments,  which are  comprised  of short  term,  highly  liquid  investments
purchased with a maturity of three months or less, to be cash equivalents.

     In accordance with Financial  Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
( SFAS No. 121), long-lived assets, such as inventories and property,  plant and
equipment to be held and used are to be reviewed for impairment  whenever events
or changes in  circumstances  indicate that the carrying amounts of an asset may
not be  recoverable.  As of December 31, 1998,  there were no assets  considered
impaired under the provisions of the Statement.

                                       33

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



1.   Basis of Presentation and Significant Accounting Policies (continued)

     The estimated fair values of financial  instruments have been determined by
the  Company  using  available  market  information  and  appropriate  valuation
methods.  Considerable  judgment  is  required  in  interpreting  market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts the Company could realize or incur
in a current market  exchange.  The use of different market  assumptions  and/or
estimation  methods  may have a  material  effect on the  estimated  fair  value
amounts.   The  Company's  financial   instruments  consist  of  cash  and  cash
equivalents,  contracts and mortgages receivable, and similar debt. The carrying
amount of cash and cash equivalents are reasonable  estimates of fair value. The
fair value of  contracts  and  mortgages  receivable  and similar  debt has been
estimated  using  interest  rates  currently  available for similar  terms.  The
carrying  value of the  contracts  and  mortgages  receivable  and similar  debt
approximates fair value.

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

2.   Contracts and Mortgages Receivable

     At December 31, 1998,  interest rates on contracts  receivable  outstanding
ranged from 5% to 12% per annum  (weighted  average  approximately  8.65%).  The
approximate principal maturities of contracts receivable were:

                                                  December 31,
                                                     1998
                                                     ----
                                                 (in thousands)
                  1999....................        $   540
                  2000....................            532
                  2001....................            511
                  2002....................            468
                  2003....................            429
                  2004 and thereafter.....          1,039
                                                  --------
                       Total..............        $ 3,519      
                                                  ========

     If a regularly scheduled payment on a contract remains unpaid 30 days after
its due date,  the  contract  is  considered  delinquent.  Aggregate  delinquent
contracts  receivable at December 31, 1998 and 1997  approximate  $1,058,000 and
$1,151,000, respectively.

     Information  with respect to interest rates and average contract lives used
in valuing new contracts receivable generated from sales follows:

                                      Average      Average Stated     Discounted
     Years ended                       Term        Interest Rate       to Yield
     -----------                     ---------     -------------      ----------
     December 31, 1998.............  94 months          8.3%              13.5%
     December 31, 1997.............  91 months          8.8%              13.5%
     December 31, 1996.............  89 months          7.8%              13.5%

     In June, 1992 and February,  1990, the Company completed sales of contracts
and mortgages  receivable  totaling  $13,500,000 and $17,000,000,  respectively,

                                       34

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



2.   Contracts and Mortgages Receivable (continued)

in net  proceeds  to the  Company.  The  anticipated  costs  of the  June,  1992
transaction were included in the extraordinary  loss from debt restructuring for
1991 since the  restructuring  was dependent on the sale. The Company recorded a
loss of $600,000 on the February, 1990 sale. In conjunction with these sales the
Company  granted  the  purchaser  a  security  interest  in  certain  additional
contracts receivable of approximately $2,700,000 and conveyed all of its rights,
title and interest in the  property  underlying  such  contracts to a collateral
trustee. In addition,  these  transactions,  among other things require that the
Company  replace or repurchase  any receivable  that becomes 90 days  delinquent
upon the  request of the  purchaser.  Such  requirement  can be  satisfied  from
contracts  in which  the  purchaser  holds a  security  interest  (approximately
$2,328,000  as of  December  31,  1998).  The  purchaser  of  these  receivables
experienced  financial difficulty and filed in 1994 for protection under Chapter
11 of the Federal  Bankruptcy  Code.  In November  1995,  the purchaser of these
receivables  sold the portfolio to Finova Capital  Corporation.  The Company has
fully  reserved for the estimated  future  cancellations  based on the Company's
historical  experience for receivables  the Company  services and believes these
reserves to be  adequate.  In 1998,  the Company did not replace any  delinquent
receivables.  As of December 31, 1998 and 1997,  $1,019,000  and  $1,279,000  in
receivables were delinquent, respectively.

     In March,  1993,  the  Company  transferred  $1,600,000  in  contracts  and
mortgages  receivable  generating  approximately  $1,059,000  in proceeds to the
Company,  which was used for  working  capital  and the  creation  of a holdback
account in the amount of  $150,000.  In 1998,  the  balance of the monies in the
holdback account were withdrawn by the contracts  receivable  purchaser pursuant
to the purchase agreement and the holdback account was terminated. 

