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

                     SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

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

               For the fiscal year ending December 31, 1996

                                   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)

    999 BRICKELL AVENUE, SUITE 700
           MIAMI, FLORIDA                               33131
(Address of principal executive offices)             (Zip Code)

       Registrant's  telephone  number,   including  area  code  (305)  579-0999
           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:  $1,087,600 based on the average price of such
stock as last traded over-the-counter.  (Excludes shares of 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:  6,734,939 shares of common
stock,  $1 par value,  as of March 21,  1997,  excluding  12,228  shares held in
treasury.

                 DOCUMENTS INCORPORATED BY REFERENCE
Document                                                   Incorporated Part(s)
   *            Registrant's 1997 Annual Meeting
                Proxy Statement to be filed with
                the Securities and Exchange
                Commission pursuant to Regulation 14A           Part III

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

<PAGE>

                             THE DELTONA CORPORATION

                                      INDEX
<TABLE>
<CAPTION>

Form 10-K                                                              Page
 Item No.           Section Heading in Attached Material              Number
---------           ------------------------------------              ------
<S>                 <C>                                               <C>
PART I
 Items 1 and 2 ...   Business.............................              1
                      General.............................              1
                      Recent Developments.................              1
                      Business Segments...................              3
                      Real Estate.........................              4
                      Other Businesses....................             10
                      Employees...........................             10
                      Competition.........................             10
                      Regulation..........................             10
 Item 3 .........    Legal Proceedings....................             14
 Item 4 .........    Not Applicable

PART II
 Item 5 ..........  Price Range of Common Stock and
                     Dividends............................             15
 Item 6 ..........  Selected Consolidated Financial
                     Information..........................             16
 Item 7 ..........  Management's Discussion and Analysis
                     of Financial Condition and Results
                     of Operations........................             17
 Item 8 ..........  Index to Consolidated Financial
                     Statements and Supplemental Data ....             31
 Item 9 ..........  Not Applicable

PART IV
 Item 14 .........  Exhibits, Financial Statement Schedules
                     and Reports on Form 8-K .............             56


</TABLE>

<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 has developed nine planned communities in Florida, six
of which are completed and three are in various stages of development, and range
in size from 1,500 to over 17,000 acres with a combined estimated  population in
excess of 209,000.  The Company plans,  designs and develops  roads,  waterways,
recreational  amenities,  grading and drainage systems within these communities.
Since  1962,  the  Company  has  sold  over  150,000   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 has substantial land holdings in Florida.  Its holdings include
an inventory of  approximately  18,700  unsold  platted  single-family  lots and
multi-family 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 operates
such amenities until their conveyance or sale.

         Historically,  the  Company  has  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 is incorporated in Delaware and has its principal executive
offices at 999 Brickell Avenue,  Suite 700, Miami,  Florida 33131. Its telephone
number is (305)  579-0999.  The Company,  as used herein,  refers to The Deltona
Corporation  and,  unless the  context  otherwise  indicates,  its  wholly-owned
subsidiaries.

RECENT DEVELOPMENTS

         During the first  quarter of 1995,  the  Company  initiated  a new land
sales program,  which utilizes a limited group of  independent  dealers.  During
1996,  the  Company  reached a lot sales  volume of  $6,612,000  as  compared to
$6,260,000 during 1995.

         Since  Antony  Gram's  appointment  as  Chairman of the Board and Chief
Executive  Officer of the Company on July 13, 1994, he has been  responsible for
resolving the financial and legal difficulties facing the Company and developing
an  alternative  business  plan to enable  the  Company to  continue  as a going
concern. Mr. Gram, who had served as a director of the Company and Vice Chairman
of the Board from June, 1992 through April 6, 1994, holds a controlling interest
in Yasawa  Holdings,  N.V., a Netherland  Antilles  Corporation  ("Yasawa")  and
Wilbury  International  N.V., a Netherlands  Antilles  Corporation  ("Wilbury"),
which  holds  all  of  the  issued  and  outstanding   capital  stock  of  Selex
International, B.V., a Netherlands corporation ("Selex"), a 41.9% shareholder of
the Company. As a consequence,  Mr. Gram is deemed to be the beneficial owner of
3,109,703  shares of Common  Stock of the  Company  (46.17%  of the  outstanding
shares of Common  Stock of the  Company,  based upon the number of shares of the
Company's Common Stock outstanding as of March 21, 1997).

         During  1996,  the  Company  was  successful  in  settling  the lawsuit
entitled Estate of Bobinger et al v. The Deltona Corporation, Case No. 87-45051,
which was filed in the Circuit Court of the Eleventh Judicial Circuit in and for
Dade

                                       1
<PAGE>

County,  Florida.   Coupled  with  the  payment  of  the  remaining  refunds  to
purchasers,  the  settlement  of  this  lawsuit  brings  to a close  the  issues
surrounding  the  denial of  dredge  and fill  permits  at the  Company's  Marco
communities.

         The Company  continues to be dependent  upon Yasawa to fund  continuing
working  capital  requirements  until the  Company is able to satisfy  its prior
development and other  obligations As of December 31, 1996,  Yasawa has advanced
an aggregate  amount of  $6,012,000 to the Company ("the Second Yasawa loan") at
an interest rate of 8% per annum. In 1996, Yasawa loaned the Company  $2,000,000
which was used to pay a portion of delinquent  real estate  taxes,  meet minimum
working capital  requirements and satisfy the remaining  obligation of the Marco
class  action  settlement  agreement.  This  final  settlement  resulted  in  an
extraordinary gain of $331,000.

     The Company  continued to experience  liquidity  problems during 1996, with
the  Company's  minimum  working  capital  requirements  being funded by Yasawa.
Efforts are continuing to seek third parties to provide funds to the Company for
the Company to continue as a going concern. There can be no assurance,  however,
that any of these efforts will be successful or that  additional  financing will
be obtained.  In the event that new  financing is not  successfully  obtained or
that Yasawa or Mr. Gram do not continue to fund the  Company's  minimum  working
capital  requirements,  the Company's  Board of Directors  will  consider  other
appropriate  action  given the  severity of the  Company's  liquidity  position,
including,  but  not  limited  to,  filing  for  protection  under  the  federal
bankruptcy laws. See "Legal Proceedings",  "Management's Discussion and Analysis
of  Financial  Condition  and  Results  of  Operations"  and Notes 1, 5 and 8 to
Consolidated Financial Statements.


                                       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 December December December December
                                    31, 1996 31, 1995 31, 1994 31, 1993 25, 1992
                                    -------- -------- -------- -------- --------
                                                  (in thousands)
          <S>                       <C>      <C>      <C>      <C>      <C>
         Revenues
         Real estate:
           Net land sales(a)........$  4,296 $  2,394 $  2,058 $  2,432 $  2,092
           Housing revenues.........   1,202    1,382    2,543      344      -0-
           Improvement revenues(b)..   1,008    1,052    1,214    4,725    2,404
           Interest income(c).......   1,464    1,019    1,046    1,197    3,584
           Other....................     -0-      -0-      -0-       67      -0-
                                    -------- -------- -------- -------- --------
             Total real estate......   7,970    5,848    6,861    8,765    8,080
         Other(d)...................     963    1,030    1,832    3,447    4,373
         Intersegment sales(e)......    (283)    (190)    (152)    (113)    (235)
                                    -------- -------- -------- -------- --------

             Total..................$  8,650 $  6,688 $  8,541 $ 12,099 $ 12,217
                                    ======== ======== ======== ======== ========

         Operating profits (losses)
         Real estate................$  3,077 $  1,377 $  1,055 $ (3,072)$  1,486
         Other (d)..................     443      341    1,033      279    2,209
         General corporate expense..  (2,966)  (2,981)  (4,147)  (4,721)  (7,057)
         Interest expense...........  (1,781)  (1,642)  (1,847)  (1,257)  (3,356)
                                    -------- -------- -------- -------- --------
         Income (loss) from
          continuing operations
          before income taxes
          and extraordinary items...$ (1,227)$ (2,905)$ (3,906)$ (8,772)$ (6,718)
                                    ======== ======== ======== ======== ========


<FN>

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

(a)      Net land sales consist of gross land sales less estimated uncollectible
         installment sales and contract  valuation  discount and, prior to 1992,
         deferred  revenue  (see  Notes  1,  2 and 7 to  Consolidated  Financial
         Statements).

(b)      Improvement revenues consist of revenue recognized due to completion of
         improvements  on prior period sales and exchanges  from  undeveloped to
         developed lots.

(c)      Interest income primarily  consists of interest earned on contracts and
         mortgages   receivable  and  on  temporary  cash  investments  and  the
         amortization of valuation discounts.

(d)      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.