     In  December  1997,  Scafholding  purchased  approximately   $7,500,000  in
contracts  receivable  from the Company at  seventy-five  percent  (75%) of face
value  with  recourse  for   non-performing   contracts.   This  sale  generated
approximately  $5.6 million,  $1,982,457 of which was used to reduce outstanding
debt to Yasawa. The balance has been used by the Company to pay a portion of the
delinquent real estate taxes, to implement its marketing  programs,  to initiate
development   of  TimberWalk   and  to  meet  the  Company's   working   capital
requirements.

     During 1998,  Scafholding purchased  approximately  $1,400,000 in contracts
and mortgages  receivable  from the Company at sixty-five  percent (65%) of face
value  with  recourse  for  non-performing  contracts.   These  sales  generated
approximately  $900,000 used to meet the Company's working capital  requirments.

     The Company was the  guarantor of  approximately  $12,208,000  of contracts
receivable  sold or transferred  as of December 31, 1998,  for the  transactions
described  above.  There  are  no  funds  on  deposit  with  purchasers  of  the
receivables  as security to assure  collectibility  as of such date. A provision
has been established for the Company's  obligation under the recourse provisions
of which  $3,251,000  remains at  December  31,  1998.  The  Company has been in
compliance with all receivable transactions since the consummation of receivable
sales.  Because of inherent  uncertainties in estimating the recourse provision,
it is at least  reasonably  possible that the Company's  estimate will change in
the near term.

     The  Company  has am  agreement  with  Scafholding  and Citony  Development
Corporation for the servicing of their receivable  portfolios.  During 1998, the
Company received approximately $82,000 in revenue pursuant to these agreements.

     In the future,  if the Company elects to do so, Yasawa and Scafholding have
agreed to purchase contracts receivable at 65% of face value, with recourse.  In
addition,  Swan has agreed to loan the Company  additional funds to be paid back
with contracts receivable at the rate of 90% of face value, with recourse.

                                       35

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

3.   Inventories

     Information  with  respect to the  classification  of inventory of land and
improvements including land held for sale or transfer is as follows:

                                             December 31,      December 31,
                                                1998              1997
                                             ------------      ------------
                                                    (in thousands)
     Unimproved land..................       $    420          $    420
     Land in various stages of
       development....................          2,287             1,888
     Fully improved land..............          4,872             5,141
                                             --------          --------
             Total....................       $  7,579          $  7,449
                                             ========          ========


4.   Property, Plant and Equipment

     Property,  plant and equipment and accumulated  depreciation consist of the
following:
<TABLE>
<CAPTION>

                                               December 31, 1998       December 31, 1997
                                             ----------------------   ----------------------
                                                       Accumulated              Accumulated
                                              Cost     Depreciation   Cost      Depreciation
                                             ------    ------------   ------    ------------
                                                             (in thousands)

     <S>                                     <C>       <C>            <C>       <C>
     Land and land improvements.........    $    74    $    -0-       $    74   $    -0-
     Other buildings, improvements and
       furnishings......................      1,073         771         1,013        746
     Construction and other equipment...        752         661           675        642
                                            --------   --------       -------   --------
         Total..........................    $ 1,899    $  1,432       $ 1,762   $  1,388 
                                            ========   ========       =======   ========
</TABLE>
     Depreciation  charged to operations  for the years ended December 31, 1998,
1997 and 1996 was approximately $45,000, $46,000 and $60,000,  respectively.  In
1996 the Company  evaluated its property,  plant and equipment  resulting in the
write off of  approximately  $1,044,000  in obsolete  equipment  and  furniture,
resulting in a loss of $40,000.

5.   Mortgages and Similar Debt

     Effective  December  30,  1997,  the Company  and its  lenders  consummated
several  transactions that resulted in a reduction in the Company's  outstanding
debt  obligation  through the  conveyance  of all remaining  land  inventory and
obligations in the Company's St. Augustine  Shores  Subdivision and the issuance
of  approximately  6.8  million  shares of Common  Stock at $1.00 per share (par
value).  Additionally,  the lenders purchased $7,500,000 in contracts receivable
from the  Company  to  generate  working  capital  and  further  reduce the debt
obligation.  Selex sold its remaining  debt  ($2,664,736),  including the Empire
note,  to Yasawa and the Company  owes no further duty or  obligation  to Selex,
which provided the Company a release. The debt purchased by Yasawa was satisfied
through  Yasawa's  purchase of  2,664,736  shares of Common  Stock issued by the
Company at a per share conversion price of One Dollar ($1.00), which is equal to
par value.


                                       36

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


5.   Mortgages and Similar Debt (continued)

     The  terms of  repayment  of the  Yasawa  and  Scafholding  debt  have been
restructured  to provide for  monthly  payments  of  principal  in the amount of
$100,000  payable  monthly in cash or with contracts  receivable at 100% of face
value,  plus interest  payable  monthly on the declining  balance at the rate of
9.6% per annum in cash or with contracts receivable at 65% of face value. Yasawa
and Scafholding have not required the Company to make monthly interest  payments
for the period September 1, 1998 to December 31, 1998.  As of December 31, 1998,
the total  amount of  interest  accrued  is  approximately  $258,000.  Effective
January 1, 1999,  Yasawa and Scafholding  agreed to reduce the annual percentage
rate on their existing loans to the Company from 9.6% to 6% per annum.