(e)      Intersegment  sales consist  primarily of sales between the Company and
         its title insurance 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, 1996.  For a detailed  description
of these communities, see "Existing Communities" and "Other Properties".

<TABLE>
<CAPTION>

                              EXISTING COMMUNITIES

                                                                  Platted       Unimproved     Improved
                    Acreage       Initial              Estimated  Lots & Tracts Unsold Platted Unsold Platted
                    in            Acquisition  Year    Current    in Masterplan Lots & Tracts  Lots & Tracts  Unplatted
                    Masterplan    Year         Opened  Population     (a)           (a) (b)        (a) (b)    Acreage
                    ----------    -----------  ------  ---------- ------------- -------------- -------------- ---------
<S>                 <C>           <C>          <C>     <C>        <C>           <C>            <C>            <C>
* Deltona Lakes...  17,203        1962         1962     68,090     34,964               -             6           -
* Marco Island(c).   7,844        1964         1965     39,000      8,657               -             1           -
* Spring Hill(d)..  17,240        1966         1967     71,890     32,909               -             6           -
* Citrus Springs
  (e),(f),(g).....  15,954        1969         1970      6,330     33,783              42           122(f)(i)
  St. Augustine
   Shores .......    1,985        1969         1970      7,450      3,130             897             5(i)       16
  Sunny Hills.....  17,743        1968         1971      1,360     26,251          12,471           726(i)        -
* Pine Ridge......   9,994        1969         1972      2,660      4,833               -             3(i)        -
  Marion Oaks(e)..  14,644        1969         1973      7,900     27,537           3,990           399(i)        -
* Seminole Woods..   1,554        1969         1979        430        262               -             -           -

JOINT VENTURE
 COMMUNITY:

* Tierra Verde....     666        1976         1977      4,740      1,036               -             -           -
                   -------                             -------    -------        --------       -------       -----

Total............. 104,827                             209,850    173,362          17,400(f)      1,268(f)       16
                   =======                             =======    =======        ========       =======       =====

<CAPTION>

                                OTHER PROPERTIES
                                                                                Initial
                                                                                Acquisition
                                                                                Year             Acres
                                                                                ------------     ------
<S>                                                                             <C>              <C>
Other Land Assets:
 Other land adjacent to existing communities(h)................................ Various          92
                                                                                                 --
         Total.................................................................                  92
                                                                                                 ==
<FN>

----------------------
*    Development completed.

(a)  Excluded from these lots and tracts are  approximately  114 improved and 92
     unimproved  lots and tracts that are  required  for  drainage and cannot be
     sold, and  approximately  142 improved and 344  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 2 unimproved golf course sites, as well as
     approximately   468  tracts  reserved  for  community  usage  such  as  for
     greenbelts, buffer areas, church and school sites.

(b)  "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.

(c)  Excludes permit denial areas; reflects seasonal population.

(d)  Includes the South Hernando U.S. # 19 Commerce Center.


                                                         4

<PAGE>



(e)  Excluded 84 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.

(f) Excludes 850  improved and 844  unimproved  platted lots and tracts held for
retail  sale by Citony  Development  Corporation  ("Citony"),  an  affiliate  of
Yasawa.  Also  excludes 272 improved and 76  unimproved  platted lots and tracts
owned by Citony that may be subject to certain  adverse soil  conditions  and/or
drainage conditions that render the subject properties unusable for retail sales
purposes.  The property  acquired by Citony in December 1992 was marketed by the
Company during 1993 and early 1994 pursuant to a joint venture agreement between
the Company and Citony.  The Company and Citony  agreed to  terminate  the joint
venture  agreement  in April 1994;  however,  the Company is  providing  certain
assistance to Citony during the  transition  period.  In March 1997, the Company
transferred to Citony, per the terms of the 1992 agreement,  173 lots and tracts
reacquired by the Company principally through cancellation and legal settlement.

(g)  Excludes 17 improved lots held by  SunBank/Miami,  N.A., as Trustee for the
     Marco Shores Trust,  which  properties were transferred back to the Company
     in March 1997.

(h)  Excludes  18  unplatted  acres in existing  communities  and 3,829 acres of
     unplatted  natural  preserves  restricted for  recreational  park use which
     cannot be sold.

(i)  Not included are 669 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 469 lots in Citrus  Springs,  199
     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
150,000 lots and tracts sold since the Company's inception, contracts receivable
presently  exist with  respect to  approximately  1,405 lots and tracts  with an
outstanding balance of approximately $12,554,900 at December 31, 1996, 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.


                                       5
<PAGE>

  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   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

     Although the Company had discontinued its single-family  housing activities
at the end of 1984, in December,  1992, the Company re-entered the single-family
housing   business  at  its  Marion  Oaks  community.   Two  and  three  bedroom
moderately-priced  homes  are  being  constructed  by an  exclusive  independent
builder at the Feather Nest housing  village in this  community  and sold in the
local markets and through the Company's independent dealer network.  These homes
include,  as standard features,  cathedral ceilings,  attached garages,  lanais,
breakfast nooks and spacious walk-in  closets.  The housing village features its
own  recreational  complex,  including a swimming pool,  tennis courts and other
amenities. The Company also offers the same model line in Marion Oaks outside of
the FeatherNest  village in a suburban  program as well as build on your own lot
program for those  purchasers who have previously  acquired a lot. Prices on the
Company's  current  model line range from $53,300 to $86,500,  exclusive of lot.
The Company sold to  Conquistador  the remaining lot inventory in FeatherNest as
partial consideration for the satisfaction of $2,599,300 in debt; however, it is
still  offering  the  product  through  its dealer  network.  See  "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

     In an effort to offset the negative cash effects of installment land sales,
the Company is attempting to direct its marketing efforts to its housing product
in which a house and lot are sold as a package.  The  success of this  direction
will be dependent upon the Company's dealer recruiting  program and availability
of funds for a national advertising and promotion program.

     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.

     Substantially  all of the  Company's  remaining  inventory  in its vacation
ownership complex, The Surf Club, located on the Gulf of Mexico at Marco Island,
was sold in 1990.

  MARKETING

     The Company has  historically  sold land and housing products 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, 1996,  sales by  independent  dealers in the United  States
accounted for  approximately 97% (in dollar volume) of new land sales contracts;
while overseas dealers accounted for approximately 3% of such contracts.

     During the first  quarter of 1995,  the Company  initiated a new land sales
program, which utilizes a limited group of independent dealers. During 1996, the
Company reached a lot sales volume of over $6,612,000 of contracts written.

                                       6
<PAGE>

   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  68,100.  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 a junior high school are located in the community.
The Company has virtually completed development of this community.

     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 39,000  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 over 3,300  condominium  units and The Surf Club, a 44 unit vacation
ownership  complex,  on the island.  In 1990, the Company  completed the sale of
substantially all of its remaining vacation ownership weeks.

     Since its  inventory at Marco Island is virtually  sold out,  1997 revenues
are expected to be generated from collections on existing contracts receivable.

     The community's planned growth was interrupted in 1976 by denial of certain
federal  permits  needed to complete the  development  of  approximately  14,500
units. The Settlement  Agreement  between the Company,  the State of Florida and
various environmental interest groups (the "Settlement  Agreement") which became
effective on March 14, 1985, allowed for the potential development of additional
dwelling  units at Marco Island,  Horr's  Island and Marco  Shores,  located two
miles from Marco Island.  The bulk of these  properties have  subsequently  been
sold or transferred to the Company's  lenders or to the trustee  pursuant to the
1992 settlement of the class action litigation. See "Management's Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital Resources" and Note 9 to Consolidated Financial Statements.

     SPRING HILL

     Spring Hill,  with an estimated  population  of  approximately  71,900,  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.  The
Company has sold its country club and golf courses. Several shopping centers and
medical  centers,  two elementary  schools,  a junior high school, a senior high
school,  numerous  houses of worship  and two fire  stations  are located in the
community. The Company has completed the development of this community.

                                       7
<PAGE>

     CITRUS SPRINGS

     Citrus Springs,  with an estimated population of 6,300, 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 and a convenience shopping area are located in
the community. The Company has completed 400 miles of road. 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 and Citony then
entered into a joint venture  agreement with respect to the property,  providing
for the Company to market the  property and receive an  administration  fee from
the venture.  The Company and Citony  terminated the joint venture  agreement in
April 1994;  however,  the Company provided certain  assistance to Citony during
the transition  period.  In February 1997, the Company finalized the sale of the
undeveloped second Citrus Springs Golf Course to a third party. The Purchase and
Sale  agreement  contemplates  the completion of the course by the buyer by June
30, 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  approximately
7,450, is located seven miles south of St.  Augustine,  between the Intracoastal
Waterway and U.S. Highway 1. Only commercial and multi-family  tracts, house and
lot packages and  condominium  apartment  units had been sold in this  community
before 1987, but that year St.  Augustine  Shores was opened for the retail sale
of single-family lots.  Approximately 1,000 additional single-family lots became
available during 1988 through the platting of 641 acres adjacent to the existing
platted  properties.  Over 2,000 single and multi-family  housing units and lots
and tracts have been sold.