     Prior to November 4, 1997 and independent of the Agreement  outlined above,
Selex and  Yasawa  agreed to  forgive  $2,050,818  in  accrued  interest  on the
Company's debt to them.

     As of December 31,  1998,  Swan  advanced the Company  $765,000 to meet its
working capital requirements (see Note 11). The Company signed a promissory note
to Swan in March 1999 which  provides  that funds  advanced by Swan will be paid
back by the Company monthly in contracts  receivables at 90% of face value, with
recourse. There will be no interest for the first six months after an advance of
money is received from Swan by the Company;  thereafter the interest shall be 6%
per annum on the outstanding balance of the advance.  The amount of each monthly
payment will vary and will be dependent upon the amount of contracts  receivable
in the Company's  portfolio,  excluding contracts  receivable held as collateral
for prior  receivable  sales.  Pursuant to the terms of the promissory note, the
Company is required to transfer to Swan  monthly as debt  repayment  all current
contracts receivable in the Company's portfolio,  in excess of the aggregate sum
of $500,000.

     The  following  table  presents  information  with respect to mortgages and
similar debt (in thousands):
                                                           Years Ended
                                                    December 31,    December 31,
                                                       1998            1997
                                                    ------------    ------------
                  Mortgage Notes Payable.....       $ 6,670         $ 6,693
                  Other Loans................         1,895           2,294
                                                    -------         -------
                    Total Mortgages and
                     similar debt............       $ 8,565         $ 8,987
                                                    -------         -------
-----------
  *         Included in Mortgage Notes Payable is the Yasawa loan ($6,670,000 at
            December 31, 1998);  included in Other Loans is the Scafholding loan
            ($1,130,000 as of December 31, 1998) and the Swan loan  ($765,000 as
            of December 31, 1998).

     The  following  table  presents  information  with respect to the principle
maturities  of  mortgages  and similar  debt for the next five years  (excluding
amounts owed to Swan):
                                                         For the year ended
                                                             December 31
                                                             ------------
                                                            (in thousands)

                  1999...............................          $   120
                  2000...............................              120
                  2001...............................              120
                  2002...............................              120
                  2003...............................              120


                                       37
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


5.   Mortgages and Similar Debt (continued)

     Indebtedness  under various purchase money mortgages and loan agreements is
collateralized by substantially all of the Company's assets,  including stock of
certain wholly-owned  subsidiaries.  The loan modifications consummated December
31, 1997, satisfied all Company obligations to Selex. The Company's  outstanding
debt to Scafholding is secured by a first lien on the Company's receivables; the
Company's  outstanding  debt  to  Yasawa  is  secured  by a  second  lien on the
Company's  receivables and a mortgage on all of the Company's property;  and the
Company's  outstanding  debt to Swan is secured by a third lien on the Company's
receivables.

6.   Income Taxes 

     Effective  December 26, 1992, the Company  adopted  Statement of Accounting
Standard No. 109 "Accounting for Income Taxes."  Differences  between accounting
rules and tax laws cause  differences  between  the basis of certain  assets and
liabilities for financial reporting purposes and tax purposes. The tax effect of
these  differences,  to the extent they are temporary,  are recorded as deferred
tax assets and liabilities.  Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred assets and
liabilities.

     For the years ended December 31, 1998, 1997 and 1996, the Company had a net
loss for tax  purposes  and there was no  material  amount of taxes  payable  or
refundable. Accordingly, there was no tax provision for such years.

     As of  December  31,  1998,  the Company  had a net  deferred  tax asset of
approximately  $19,374,000  which primarily  resulted from the tax effect of the
Company's  net  operating  loss   carryforward  of  $14,817,000  and  losses  on
subsidiaries  sold in prior  years  of  $3,960,000.  A  valuation  allowance  of
$19,374,000 has been established against the net deferred tax asset.

     As of  December  31,  1997,  the Company  had a net  deferred  tax asset of
approximately  $22,868,000  which primarily  resulted from the tax effect of the
Company's  net  operating  loss   carryforward  of  $14,893,000  and  losses  on
subsidiaries  sold in prior  years  of  $3,960,000.  A  valuation  allowance  of
$22,868,000 has been established against the net deferred tax asset.

     The  Company's  regular net  operating  loss  carryover for tax purposes is
estimated  to be  $37,417,000  at December  31, 1998,  of which  $7,319,000  was
available  through  1999,  $364,000  through  2002,   $9,189,000  through  2005,
$9,780,000 through 2006,  $5,029,000 through 2008,  $5,401,000 through 2009, and
the remainder  through 2011.  In addition to the net operating  loss  carryover,
investment tax credit  carryovers of  approximately  $66,000,  which expire from
1999  through  2001 and  alternative  minimum  tax  credits  of  $386,000  , are
available to reduce federal income tax liabilities  only after the net operating
loss carryovers have been utilized.