     The Company has  completed  28 miles of road.  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 and shopping  facilities are also
located in the  community.  A golf  course  and  country  club and a  recreation
building have been  completed by the Company.  In October 1991, the country club
and golf course was  transferred  to the Company's  lenders.  See  "Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
Liquidity  and  Capital   Resources"  and  Note  5  to  Consolidated   Financial
Statements.

     Pursuant to the June, 1992 transaction  with Selex,  the Company  purchased
certain  multi-family and commercial  property at this community from Mr. Muyres
and entities affiliated with Messrs. Muyres and Zwaans. Also in conjunction with
the June,  1992  transaction,  an  affiliate  of Selex was  granted an option to
repurchase  certain of the property for $312,000,  which option was exercised by
the  affiliate in March,  1994.  See  "Management's  Discussion  and Analysis of
Financial  Condition  and  Results of  Operations".  Retail  land sales will not
resume at the community until certain improvements are completed, as the Company
is  selling  only  fully  improved  lots.  See  also   "Regulation  -  Community
Development and Environmental".

     On May 22, 1995 the Company sold to Conquistador (the "Second  Conquistador
Acquisition")  an  administration  building  and  a  multi-family  site  in  the
Company's  St.  Augustine  Shores  community,  as well  as  other  property,  in
consideration  for the  satisfaction  of  $2,599,300  of  principal  and accrued
interest  on the  Second  and  Third  Selex  Loans.  On that  same date but in a
separate  transaction,  the  Company  also  sold  to  Conquistador  (the  "Third
Conquistador  Acquisition")  four  single  family  residential  lots  in the St.
Augustine  Shores  community  for  $100,000  in cash.  These  transactions  were
accounted for in accordance with generally  accepted  accounting  principals for
these types of related party  transactions.  Accordingly,  the resulting gain of
$1,900,000  was treated as a  contribution  of capital and recorded  directly to
capital surplus.


     SUNNY HILLS

     Sunny Hills, with a population of approximately 1,360 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.  It includes  several houses of worship and a
convenience shopping center. The Company has


                                       8
<PAGE>

completed or under construction 165 miles of road. The community also has a golf
course and country club, which was sold by the Company for $1,000,000 in the the
first quarter of 1993.

     The Company reopened Sunny Hills for retail lot sales in mid-1989. Revenues
in 1997 will be generated  from  collections on existing  contracts  receivable,
from retail  land sales and from the  recognition  of  deferred  revenue as land
development and lot exchanges proceed.

     PINE RIDGE

     Pine Ridge,  with a population of approximately  2,660, is located 34 miles
southwest of Ocala.  The community's  facilities  include an equestrian club and
tennis courts.  In May, 1987, the Company  completed the $8,500,000  sale of its
remaining  inventory  and golf  course at Pine  Ridge.  Prior to the  sale,  the
Company had sold over 3,500 lots and tracts and over 53  single-family  homes in
Pine Ridge.

     MARION OAKS

     Marion Oaks, with a population of approximately 7,900 residents, is located
18  miles  south  of  Ocala.   Over  23,000  lots  and  tracts  and  over  2,700
single-family  homes have been sold in the  community.  The  community  includes
playgrounds,  two golf  courses  (one of which  was sold in 1988 and the  second
which was transferred to the Company's  lenders on October 11, 1991) and several
recreation  buildings.  A shopping  center  and  several  houses of worship  are
located in the  community.  The Company  has  completed  311 miles of road.  The
Company  re-entered  the  single-family  housing  business at this  community in
December,  1992 with the opening of its FeatherNest  housing village. On May 22,
1995, the Company sold to Conquistador (the "Second  Conquistador  Acquisition")
the remaining lot  inventory in the  Company's  FeatherNest  community at Marion
Oaks , as well as other  property,  in  consideration  for the  satisfaction  of
$2,599,300  of  principal  and  accrued  interest  on the Second and Third Selex
Loans.  See "Housing" and  "Marketing".  Revenues in 1997 will be generated from
the sale of land inventory, from housing sales, from the recognition of deferred
revenue as land  development  and lot exchanges  proceed,  from  collections  on
existing  contracts  receivable  and from the  Company's  real estate  brokerage
operation.

     SEMINOLE WOODS

     Seminole  Woods,  with a population of  approximately  430, is comprised of
1,554  acres of  property  located 20 miles  north of  Orlando.  The  community,
comprised of 262 single-family lots, each a minimum of five acres, has been sold
out and development completed.

     TIERRA VERDE

     Tierra  Verde,  with a population  of  approximately  4,740,  is a 666-acre
waterfront  subdivision  located  eight  miles south of St.  Petersburg.  It was
developed and marketed  pursuant to a 50% joint venture  between a  wholly-owned
subsidiary of the Company and an unaffiliated corporation which filed a petition
for bankruptcy  under the  Bankruptcy  Code in 1985. The community has been sold
out and development  completed.  The venture,  which extended until December 31,
1990,  provided for the Company's  subsidiary to receive a management fee and to
share in the venture's  results of operations  equally with its venture partner.
The venture was extended for the purposes of winding down operations  which were
completed in 1993.

     OTHER LAND ASSETS

     The Company also owns 92 acres of land in Florida  adjacent to its existing
communities.  Certain of these  properties  are being  marketed by the Company's
commercial sales division.

                                       9
<PAGE>


  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  products  to its
purchasers. The 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,  1996,  the  Company  had 37  employees,  of whom 34 were
involved in  executive,  administrative,  sales and  community  development  and
maintenance  capacities and 3 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.

  COMPETITION

     The  Company  faces  competition  primarily  from  property  owners  in the
Company's  communities  seeking to resell their land. The Company is also facing
competition, on a regional level, with 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")
has now  commenced.  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 virtually  completed in certain of these  communities).
Thus,  such  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.

     On September 30, 1988,  the Company  entered into an agreement  with Citrus
County,  Florida to establish the procedure for transferring  final  maintenance
responsibilities for roads in the Company's Citrus Springs subdivision to Citrus
County. The agreement  obligated the Company to perform certain remedial work on
previously completed  improvements within the Citrus Springs subdivision by June
1,  1991.  The  Company  was  unable  to  complete  this work due to the lack of
available

                                       10
<PAGE>


funds and negotiated a final  settlement  with Citrus County for the transfer of
final  maintenance  responsibility  for the  roads  to the  County.  This  final
agreement was entered into in May 1995.

     The Company's present development  schedule for completing  improvements to
approximately  600 acres at its St. Augustine Shores community does not coincide
with the  current  development  requirements  of the  Planned  Unit  Development
("PUD")  approved by St. Johns County.  The Company will seek a modification  of
the  PUD  development   requirements   consistent  with  the  Company's   future
development plans at St. Augustine Shores.

     The  Company's  corporate  performance  bonds to assure the  completion  of
development at its St. Augustine  Shores  community  expired in 1993. Such bonds
cannot  be  renewed  due to a  change  in the  policy  of the  Board  of  County
Commissioners  of St.  Johns County which  precludes  allowing any  developer to
secure the  performance of development  obligations by the issuance of corporate
bonds.  In the event that St. Johns County elects to undertake the completion of
such  development  work,  the Company  would be obligated  with respect to 1,000
unimproved  lots  at  St.  Augustine  Shores  in  the  amount  of  approximately
$6,200,000.  The Company has proposed the  formation of a community  development
district as a funding source and submitted an alternative  assurance program for
the completion of such development and improvements.

  ENVIRONMENTAL

     To varying  degrees,  certain  permits and  approvals  will be necessary to
complete the  development of all of the Company's  comunities.  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  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.

     Certain  of the  Company's  development  permits  for a portion  of its St.
Augustine Shores community issued by the St. Johns Water Management District and
the U.S.  Army Corps of  Engineers  expired.  The Company will submit new permit
applications  that will coincide with the Company's  future  development  plans.
Since there can be no assurance that the Company will be successful in obtaining
such new  permits in a timely  manner,  the Company may be required to alter its
development plans for this community.

     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

                                       11
<PAGE>

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;  reviews  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,  the Company,  in February,  1980,  entered into a
Consent Order with the Division which provided a program for notifying  affected
customers. The Consent Order, which was restated and amended, provided a program
for notifying  affected customers of the anticipated delays in the completion of
improvements (or, in the case of purchasers of unbuildable lots in certain areas
of the Company's Sunny Hills community,  the transfer of development obligations
to core growth areas of the community); various options which may be selected by
affected  purchasers;  a schedule for  completing  certain  improvements;  and a
deferral  of the  obligation  to install  water  mains  until  requested  by the
purchaser.  Under an agreement with Topeka, Topeka's utility companies agreed to
furnish utility service to the future residents of the Company's  communities on
substantially the same basis as such services were provided by the Company.  The
Consent Order also required the  establishment of an improvement  escrow account
as assurance for completing such improvement obligations.

     In June,  1992,  the Company  entered into the 1992 Consent  Order with the
Division,  which replaced and superseded the original  Consent Order, as amended
and  restated.  Among other  things,  the 1992 Consent  Order  consolidated  the
Company's  development  obligations and provided for a reduction in its required
monthly escrow  obligation to $175,000 from  September,  1992 through  December,
1993.  Beginning  January,  1994 and until  development is completed or the 1992
Consent Order is amended,  the Company is required to deposit $430,000 per month
into the escrow account. As part of the assurance program under the 1992 Consent
Order,  the  Company  and its  lenders  granted  the  Division a lien on certain
receivables and future  receivables.  The Company defaulted on its obligation to
escrow  $430,000  per month for the period of January,  1994 through the present
and,  in  accordance  with the  1992  Consent  Order,  collections  on  Division
receivables  were  escrowed  for the  benefit of  purchasers  from March 1, 1994
through  April 30,  1994.  In May,  1994 the  Company  implemented  a program to
exchange  purchasers who contracted to purchase property which is undeveloped to
property  which is  developed.  As of March 21, 1997,  approximately  84% of the
customers  whose lots are currently  undeveloped  have opted to exchange or have
otherwise been resolved.  Consequently,  the Division has allowed the Company to
utilize  collections on receivables since May 1, 1994.  Because of the Company's
default,  the Division  could also exercise other  available  remedies under the
1992 Consent Order, which remedies entitle the Division,  among other things, to
halt all sales of registered  property.  The Company's  goal is to eliminate its
development  obligation  (with the  exception of its  maintenance  obligation in
Marion Oaks) under the 1992 Consent  Order  through  this  exchange  program and
settlement of all remaining  maintenance and improvements  obligations in Citrus
Springs through a final agreement with Citrus County (entered into in May 1995).
Pursuant  to the  1992  Consent  Order,  the  Company  has  limited  the sale of
single-family  lots to lots  which  front on a paved  street  and are  ready for
immediate building.

     As of December 31, 1996, the Company had estimated development  obligations
of approximately  $1,134,000 on sold property, an estimated liability to provide
title insurance and deeding  costing  $1,139,000 and an estimated cost of street
maintenance,  prior to assumption of such obligations by local  governments,  of
$880,000, all of which are included in

                                       12
<PAGE>


deferred revenue.  The total cost to complete  improvements at December 31, 1996
to lots subject to the 1992 Consent Order,  including the  previously  mentioned
obligations,  and to all lots,  sold and  unsold,  including  the St.  Augustine
Shores community, was estimated to be approximately $15,152,000.  As of December
31, 1996 and December 31, 1995 the Company had in escrow approximately  $360,000
and $489,000, respectively, specifically for land improvements at certain of its
Central and North Florida communities.

     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.

     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.

     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,  particularly  given  the  adverse
publicity  surrounding  the  industry  which  existed in 1990.  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

     In addition,  various other  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.

                                       13
<PAGE>


ITEM 3

                                LEGAL PROCEEDINGS

     In the action styled Garcia v. Deltona et. al, Case No. 86-03542,  filed in
the Circuit Court for Dade County,  Florida,  on January 30, 1986, the plaintiff
sought to recover  $2,000,000  allegedly paid to the Company on four installment
land sales contracts,  claiming fraud and  misrepresentation  on the part of the
Company.  On October 27, 1995, the parties resolved and settled their dispute by
the Company  transferring  alternative  property for  settlement  purposes.  The
Company exchanged  releases with the plaintiff,  which released the Company from
any further obligations,  except certain obligations and warranties contained in
the modification of the Settlement Agreement. The Company believes that it is in
compliance with the warranties and obligations under the Settlement Agreement.

     In  the  action  entitled  Estate  of  Bobinger,  et  al.  v.  The  Deltona
Corporation,  Case No.  87-45051,  filed in the  Circuit  Court of the  Eleventh
Judicial Circuit in and for Dade County, Florida, the plaintiff sued the Company
for alleged  breach of contract and for recovery of monies paid on contracts for
Marco  property  that will not be  developed  by the  Company.  The  matter  was
settled.  This matter has been  dismissed  in  accordance  with the order of the
Circuit Court dismissing the case with prejudice entered September 25, 1996. The
Company does not expect further liability from this claim.

     In the action styled Lee Su Wen Ni et. al. v. The Deltona  Corporation  and
Scafholding  B.V., Case No.  95-4422-CA-E,  filed in the Circuit Court of Marion
County,  Florida on October 11, 1995, the plaintiff  alleges that the liquidated
damages  provision in the  Company's  installment  contracts for the sale of its
properties is  unenforceable  under Florida Law and contests the method utilized
by  the  Company  to  calculate   actual   damages  in  the  event  of  contract
cancellations.  As part of the complaint, the plaintiff is seeking certification
as a class action, as well as unspecified  compensatory  damages,  together with
interest,  costs and fees.  The Company filed a Motion to Dismiss in response to
the  plaintiff's  complaint.  The trial court  dismissed  the claim of the class
representative  against the Company and against  Scafholding B.V. An appeal from
that dismissed is pending.  There has been no ruling by the appellate  court. In
the event  that  this  appeal  is  successful  and if,  class  certification  is
authorized,  and if the Company is not successful in its defenses, a substantial
claim could be asserted against the Company.

     In the action styled Joseph Mancilla, Jr. v. The Deltona Corporation, filed
in the Circuit Court of Dade County,  Florida, Case No. 94-09116, the plaintiff,
Joseph  Mancilla,  Jr.,  prior Senior Vice  President  of the Company,  sued the
Company  on May 17,  1994 for  alleged  breach of  employment  contract  seeking
damages in excess of $391,000 plus an unspecified  amount in employee  benefits,
costs and attorneys'  fees. The Company settled the matter and a general release
was entered into in 1995. The Company  satisfied its  settlement  obligations in
January 1997 and a Notice of Voluntary Dismissal, with prejudice, was filed.

     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.


                                       14
<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, 1996, the Company's Common Stock
was traded on a limited basis in the over-the-counter markets. The average price
at which the stock was traded at the end of the first,  second, third and fourth
quarters of 1996 is as follows:

<TABLE>
<CAPTION>

               <S>                           <C>

               March 31, 1996                $ .300
               June 30, 1996                 $ .125
               September 30, 1996            $ .097
               December 31, 1996             $ .196
</TABLE>

     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.

                                       15
<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 25,
                                        1996         1995            1994           1993           1992
                                    ------------  ------------   ------------   ------------   ------------
<S>                                 <C>           <C>            <C>            <C>            <C>
Revenues .........................  $   8,650     $    6,688     $    8,541     $   12,099     $   12,217
Costs and expenses................      9,877          9,593         12,447         20,871         18,935
                                    ---------     ----------     ----------     ----------     ----------
Loss from continuing operations
 before taxes and extraordinary
 items............................     (1,227)        (2,905)        (3,906)        (8,772)        (6,718)
Provision for income taxes........        -0-            -0-            -0-            -0-             90
                                    ---------     ----------     ----------     ----------     ----------
Loss from operations
 before extraordinary items.......     (1,227)        (2,905)        (3,906)        (8,772)        (6,808)
Extraordinary items:
 Gain (loss) from debt
  restructuring...................        -0-            -0-            -0-            -0-         10,161
Gain on settlement related to
  the Marco refund obligation.....        331            702            -0-            -0-          3,983
                                    ---------    -----------     ----------     ----------     ----------
Net income (loss) applicable
  to common stock.................  $    (896)   $    (2,203)    $   (3,906)    $   (8,772)    $    7,336
                                    =========    ===========     ==========     ==========     ==========
Per common share amounts:
    Continuing operations.........  $    (.18)   $      (.43)    $     (.59)    $    (1.45)    $    (1.19)
    Extraordinary items...........        .05            .10            .00            .00           2.48
                                    ---------    -----------     ----------     ----------     ----------
Net income (loss).................  $    (.13)   $      (.33)    $     (.59)    $    (1.45)    $     1.29
                                    =========    ===========     ==========     ===========    ==========
Weighted average common shares
 outstanding......................  6,729,648      6,699,923      6,514,988       6,056,743     5,694,236
                                    =========    ===========     ==========     ===========    ==========