     The  utilization  of the  Company's  net  operating  loss  and  tax  credit
carryforwards could be impaired or reduced under certain circumstances, pursuant
to changes in the  federal  income  tax laws  effected  by the Tax Reform Act of
1986. Events which affect these carryforwards  include,  but are not limited to,
cumulative stock ownership  changes of 50% or more over a three-year  period, as
defined, and the timing of the utilization of the tax benefit carryforwards.

7.   Liability for Improvements

     The Company has an obligation to complete  land  improvements  upon deeding
which,  depending on contractual  provisions,  typically occurs within 90 to 120
days after the  completion  of payments by the customer.  The estimated  cost to
complete  improvements  to lots and tracts  from  which  sales have been made at
December  31,  1998  and  1997 was


                                       38

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES




7.  Liability for Improvements (continued)

approximately $1,060,000 and $1,159,000,  respectively.  The foregoing estimates
reflect the Company's current development plans at its communities (see Note 8).
These estimates include:  estimated development  obligations  applicable to sold
lots of  approximately  $25,000;  a liability  to provide  title  insurance  and
deeding costs of $423,000 and $676,000,  respectively;  and an estimated cost of
street   maintenance,   prior  to  assumption  of  such   obligations  by  local
governments, of $612,000 and $458,000,  respectively;  all of which are included
in deferred  revenue.  Included in cash at December  31, 1998 and  December  31,
1997, are escrow  deposits of $7,000 and $50,000,  respectively,  restricted for
completion  of  improvements  in  certain  of  the  Company's  communities.  The
Company's  development  obligation  was  substantially  reduced  in  1997 by the
consummation of the Agreement  approved by the stockholders on November 4, 1997.
Approximately  $7,400,000 of the development  obligation at St. Augustine Shores
was assumed by Swan. In addition,  the creation of a Lot Exchange  Trust reduced
the  development  obligation  at Marion  Oaks and Sunny  Hills by  approximately
$5,800,000.

     The anticipated  expenditures  for land  improvements,  title insurance and
deeding to complete  areas from which sales have been made through  December 31,
1998 are as follows:

                                                       December 31, 1998
                                                       -----------------
                                                         (in thousands)
     1999..........................................    $     286
     2000..........................................          291
     2001..........................................          275
     2002 and thereafter...........................          208
                                                       ---------
            Total..................................    $   1,060    
                                                       =========

8.   Commitments and Contingent Liabilities

     Total rental  expense for the years ended  December 31, 1998,  December 31,
1997 and December 31, 1996 was  approximately  $134,000,  $121,000 and $148,000,
respectively.

     The Company has a lease on its  headquarters  building in TimberWalk and on
its Miami office that extend through 2003.  Estimated rental expense under these
leases is  expected to be  approximately  $76,000  annually.  The Company has no
material equipment leases.

     During 1998, the Company  transferred 14 lots and 4 tracts of land to Swan.
In  return,  Swan  built an  office  complex  on part of the land for use by the
Company for a period of 54 months, renewable thereafter.  The Company valued the
land transferred at approximately $440,000 and recorded the net present value of
the use of the office  complex of  approximately  $375,000 as prepaid rent.  The
difference between the net present value of the rent and the cost of the land of
approximately $290,000 is recorded as deferred profit at December 31, 1998.

     Additionally during 1998, Scafholding advanced the Company $200,000 against
future   administrative   fees  due  the  Company  for  selling  lots  owned  by
Scafholding.  The Company  recorded this advance as a deposit.  During 1998, the
Company earned $27,780 in fees for sold lots.

     Homesite  sales  contracts  provide  for the return of all  monies  paid in
(including   paid-in  interest)  should  the  Company  be  unable  to  meet  its
contractual  obligations after the use of reasonable  diligence.  If a refund is
made, the Company will recover the related homesite and any improvement thereto.

     As a result of the delays in completing  the land  improvements  to certain
property  sold in certain of its  Central  and North  Florida  communities,  the
Company fell behind in meeting its contractual  obligations to its customers. In
connection

                                       39

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



8.   Commitments and Contingent Liabilities (continued)

with these  delays,  in 1980 the Company  entered into a Consent  Order with the
Division of Florida  Land Sales,  Condominiums  and Mobile  Homes  ("Division"),
which  provided a program for  notifying  affected  customers.  Since 1980,  the
Consent Order was restated and amended  several  times,  culminating in the 1992
Deltona Consent Order.

     On December 30, 1997, the Division approved the formation of a Lot Exchange
Trust into which the Company conveyed  sufficient  exchange inventory to provide
exchanges  to  customers  with  undeveloped  lots.  Concurrently,  the  Division
released its lien on the Company's contracts receivable,  satisfied its mortgage
on the  Company's  property and approved a settlement  of all  remaining  issues
under  the 1992  Deltona  Consent  Order.  The 1992  Deltona  Consent  Order was
formally terminated on April 13, 1998.

     As of  December  31, 1998 and  December  31, 1997 the Company had in escrow
approximately   $7,000  and  $50,000,   respectively,   specifically   for  land
improvements  at certain  of its  Central  and North  Florida  communities.  The
Company's  development  obligation  was  substantially  reduced  in  1997 by the
consummation of the Agreement  approved by the stockholders on November 4, 1997.
Approximately  $7,400,000 of the development  obligation at St. Augustine Shores
was assumed by Swan. In addition,  the creation of a Lot Exchange  Trust reduced
the  development  obligation  at Marion  Oaks and Sunny  Hills by  approximately
$5,800,000.

     The  Company's  continuing  liquidity  problems  have  precluded the timely
payment of the full amount of certain real estate taxes.  Delinquent real estate
taxes aggregated approximately $2,880,000 as of December 31, 1998. On properties
where  customers  have  contractually  assumed the  obligation to pay into a tax
escrow  maintained  by the  Company,  the Company  has and will  continue to pay
delinquent  real estate taxes as monies are  collected  from  customers.  Of the
$2,880,000 in delinquent  real estate taxes,  approximately  $90,000  relates to
sold lots on which the  customer has assumed the  obligation  to pay but has not
yet done so. (See Note 11)

     The  Company  is  subject  to  a  lawsuit   entitled   Marco  Island  Civic
Association,  Inc. et al v. The Deltona Corporation, et al, Case No. 98-3758-CA,
which was filed in the Circuit  Court of Collier  County  Florida on October 29,
1998.  The complaint  alleges that the Company  amended  certain  Declaration of
Restrictions for property in Marco Island without having the authority to do so.
The  plaintiff is seeking to overturn the Amendment to the  Declaration  as null
and void and for unspecified  relief. The complaint was amended by the plaintiff
to add claims for breach of warranty and  indemnity and now includes a claim for
attorney's  fees incurred in connection  with prior  litigation.  In the amended
Complaint,  the plaintiff is also seeking  certification  of the case as a class
action based upon an allegation that Deltona received  compensation for granting
amendments.  The case is in the initial  discovery phase. The Company intends to
vigorously  defend itself against the claims and to defeat the effort to convert
the case to a class action.  In the event the plaintiff is successful and if the
class  certification is authorized,  and if the Company is not successful in its
defenses,  a  substantial  claim  would be  obtained  against  the  Company.  No
provision has been made for an unfavorable outcome in the accompanying financial
statements at December 31, 1998.

     In addition to the matters discussed above, the Company is a party to other
litigation  relating to the conduct of its  business  which is routine in nature
and, in the  opinion of  management,  should  have no  material  effect upon the
Company's operation.

9.   Marco Island - Marco Shores Permits

     On April 16, 1976,  the U.S. Army Corps of Engineers  (the "Corps")  denied
the  Company's  application  for dredge and fill  permits  required  to complete
development of the Marco Island community.  These denials adversely affected the

                                       40
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



9.   Marco Island-Marco Shores Permits (continued)

Company's  ability to obtain the required permits for the Marco Shores community
as originally  platted.  Following  the denials,  the Company  instituted  legal
proceedings,  implemented  various programs to assist its customers  affected by
the Corps' action, and applied for permits from certain administrative  agencies
for other areas of the Company's Marco ownership.

     On July 20, 1982,  the Company  entered into an agreement with the State of
Florida and  various  state and local  agencies  (the  "Settlement  Agreement"),
endorsed by various environmental interest groups, to resolve pending litigation
and  administrative  proceedings  relative to the Marco permitting  issues.  The
Settlement  Agreement became  effective when,  pursuant  thereto,  approximately
12,400  acres of the  Company's  Marco  wetlands  were  conveyed to the State in
exchange  for  approximately  50 acres of  State-owned  property in Dade County,
Florida.  In October,  1987,  the  Company  sold the Dade  County  property  for
$9,000,000. The Settlement Agreement also allowed the Company to develop as many
as 14,500 additional dwelling units in the Marco vicinity.  On October 11, 1991,
1,300  acres of Marco  property  (7,000  dwelling  units)  were  conveyed to the
Company's lenders for debt reduction.

     The  Company  placed  certain  properties  in  trust  to  meet  its  refund
obligation  to affected  customers.  On September 14, 1992, the Circuit Court of
Dade County,  Florida  approved a settlement of certain class action  litigation
instituted by customers affected by the Marco permit denials, under the terms of
which the Company was  required,  among  other  things,  to convey more than 120
acres of  multi-family  and commercial land that had been placed in trust to the
trustee  of the  809  member  class.  As  part of the  settlement,  the  Company
guaranteed  the amount to be realized  from the sale of the  conveyed  property.
This guaranteed amount shall not exceed $2,000,000.

     Following the closing in 1995 on a majority of the property conveyed to the
Trust, the Company recorded an extraordinary  gain of $702,000  resulting from a
reduction in the amount of its guarantee pursuant to the Settlement Agreement.