<CAPTION>

                         Consolidated Balance Sheet Data
                                 (in thousands)


                                    December 31, December 31,    December 31,   December 31,   December 25,
                                       1996         1995             1994          1993            1992
                                    -----------  ------------    ------------   ------------   ------------
<S>                                 <C>          <C>             <C>            <C>            <C>

Total assets....................    $    19,442  $   19,180      $  22,109      $  26,565      $  37,050
                                    ===========  ==========      =========      =========      =========

Liabilities....................     $    37,301  $   36,192      $  38,930      $  40,856      $  42,569
Stockholders' equity (deficiency).      (17,879)    (17,013)       (16,821)       (14,291)        (5,519)
                                    -----------  ----------      ---------      ---------      ---------
Total liabilities and stockholders'
 equity (deficiency)..............  $    19,422  $   19,180      $  22,109      $  26,565      $  37,050
                                    ===========  ==========      =========      =========      =========


</TABLE>


                                       16
<PAGE>






ITEM 7

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


     On June 19, 1992,  the Company  completed a transaction  with Selex,  which
resulted in a change in control of the  Company.  Under the  transaction,  Selex
loaned the Company  $3,000,000  collateralized by a first mortgage on certain of
the Company's  property in its St.  Augustine  Shores,  Florida  community  (the
"First Selex Loan").  The First Selex Loan initially  bears interest at the rate
of 10% per annum with a term of four years and payment of interest  deferred for
the first 18 months.

     In  conjunction  with the First Selex Loan:  (i) Empire of  Carolina,  Inc.
("Empire")  sold Selex its 2,220,066  shares of the  Company's  Common Stock and
assigned Selex its $1,000,000  Note from the Company,  with $225,000 of interest
accrued thereon;  (ii) Maurice A. Halperin,  Chairman of the Board of Empire and
former  Chairman of the Board of the  Company,  forgave  payment of the $200,000
salary due him for the period of April,  1990 through April,  1991, which was in
arrears;  and (iii) certain changes occurred in the composition of the Company's
Board of Directors. Namely, the six directors serving on the Company's Board who
were previously  designated by Empire resigned and four Selex designees (Messrs.
Marcellus H.B. Muyres,  Antony Gram,  Cornelis van de Peppel and Cornelis L.J.J.
Zwaans) were elected to serve as directors in their stead. Marcellus H.B. Muyres
was appointed  Chairman of the Board and Chief Executive Officer of the Company.
These directors,  as well as Leonardus G.M.  Nipshagen,  a Selex designee,  were
then elected as directors at the Company's 1992 Annual Meeting and re-elected at
the Company's 1993 Annual Meeting.

     As part of the Selex transaction,  Selex was granted an option, approved by
the  holders of a majority of the  outstanding  shares of the  Company's  Common
Stock at the Company's  1992 Annual  Meeting,  to convert the Selex Loan, or any
portion thereof,  into a maximum of 850,000 shares of the Company's Common Stock
at a per share conversion price equal to the greater of (i) $1.25 or (ii) 95% of
the market price of the Company's Common Stock at the time of conversion, but in
no event greater than $4.50 per share (the "Option").  However, on September 14,
1992, Selex formally waived and relinquished its right to exercise the Option as
to 250,000 shares of the Company's  Common Stock to enable the Company to settle
certain  litigation  involving the Company through the issuance of approximately
250,000  shares  of  the  Company's  Common  Stock  to  the  claimants,  without
jeopardizing  the utilization of the Company's net operating loss  carryforward.
On February 17, 1994, Selex exercised the remaining full 600,000 share Option at
a conversion  price of $1.90 per share,  such that  $1,140,000  in principal was
repaid under the First Selex Loan through such  conversion.  As a consequence of
such  conversion,  Selex holds  2,820,066  shares of the Company's  Common Stock
(41.9% of the  outstanding  shares of Common Stock of the Company based upon the
number of shares  of the  Company's  Common  Stock  outstanding  as of March 21,
1997).

     Pursuant to the Selex  transaction,  $1,000,000  of the  proceeds  from the
First  Selex  Loan was used by the  Company to acquire  certain  commercial  and
multi-family properties at the Company's St. Augustine Shores community at their
net  appraised  value,  from Mr.  Muyres and certain  entities  affiliated  with
Messrs.  Zwaans  and  Muyres.  Namely,  (i)  $416,000  was  used to  acquire  48
undeveloped  condominium  units (twelve 4 unit  building  sites) and 4 completed
(and rented)  condominium units from Conquistador,  in which Messrs.  Zwaans and
Muyres  serve  as  directors,  as well  as  President  and  Secretary/Treasurer,
respectively;  (ii)  $485,000  was used to acquire 4  commercial  lots from Swan
Development  Corporation ("Swan"), in which Messrs. Zwaans and Muyres also serve
as  directors,  as well as  President  and  Secretary,  respectively;  and (iii)
approximately $99,000 was used to reacquire, from Mr. Muyres, all of his rights,
title and interest in a certain  contract with the Company for the purchase of a
commercial tract in St. Augustine Shores,  Florida.  None of the commercial land
and  multi-family  property  acquired by the Company from Mr. Muyres and certain
entities  affiliated  with Messrs.  Zwaans and Muyres  collateralizes  the First
Selex Loan.  In March,  1994,  Conquistador  exercised  its right to  repurchase
certain of the  multi-family  property  from the Company  (which  right had been
granted in connection with the June,  1992  transaction) at a price of $312,000,
of which  $260,000  was paid in cash to the  Company  and $52,000 was applied to
reduce   interest  due  to  Selex  under  the  Second  Selex  Loan  (the  "First
Conquistador Acquisition").


                                       17
<PAGE>

     In December, 1992, Mr. Gram, a director of the Company and beneficial owner
of the Common Stock of the Company held by Selex,  acquired all of the Company's
outstanding  bank debt and then  assigned  same to Yasawa,  of which Mr. Gram is
also  the  beneficial  owner.  Yasawa  simultaneously   completed  a  series  of
transactions  with the Company which  involved the transfer of certain assets to
Yasawa or its affiliated companies,  the acquisition by Yasawa of 289,637 shares
of the Company's  Common Stock through the exercise of warrants  previously held
by the banks,  the  provision of a $1,500,000  line of credit to the Company and
the restructuring of the remaining debt as a $5,106,000  Yasawa Loan.  Principal
repayments aggregating $136,000 have reduced the Yasawa Loan to $4,764,600 as of
December 31, 1996.  On April 30,  1993,  Selex loaned the Company an  additional
amount of  $1,000,000  pursuant to the Second  Selex Loan and since July 1, 1993
made further loans to the Company  aggregating  $4,400,000 under the Third Selex
Loan.  The Second Selex Loan has been  satisfied and principal of $1,381,000 has
been repaid under the Third Selex Loan through December 31, 1996. As of December
31, 1996, Yasawa has loaned the Company an additional sum of $6,012,000 pursuant
to the Second Yasawa Loan. As a consequence of these  transactions,  the Company
had loans  outstanding  from Selex,  Yasawa and their affiliates on December 31,
1996 in the aggregate amount of approximately $22,368,000.  On May 22, 1995, the
Company  closed  a  transaction  with  Conquistador  (the  "Second  Conquistador
Acquisition") for the sale of an administration building and a multi-family site
in the Company's  St.  Augustine  Shores  community as well as the remaining lot
inventory in the Company's FeatherNest community at Marion Oaks in consideration
for the  satisfaction  of $2,599,300  of principal  and accrued  interest on the
Second and Third Selex Loans. On that same date, but in a separate  transaction,
the  Company  also sold to  Conquistador  Development  Corporation  (the  "Third
Conquistador  Acquisition")  four  single  family  residential  lots  in the St.
Augustine  Shores  community  for  $100,000  in cash.  These  transactions  were
accounted for in accordance with generally  accepted  accounting  principals for
these types of related party  transactions.  Accordingly,  the resulting gain of
$1,900,000  was treated as a  contribution  of capital and recorded  directly to
capital surplus.  The loans from Selex,  Yasawa and their affiliates are secured
by  substantially  all of the assets of the Company.  See Note 5 to Consolidated
Financial Statements.

     On March 10, 1994, the Company was advised that Selex filed an Amendment to
its Schedule 13D with the Commission. In the Amendment,  Selex reported that it,
together  with Yasawa and their  affiliates,  were  uncertain as to whether they
would provide any further funds to the Company.  The  Amendment  further  stated
that Selex,  Yasawa and their  affiliates  were seeking third parties to provide
financing for the Company and that as part of any such  transaction,  they would
be willing  to sell or  restructure  all or a portion of their  loans and Common
Stock in the Company.