     In September,  1996 the Company  satisfied all remaining  obligations under
the Settlement Agreement resulting in an additional gain of $331,000.

10.  Common Stock and Earnings per Share Information

     Effective  December 30, 1997, the Company  entered into agreements with its
lenders to  substantially  reduce the Company's  outstanding  debt  obligations.
Yasawa purchased 6,809,338 shares of Common Stock issued by the Company at a per
share price of One Dollar ($1.00),  which is equal to par value, in satisfaction
of $6,809,338 of the Company's debt to Yasawa.  Through Yasawa's  acquisition of
the 6,809,338 shares of Common Stock of the Company referenced above, Mr. Antony
Gram's beneficial  ownership increased from 3,109,703 shares to 9,919,041 shares
(73.23% of the outstanding shares of Common Stock of the Company as of March 19,
1999).

     The Company  adopted  Statement of Financial  Accounting  Standards No. 128
(SFAS No.  128) in the  fourth  quarter  of 1997.  SFAS No.  128  requires  dual
presentation  of basic and diluted  earnings per share on the face of the income
statement.  Basic  earnings  per share  excludes  dilution  and is  computed  by
dividing  income or loss  attributable  to common  shareholders  by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share  reflects the  potential  dilution that could occur if securities or other
contracts are excluded if there effects would be anti-dilutive. All prior period
loss per share data has been computed in accordance with SFAS No. 128.


                                       41


<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


10.  Common Stock and Earnings per Share Information (continued)

     The net loss and the  average  number of shares of common  stock and common
stock  equivalents  used to calculate  basic earnings (loss) per share for 1998,
1997 and 1996 were $ (2,591,000),  $(1,326,000)  and $(896,000) and  13,544,277,
6,753,587 and 6,729,748, respectively.

11.  Subsequent Event

     Between  January  1, 1999 and March  26,  1999,  Swan  loaned  the  Company
$4,925,000 under the agreement described in Note 5. These funds were used by the
Company to pay  approximately  $2,567,000 in outstanding  real estate taxes with
the balance to meet the Company's working capital requirements.


                                       42

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


12.  Business Segments
                                       
         <TABLE>
         <CAPTION>
                                                                           Years ended
                                            -------------------------------------------------------------------------
                                            December 31,    December 31,   December 31,   December 31,   December 25,
                                                1998            1997           1996           1995           1994
                                            ------------    ------------   ------------   ------------   ------------
                                                                          (in thousands)
         <S>                                <C>             <C>            <C>            <C>            <C>       
        Revenues
         Real estate:
           Net land sales<F1>.......        $  3,078        $  4,045       $  4,296       $  2,394       $  2,058
           Housing revenues.........           1,622           1,214          1,202          1,383          2,543
           Improvement revenues<F2>.             956           2,366          1,008          1,052          1,214 
           Interest income<F3>......             548           1,367          1,464          1,019          1,046 
                                            --------        --------       --------       --------       --------
             Total real estate......           6,204           8,992          7,970          5,848          6,861 
         Other<F4>..................             529             617            963          1,030          1,832 
         Intersegment sales<F5>.....            (245)           (184)          (283)          (190)          (152)
                                            --------        --------       --------       --------       --------
             Total..................        $  6,488        $  9,425       $  8,650       $  6,688       $  8,541 
                                            ========        ========       ========       ========       ========
         Operating profits (losses)
         Real estate................        $  1,361        $  3,052       $  3,077       $  1,377       $  1,055 
         Other......................              33             185            443            341          1,032 
         General corporate expense..          (3,173)         (3,018)        (2,966)        (2,981)        (4,147)
         Interest expense...........            (812)         (1,545)        (1,781)        (1,642)        (1,847) 
                                            --------        --------       --------       --------       --------
         Income (loss) from
          continuing operations
          before income taxes
          and extraordinary items...        $ (2,591)       $ (1,326)      $ (1,227)      $ (2,905)      $ (3,906)
                                            ========        ========       ========       ========       ========

         <CAPTION>
                                                               Real
                                                              Estate            Other            Corporate           Total
                                                              ------            --------         ---------         --------
         <S>                                <C>               <C>               <C>              <C>               <C>
         Identifiable assets........        1998              $ 10,976          $    656         $    283          $ 11,915  
                                            1997                13,107               404               49            13,560
                                            1996                18,864               502               56            19,422
 
         Depreciation expense.......        1998              $     27          $      1         $     16          $     44 
                                            1997                    25                 5               16                46
                                            1996                    38                 5               17                60

         Capital expenditures.......        1998              $     67            $  -0-         $     70          $    137   
                                            1997                     6               -0-              -0-                 6
                                            1996                     2               -0-                2                 4
 
<FN>
-----------------------
<F1>     Net land sales consist of gross land sales less estimated uncollectible
         installment sales and contract valuation discount (see Notes 1, 2 and 7
         to Consolidated Financial Statements).

<F2>     Improvement revenues consist of revenue recognized due to completion of
         improvements  on prior period sales and exchanges  from  undeveloped to
         developed lots.