     The Company, Selex and Yasawa entered into loan modification  agreements in
which all accrued interest was converted into non-interest  bearing principal at
the earlier of the maturity date or the default date.  Accordingly,  at December
31, 1995,  $4,200,000 of accrued  interest was  reclassified  as principal.  The
loans were also modified to formalize the  elimination  of the default  interest
rate provisions in each of the applicable loan agreements.

     The  Company  has  stated  in  previous  filings  with the  Commission  and
elsewhere  herein that the  obtainment  of  additional  funds to  implement  its
marketing  program and achieve the  objectives of its business plan is essential
to enable the Company to maintain  operations  and continue as a going  concern.
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.  As previously  stated,
during the last nine months of 1993,  Selex,  Yasawa and their affiliates loaned
the Company an  aggregate  of  $4,400,000  pursuant  to Third Selex Loan.  Funds
advanced   under  the  Third   Selex  Loan   enabled  the  Company  to  commence
implementation  of the majority of its marketing program in the third quarter of
1993. The full benefits of the program were not realized in 1993 and the Company
was unable to secure financing in 1994 to meet its working capital  requirements
and  continue  its  marketing  program.  Commencing  in  1994,  Yasawa  advanced
additional  funds (the "Second Yasawa Loan") totaling  $6,012,000 as of December
31, 1996, to meet the Company's minimum working capital  requirements,  to pay a
portion of delinquent real estate taxes,  to pay settlements  with certain trade
creditors and to settle certain litigation.

     As a consequence  of its liquidity  position,  the Company has defaulted on
certain  obligations,  including its previously  described escrow obligations to
the Division  pursuant to the Company's 1992 Consent Order and its obligation to
make  required  payments  under loans from Selex,  Yasawa and their  affiliates.
Furthermore,  the  Company  has not paid  delinquent  real  estate  taxes  which
aggregate approximately $2,371,000 as of December 31, 1996; non-payment of these
delinquent taxes may adversely affect the financial condition of the Company.


                                       18
<PAGE>


     The Company is continuing to seek third parties to provide financing. There
can be no assurance, however, that any financing will be obtained.  Accordingly,
the Company's  Board of Directors will consider other  appropriate  action given
the severity of the Company's liquidity position including,  but not limited, to
filing for protection under the federal  bankruptcy laws. See "Business:  Recent
Developments", and Notes 1, 5 and 8 to Consolidated Financial Statements.


RESULTS OF OPERATIONS

  YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995

     REVENUES

     Total revenues were $8,650,000 for 1996 compared to $6,688,000 for 1995.

     Gross land sales were  $6,816,000 for 1996 versus  $3,623,000 for 1995. Net
land sales (gross land sales less estimated uncollectible  installment sales and
contract  valuation  discount)  increased to $4,296,000 for 1996 from $2,394,000
for 1995. The increase in sales reflects the Company's  marketing  program which
was initiated in 1995.

     There were no bulk land sales in 1996 and 1995.  In light of the  Company's
diminished  bulk land sales  inventory it is anticipated  that in the future the
Company will produce a negligible  volume of bulk land sales. See "Liquidity and
Capital Resources: Mortgages and Similar Debt".

     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  $1,202,000 for 1996
compared to  $1,383,000  in 1995.  The decrease in housing  revenues is directly
related to the reduction in the Company's  housing  advertising  and promotional
programs for housing due to limited working capital.  Housing revenues decreased
in both 1995 and 1996 due to the lack of an advertising and promotion program

     The following table reflects the Company's real estate product mix for 1996
and 1995 (in thousands):

<TABLE>
<CAPTION>

                                                                                         Years Ended
                                                                                --------------------------------
                                                                                December 31,      December 31,
                                                                                   1996               1995
                                                                                ------------      ------------
<S>                                                                             <C>               <C>
Gross Land Sales:
     Retail sales*............................................                  $ 6,816           $ 3,623
                                                                                -------           -------
         Total................................................                    6,816             3,623
                                                                                -------           -------
Housing Sales:
     Single Family............................................                    1,188             1,328
     Vacation Ownership.......................................                       14                55
                                                                                -------           -------
         Total................................................                    1,202             1,383
                                                                                -------           -------
         Total Real Estate....................................                  $ 8,018           $ 5,006
                                                                                =======           =======
<FN>

------------
     * 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, 1996 and December 31, 1995 were
$6,612,000 and $6,260,000, respectively. The Company had a backlog of $2,089,000
and  $3,100,000 in  unrecognized  sales as of December 31, 1996 and December 31,
1995,  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.

</FN>
</TABLE>


     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  $1,008,000 in 1996 as compared to $1,052,000 for
1995.  Due to the Company's  financial  condition,  the Company has done minimal
development work in the last two years.

     Interest  income was  $1,464,000  for 1996 compared to $1,019,000 for 1995.
This increase is the result of higher contract receivable balances.


                                       19
<PAGE>

     Other  revenues were $680,000 for 1996 compared to $840,000 in 1995.  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.  Included in the
1995 results is an extraordinary  gain of $702,000 resulting from a reduction in
the allowance for the  guarantee  pursuant to 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.

     COSTS AND EXPENSES

     Costs and expenses were $9,877,000 for 1996 compared to $9,593,000 in 1995.
Cost of sales  totaled  $2,673,000  for 1996 versus  $2,432,000  for 1995.  This
increase is primarily due to higher land sales in 1996.

     In 1995,  the Company  recorded a provision  of $650,000  representing  the
Company's estimate of its liability to replace or repurchase  canceled contracts
receivable  under the recourse  provisions  of its prior sales of contracts  and
mortgages receivable.

     Commissions,  advertising and other selling expenses totaled $2,457,000 for
1996 versus  $1,889,000  for 1995.  The increase is the result of higher  retail
sales levels.  Advertising and promotional expenditures decreased to $118,000 in
1996  from  $151,000  in 1995 as a  result  of the  reduction  in the  Company's
marketing  programs.  Other selling expenses  decreased to $514,000 in 1996 from
$550,000 in 1995.

     General  and  administrative   expenses  were  $1,715,000  in  1996  versus
$1,869,000  for  1995.  General  and  administrative   expenses  have  decreased
primarily due to overhead reductions.

     Real estate tax expense was  $1,251,000  in 1996  compared to $1,111,000 in
1995.   Included  in  real  estate  tax  expense  is  delinquent   interest  and
administrative fees on delinquent taxes, which accrue interest at 18% per annum.

     Total interest cost (none of which  represents  capitalized) was $1,781,000
for 1996 as compared to $1,642,000 for 1995. The increase in interest expense is
the result of the increase in debt. No interest was capitalized in 1996 and 1995
since the Company did minimal land development work at its communities.

     NET INCOME

     The  Company  reported a net loss of $896,000  for 1996,  compared to a net
loss of $2,203,000  for 1995.  Included in the 1996 results is an  extraordinary
gain of $331,000  resulting from the final  settlement of the Marco class action
litigation.  Included in the 1995 results is an  extraordinary  gain of $702,000
resulting  from a reduction in the allowance  for the guarantee  pursuant to the
final settlement of the Marco class action litigation.


                                       20
<PAGE>



  YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

     REVENUES

     Total revenues were $6,688,000 for 1995 compared to $ 8,541,000 for 1994.

     Gross land sales were  $3,623,000 for 1995 versus  $2,994,000 for 1994. Net
land sales (gross land sales less estimated uncollectible  installment sales and
contract  valuation  discount)  increased to $2,394,000 for 1995 from $2,058,000
for 1994. The increase in sales reflects the Company's  marketing  program which
was initiated in 1995.

     There  were no bulk land  sales in 1995 as  compared  to bulk land sales of
$315,000 in 1994. In light of the Company's diminished bulk land sales inventory
it is  anticipated  that in the future the  Company  will  produce a  negligible
volume of bulk land sales. See "Liquidity and Capital  Resources:  Mortgages and
Similar Debt".

     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  $1,383,000 for 1995
compared to $2,543,000 in 1994.  Housing  revenues  decreased in 1995 due to the
lack of an advertising and promotion program.

     The following table reflects the Company's real estate product mix for 1995
and 1994 (in thousands):

<TABLE>
<CAPTION>

                                                                                       Years Ended
                                                                                ---------------------------
                                                                                December 31,   December 31,
                                                                                   1995            1994
                                                                                ------------   ------------
<S>                                                                             <C>            <C>
Gross Land Sales:
     Bulk sales...............................................                  $    0         $   315
     Retail sales*............................................                   3,623           2,679
                                                                                ------         -------
         Total................................................                   3,623           2,994
                                                                                ------         -------
Housing Sales:
     Single Family............................................                   1,328           2,506
     Vacation Ownership.......................................                      55              37
                                                                                ------         -------
         Total................................................                   1,383           2,543
                                                                                ------         -------
         Total Real Estate....................................                  $5,006         $ 5,537
                                                                                ======         =======

<FN>

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

     * 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, 1995 and December 31, 1994 were
$6,260,000 and $1,910,000, respectively. The Company had a backlog of $3,100,000
and  $906,000 in  unrecognized  sales as of December  31, 1995 and  December 31,
1994,  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.

</FN>
</TABLE>

     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  $1,052,000 in 1995 as compared to $1,214,000 for
1994. The decrease was due to the Company's financial condition which caused the
Company to curtail development in the first quarter of 1994.

     Interest  income was  $1,019,000  for 1995 compared to $1,046,000 for 1994.
This decrease is the result of lower escrow balances.

     Other  revenues were $840,000 for 1995 compared to $629,000 in 1994.  Other
revenues are generated  principally  by the Company's  title  insurance and real
estate brokerage subsidiaries.

     Included in the 1995 results is an  extraordinary  gain of $702,000 related
to the settlement of the Marco refund obligation.

     Included in the 1994 results is a gain of $1,051,000  from the  termination
of the lease on the Company's corporate headquarters in Miami.

                                       21
<PAGE>

     COSTS AND EXPENSES

     Costs and expenses  were  $9,593,000  for 1995 compared to  $12,447,000  in
1994.  Cost of sales totaled  $2,432,000  for 1995 versus  $3,845,000  for 1994.
These  decreases are  primarily due to lower housing sales in 1995.  The Company
completed  its  Compromise  and  Settlement  Agreement  program  with its  trade
creditors during the third quarter of 1994. Accordingly, costs and expenses were
reduced by approximately $430,000 as a result of these settlements.

     In 1995,  the Company  recorded a provision  of $650,000  representing  the
Company's estimate of its liability to replace or repurchase  canceled contracts
receivable  under the recourse  provisions  of its prior sales of contracts  and
mortgages receivable.

     Commissions,  advertising and other selling expenses totaled $1,889,000 for
1995  versus  $2,608,000  for 1994.  Advertising  and  promotional  expenditures
decreased to $151,000 in 1995 from $275,000 in 1994 as a result of the reduction
in the  Company's  marketing  programs.  Other  selling  expenses  decreased  to
$550,000 in 1995 from $1,595,000 in 1994 as a result of cost reductions.

     General  and  administrative   expenses  were  $1,869,000  in  1995  versus
$2,984,000  for  1994.  General  and  administrative   expenses  have  decreased
primarily due to overhead  reductions  and  settlement  of the  Company's  lease
obligation on its corporate headquarters in October 1994.

     Real estate tax expense was  $1,111,000  in 1995  compared to $1,163,000 in
1994.   Included  in  real  estate  tax  expense  is  delinquent   interest  and
administrative  fees on 1993 and 1994 delinquent taxes, which accrue interest at
18% per annum.

     Interest  expense was  $1,642,000  for 1995, as compared to $1,847,000  for
1994. The decrease in interest expense is the result of the decrease in debt. No
interest was  capitalized  in 1995 and 1994 since the Company had curtailed land
development work at its communities.

     NET INCOME

     The Company  reported a net loss of $2,203,000 for 1995,  compared to a net
loss of $3,906,000  for 1994.  Included in the 1995 results is an  extraordinary
gain of  $702,000  related to the  settlement  of the Marco  refund  obligation.
Included in 1994 results is a gain of  $1,051,000  from the  termination  of the
lease on the Company's corporate headquarters in Miami.


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,  the  increased  regulation  has  lengthened  the  development
process and added to development costs.

     On a statewide level, the Florida  Legislature  adopted and implemented the
Florida  Growth  Management  Act of 1985 (the  "Act")  to aid local  governments
efforts to  discourage  uncontrolled  growth in Florida.  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
virtually completed in certain of these communities). Thus, such 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.

                                       22
<PAGE>


     In  addition  to  Florida,  other  jurisdictions  in  which  the  Company's
properties are offered for sale have recently  strengthened,  or are considering
strengthening,  their regulation of subdividers and subdivided lands in order to
provide  further  assurances  to the  public,  particularly  given  the  adverse
publicity  surrounding  the  industry  which  existed in 1990.  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  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

     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, Selex and Yasawa entered into loan modification  agreements in
which all accrued interest was converted into non-interest  bearing principal at
the earlier of the maturity date or the default date.  Accordingly,  at December
31, 1995,  $4,200,000  of accrued  interest  was  reclassified  as  non-interest
bearing principal.  The loans were also modified to formalize the elimination of
the default interest rate provisions in each of the applicable loan agreements.

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

<TABLE>
<CAPTION>

                                                        Years Ended
                                                ------------------------------
                                                December 31,      December 31,
                                                    1996              1995
                                                ------------      ------------
<S>                                             <C>               <C>

Mortgage Notes Payable ..................       $ 18,707          $ 16,717
Other Loans..............................          3,661             3,661
                                                --------          --------
  Total mortgages and similar debt.......       $ 22,368          $ 20,378
                                                ========          ========
</TABLE>


     Included in Mortgage Notes Payable are the First Selex Loan  ($2,722,000 as
of December  31,  1996),  the Third Selex Loan  ($3,816,000  as of December  31,
1996),  the Yasawa  Loan  ($5,829,000  as of December  31,  1996) and the Second
Yasawa  Loan  ($6,340,000  as of December  31,  1996).  Other loans  include the
$1,656,000 Empire note and the $2,005,000 Scafholding Loan.

     These  mortgage notes payable and other loans are in default as of December
31, 1996 due to the  non-payment  of  principal.  The lenders have not taken any
other action as a result of these defaults.

     On June 19, 1992,  Selex loaned the Company the sum of $3,000,000  pursuant
to the First  Selex  Loan.  The First  Selex Loan is  collateralized  by a first
mortgage on certain of the  Company's  unsold,  undeveloped  property in its St.
Augustine  Shores,  Florida  community.  The Loan  matures on June 15,  1996 and
provides for  principal to be repaid at 50% of the net proceeds per lot for lots
requiring release from the mortgage, with the entire unpaid balance becoming due
and payable at the end of the four year term. It initially bears interest at the
rate of 10% per annum,  with  payment of  interest  deferred  for the initial 18
months of the Loan and interest  payments due quarterly  thereafter.  As part of
the Selex transaction, Selex was granted an option, approved by the holders of a
majority  of  the  outstanding  shares  of the  Company's  Common  Stock  at the
Company's 1992 Annual Meeting, which, as modified,  enabled Selex to convert the
First Selex Loan, or any portion  thereof,  into a maximum of 600,000  shares of
the Company's  Common Stock at a per share conversion price equal to the greater
of (i) $1.25 or (ii) 95% of the market  price of the  Company's  Common Stock at
the time of conversion, but in no event greater


                                       23
<PAGE>


than $4.50 per share (the "Option").  On February 17, 1994,  Selex exercised the
Option,  in full, at a conversion price of $1.90 per share, such that $1,140,000
in principal was repaid under the First Selex Loan through such  conversion.  As
of March 21, 1997, the Company was in default of the First Selex Loan.

     One million  dollars of the proceeds  from the First Selex Loan was used by
the Company to acquire  certain  commercial and  multi-family  properties at the
Company's St. Augustine Shores community at their net appraised value,  from Mr.
Muyres and certain entities affiliated with Messrs.  Zwaans and Muyres.  Namely,
(i) $416,000 was used to acquire 48 undeveloped condominium units (twelve 4 unit
building   sites)  and  4  completed   (and  rented)   condominium   units  from
Conquistador,  in which Messrs. Zwaans and Muyres serve as directors, as well as
President  and  Secretary/Treasurer,  respectively;  (ii)  $485,000  was used to
acquire 4 commercial  lots from Swan,  in which  Messrs.  Zwaans and Muyres also
serve as directors, as well as President and Secretary,  respectively; and (iii)
approximately $99,000 was used to reacquire, from Mr. Muyres, all of his rights,
title and interest in that certain  contracts  with the Company for the purchase
of a commercial tract in St. Augustine Shores,  Florida.  None of the commercial
and  multi-family  property  acquired by the Company from Mr. Muyres and certain
entities  affiliated  with Messrs.  Zwaans and Muyres  collateralizes  the First
Selex Loan.  In March,  1994,  Conquistador  exercised  its right to  repurchase
certain multi-family  property from the Company (which right had been granted in
connection  with the June, 1992 Selex  transaction)  at a price of $312,000,  of
which $260,000 was paid in cash to the Company and $52,000 was applied to reduce
interest  due to Selex  under the  Second  Selex Loan (the  "First  Conquistador
Acquisition").