<F3>     Interest income primarily  consists of interest earned on contracts and
         mortgages   receivable  and  on  temporary  cash  investments  and  the
         amortization of valuation discounts.

<F4>     Other consists of revenues from sales other than real estate, the major
         portion of which came from the country club  operations in prior years.
         In 1994,  the major portion  consists of a gain of $1,051,000  from the
         termination of its office lease on its Miami corporate headquarters.

<F5>     Intersegment  sales consist primarily of sales between the Company and
         its title insurance subsidiary.

</FN>
</TABLE>

                                       43

<PAGE>



                 SUPPLEMENTAL UNAUDITED QUARTERLY FINANCIAL DATA
                    (in thousands, except per share amounts)


<TABLE>
<CAPTION>

                                                       Extraordinary
                             (Loss)                    Item: Gain on
                             From                      Settlement
                             Operations                Relating to
                             Before     (Loss)         the            Net
                             Income     From           Marco Refund   Income
                    Revenues Taxes      Operations     Obligation     (Loss)
                    -------- ---------- ----------     -------------  -------
<S>                 <C>      <C>        <C>            <C>            <C>
1998
  First....         $  1,379 $    (621) $   (621)      $    -0-       $  (621)
  Second...            1,946      (304)     (304)           -0-          (304)
  Third....            1,338    (1,269)   (1,269)           -0-        (1,269)    
  Fourth...            1,825      (397)     (397)           -0-          (397)
                    -------- ---------  --------       --------       -------
Total......         $  6,488 $  (2,591) $ (2,591)      $    -0-       $(2,591)
                    ======== =========  ========       ========       =======

1997
  First....         $  2,072 $    (429) $   (429)      $    -0-       $  (429)
  Second...            2,291      (174)     (174)           -0-          (174)
  Third....            1,631      (627)     (627)           -0-          (627)
  Fourth...            3,431       (96)      (96)           -0-           (96)
                    -------- ---------  --------       --------       -------
Total......         $  9,425 $  (1,326) $ (1,326)      $    -0-       $(1,326)
                    ======== =========  ========       ========       =======

1996
  First....         $  2,017  $   (404) $   (404)      $    -0-       $  (404)
  Second...         $  2,251  $   (179) $   (179)      $    -0-       $  (179)
  Third....         $  2,607  $   (151) $   (151)      $    331       $   180
  Fourth...         $  1,775  $   (493) $   (493)      $    -0-       $  (493)
                    --------  --------  --------       --------       -------
Total......         $  8,650  $ (1,227) $ (1,227)      $    331       $  (896)
                    ========  ========  ========       ========       =======

<CAPTION>

Basic earnings (Loss) Per Share<F1>
-------------------------------
                                                                      Extraordinary  Net Income
                                                       Operations          Items      (Loss)
                                                       ----------     -------------  ----------
<S>                                                    <C>            <C>            <C>
1998
         First......................                   $  (.05)       $    .00       $   (.05)
         Second.....................                   $  (.02)       $    .00       $   (.02)
         Third......................                   $  (.09)       $    .00       $   (.09)
         Fourth.....................                   $  (.03)       $    .00       $   (.03)
                                                       -------        --------       --------
Total...............................                   $  (.19)       $    .00       $   (.19)
                                                       =======        ========       ========
1997
         First......................                   $  (.06)       $    .00       $   (.06)
         Second.....................                   $  (.03)       $    .00       $   (.03)
         Third......................                   $  (.09)       $    .00       $   (.09)
         Fourth.....................                   $  (.01)       $    .00       $   (.01)
                                                       -------        --------       --------
Total...............................                   $  (.20)       $    .00       $   (.20)
                                                       =======        ========       ========

1996
         First......................                   $  (.06)       $    .00       $  (.06)
         Second.....................                   $  (.03)       $    .00       $  (.03)
         Third......................                   $  (.02)       $    .05       $   .03
         Fourth.....................                   $  (.07)       $    .00       $  (.07)
                                                       -------        --------       -------
Total...............................                   $  (.18)       $    .05       $  (.13)
                                                       =======        ========       =======

<FN>
-------------------

     <F1> Total shown does not agree with basic  earnings per share set forth in
          the Company's Statement of Consolidated  Operations for the year ended
          December  31,  1997  due  to  differences  in the  calculation  of the
          weighted  average  number  of  shares  outstanding  at the end of each
          quarter during the year.

</FN>
</TABLE>


                                       44

<PAGE>

ITEM 14

         EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


(a)  1.   Financial Statements

          See Item 8, Index to Consolidated Financial Statements
          and Supplemental Data.


(a)  2.   Financial Statement Schedules
         
                                                                            Page
                                                                            ----

          Independent Auditors' Report..................................      46

          Schedule VIII - Valuation and qualifying accounts for
          the three years ended December 31, 1998.......................      48

All other schedules are omitted because they are not applicable or not required,
or because the required  information is included in the  Consolidated  Financial
Statements  or Notes thereto or the 1999 Annual  Meeting  Proxy  Statement to be
filed with the Securities and Exchange  Commission  pursuant to Regulation  14A,
incorporated herein by reference.


(a)  3.   Exhibits

     See the Exhibit Index included herewith.

(b)  Reports on Form 8-K

     A report on Form 8-K was filed on April 2, 1998 and incorporated  herein by
     reference to communicate a change in the Company's auditors.


                                       45

<PAGE>


                         INDEPENDENT AUDITORS' REPORT



TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF THE DELTONA CORPORATION:

     We have  audited  the  consolidated  financial  statements  of The  Deltona
Corporation and subsidiaries (the "Company") as of December 31, 1998 and for the
year then ended,  and have issued our report thereon dated March 26, 1999 (which
expresses an unqualified opinion and includes an explanatory  paragraph relating
to the Company's ability to continue as a going concern),  included elsewhere in
this Annual Report on Form 10-K. Our audit also included the financial statement
schedules  listed in Item  14(a)2 of this  Annual  Report  on Form  10-K.  These
financial   statement   schedules  are  the   responsibility  of  the  Company's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules,  when considered in relation to
the basic consolidated  financial statements taken as a whole, present fairly in
all material respects the information set forth therein.




JAMES MOORE & CO. P.L.
Certified Public Accountants
Gainesville, Florida
March 26, 1999


                                       46

<PAGE>


                         INDEPENDENT AUDITORS' REPORT



TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF THE DELTONA CORPORATION:

     We have  audited  the  consolidated  financial  statements  of The  Deltona
Corporation  and  subsidiaries  (the "Company") as of December 31, 1997, and for
the years ended  December  31, 1997 and 1996 and have issued our report  thereon
dated March 25, 1998 (which  expresses  an  unqualified  opinion and includes an
explanatory  paragraph  relating to the Company's ability to continue as a going
concern), included elsewhere in this Annual Report on Form 10-K. Our audits also
included the financial  statement schedules listed in Item 14(a)2 of this Annual
Report on Form 10-K. These financial  statement schedules are the responsibility
of the Company's  management.  Our responsibility is to express an opinion based
on  our  audits.  In our  opinion,  such  financial  statement  schedules,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  present  fairly  in all  material  respects  the  information  set forth
therein.


DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
March 25, 1998

                                       47
<PAGE>


                                                                   SCHEDULE VIII



                     THE DELTONA CORPORATION AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                       Additions
                                                                                      Charged to
Those Valuation and Qualifying Accounts           Balance at         Revenues,        Deductions       Balance at
Which are Deducted in the Balance Sheet           Beginning          Costs, and          from            End of
  from the Assets to Which They Apply             of Period          Expenses         Reserves           Period
--------------------------------------            ---------         -----------       ----------       ----------
<S>                                               <C>               <C>               <C>              <C>
Year ended December 31, 1998
  
  Allowance for uncollectible contracts<F1>..     $    1,150        $     840         $   1,045        $   945   
                                                  ==========        =========         =========        =======

  Unamortized contract valuation discount<F2>     $      508        $     237         $     344        $   401
                                                  ==========        =========         =========        ======= 
Year ended December 31, 1997

  Allowance for uncollectible contracts<F1>..     $    2,429        $   1,528         $   2,807        $ 1,150
                                                  ==========        =========         =========        =======

  Unamortized contract valuation discount<F2>.    $    1,094        $     520         $   1,106        $   508
                                                  ==========        =========         =========        =======

Year ended December 31, 1996

  Allowance for uncollectible contracts<F1>..     $    1,629        $   1,706         $     906        $ 2,429
                                                  ==========        =========         =========        =======

  Unamortized contract valuation discount<F2>     $      829        $     814         $     549        $ 1,094
                                                  ==========        =========         =========        =======

<FN>
------------

     <F1> Represents estimated  uncollectible  contracts receivable (see Notes 1
          and 2 to Consolidated Financial Statements).

     <F2> Represents the unamortized  discount generated from initial valuations
          of contracts  receivable (see Notes 1 and 2 to Consolidated  Financial
          Statements).
</FN>
</TABLE>
                                       48
  
<PAGE>


                                   SIGNATURES

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

THE DELTONA CORPORATION
  (Company)


By:  /s/ Donald O. McNelley                                DATE:  March 31, 1999
     -----------------------
     Donald O. McNelley, Treasurer

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



     /s/  Antony Gram
     ------------------------
     Antony Gram, Chairman of the Board of Directors,
        Chief Executive Officer and President

    /s/ Christel DeWilde
    -------------------------
    Christel DeWilde, Director

    /s/George W. Fischer
    -------------------------
    George W. Fischer, Director

    /s/Rudy Gram
    -------------------------
    Rudy Gram, Director

    /s/Thomas B. McNeill
    -------------------------
    Thomas B. McNeill, Director                            DATE:  March 31, 1999

                                       49

<PAGE>