     On December 2, 1992, the Company entered into various  agreements  relating
to certain of its assets and the restructuring of its debt with Yasawa, which is
beneficially  owned by Mr. Antony Gram. The  consummation  of these  agreements,
which are further described below, was conditioned upon the acquisition by Mr.
Gram of the Company's outstanding bank loan.

     On December 4, 1992,  Mr. Gram entered into an agreement  with the lenders,
pursuant  to  which  he  acquired  the bank  loan of  approximately  $25,150,000
(including  interest and fees) for a price of $10,750,000.  In conjunction  with
such  transaction,  the lenders  transferred to Mr. Gram the warrants which they
held that entitled the holder to purchase an aggregate of 277,387  shares of the
Company's  Common  Stock at an  exercise  price of $1.00 per share.  Immediately
after the acquisition of the bank loan, Mr. Gram transferred all of his interest
in the bank loan, including the warrants, to Yasawa.

     On  December  11,  1992,  the  Company  consummated  the  December  2, 1992
agreements with Yasawa.  Under these agreements,  Yasawa, its affiliates and the
Company agreed as follows:  (i) the Company sold certain  property at its Citrus
Springs  community  to an  affiliate  of Yasawa in  exchange  for  approximately
$6,500,000 of debt reduction credit; (ii) an affiliate of Yasawa and the Company
entered  into a joint  venture  agreement  with  respect to the  Citrus  Springs
property,  providing  for the  Company to market  such  property  and receive an
administration  fee from the  venture  (in  March,  1994,  the  Company  and the
affiliate  agreed to  terminate  the  venture);  (iii) the Company  sold certain
contracts  receivable at face value to an affiliate of Yasawa for debt reduction
credit of  approximately  $10,800,000;  (iv) the Company  sold the Marco  Shores
Country Club and Golf Course to an  affiliate  of Yasawa for an aggregate  sales
price of $5,500,000,  with the affiliate  assuming an existing first mortgage of
approximately  $1,100,000 and the Company  receiving  debt  reduction  credit of
$2,400,000,  such that the Company  obtained cash proceeds from this transaction
of $2,000,000,  which amount was used for working  capital;  (v) an affiliate of
Yasawa  agreed to lease the Marco  Shores  Country  Club and Golf  Course to the
Company for a period of approximately  one year; (vi) an affiliate of Yasawa and
the Company  agreed to amend the terms of the warrants to increase the number of
shares issuable upon their exercise from 277,387 shares to 289,637 shares and to
adjust the  exercise  price to an  aggregate of  approximately  $314,000;  (vii)
Yasawa  exercised  the  warrants  in  exchange  for  debt  reduction  credit  of
approximately  $314,000;  (viii) Yasawa released certain collateral held for the
bank loan;  (ix) an affiliate of Yasawa agreed to make an additional  loan of up
to $1,500,000 to the Company,  thus  providing the Company with a future line of
credit (all of which was drawn and  outstanding  as of March 21, 1997);  and (x)
Yasawa agreed to  restructure  the payment terms of the remaining  $5,106,000 of
the bank loan as a loan from Yasawa (the "Yasawa Loan").

     The Yasawa Loan bears  interest at the rate of 11% per annum,  with payment
of interest  deferred until December 31, 1993, when only accrued interest became
payable.  Commencing  January 31, 1994,  principal and interest  became  payable
monthly, with all unpaid principal and accrued interest being due and payable on
December 31, 1997.  As of March 21, 1997,  $6,478,100  in principal  and accrued
interest was in default under the Yasawa Loan.

                                       24
<PAGE>

     On April 30,  1993  Selex  loaned  the  Company  an  additional  $1,000,000
collateralized  by a first mortgage on certain of the Company's  property in its
Marion Oaks,  Florida  community  (the "Second Selex Loan").  Interest under the
Second Selex Loan was 11% per annum,  deferred  until  December  31,  1993,  and
principal was to be repaid at $3,000 per lot for lots requiring release from the
mortgage,  with the entire unpaid principal  balance and interest  accruing from
January 1, 1994 to April 30,  1994 due and payable on April 30,  1994.  Although
Selex had certain conversion rights under the Second Selex Loan in the event the
Company sold any Common Stock or Preferred Stock prior to payment in full of all
amounts due to Selex under the Second Selex Loan,  such rights were voided.  The
Second  Selex Loan was  satisfied  on May 22,  1995  through  the closing of the
Second Conquistador Acquisition, discussed below.

     From July 9, 1993 through  December  31, 1993,  Selex loaned the Company an
additional  $4,400,000  collateralized  by a second  mortgage  on certain of the
Company's  property on which Selex and/or Yasawa hold a first mortgage  pursuant
to a Loan Agreement dated July 14, 1993 and amendments thereto (the "Third Selex
Loan").  The Third  Selex Loan bears  interest at 11% per annum,  with  interest
deferred  until  December 31, 1993.  Principal is to be repaid at $3,000 per lot
for lots requiring  release from the mortgage,  with the entire unpaid principal
balance and  interest  accruing  from  January 1, 1994 to April 30, 1994 due and
payable on April 30, 1994. The Second Conquistador Acquisition, discussed below,
closed on May 22, 1995,  provided a reduction of the debt due and payable  under
the Third Selex Loan. As of March 21, 1997, the remaining  balance of $4,229,200
in principal and accrued interest remained unpaid and in default.

     In  February,  1994,  Yasawa  loaned the  Company an  additional  amount of
approximately  $514,900 at an interest rate of 8% per annum (the "Second  Yasawa
Loan").  Since May, 1994,  additional amounts were advanced to the Company under
the Second Yasawa Loan to enable the Company to pay certain essential  expenses,
including payment of certain real estate taxes, and effectuate  settlements with
the Company's principal creditors.  As of March 21, 1997, an aggregate amount of
$6,012,000 had been advanced to the Company under the Second Yasawa Loan and the
balance of $6,859,300 in principal and accrued interest remains unpaid.

     On May 22, 1995, the Company closed a transaction  with  Conquistador  (the
"Second  Conquistador  Acquisition") for the sale of an administration  building
and a multi-family  site in the Company's St. Augustine Shores community as well
as the remaining lot inventory in the Company's  FeatherNest community at Marion
Oaks in  consideration  for the  satisfaction  of  $2,599,300  of principal  and
accrued interest on the Second and Third Selex Loans. In a separate  transaction
which also closed on the same date, the Company sold to Conquistador (the "Third
Conquistador  Acquisition")  four  single  family  residential  lots  in the St.
Augustine  Shores  community  for  $100,000  in cash.  These  transactions  were
accounted for in accordance with generally  accepted  accounting  principals for
these types of related party  transactions.  Accordingly,  the resulting gain of
$1,900,000  was treated as a  contribution  of capital and recorded  directly to
capital surplus.

     As previously stated, Messrs. Muyres and Zwaans also serve as directors and
executive  officers of M&M First Coast  Realty  ("M&M").  The Company had leased
certain office space to M&M at its St. Augustine Shores community  pursuant to a
Lease  Agreement  dated August 10, 1990. A payment of  approximately  $21,300 in
delinquent  rental  payments  was made on May 22,  1995 upon the  closing of the
Second  Conquistador  Acquisition,  which included the sale of the St. Augustine
Administration Building.

     In  1996,  Yasawa  loaned  the  Company  $2,000,000  which  was used to pay
approximately $979,000 of delinquent real estate taxes and $993,000 of which was
used to satisfy the remaining  obligation  on the Marco class action  settlement
agreement. As part of the settlement agreement, Swan Development Corporation, an
affiliate  of Yasawa,  acquired  four  condominium  units from the class  action
trustee for $182,000, the same value that the trustee attributed to the units on
September 14, 1992.

     At December 31, 1995,  $4,200,000 of accrued interest due to Selex,  Yasawa
and their affiliates was reclassified as non-interest bearing principal. Through
March 21, 1997,  $1,140,000  in principal  was repaid under the First Selex Loan
through the exercise of the above  described  Option,  the Second Selex Loan was
repaid in full,  $1,380,900  in principal was repaid under the Third Selex Loan,
and $136,000 in principal and $346,000 in accrued  interest was repaid under the
Yasawa loan. As of March 21, 1997, the Company had loans outstanding from Selex,
Yasawa  and  their   affiliates  in  the  aggregate   amount  of   approximately
$24,522,200,  including  interest,  all  of  which  are  in  default,  including
approximately $8,986,900, which


                                       25
<PAGE>

is owed to  Selex,  including  accrued  and  unpaid  interest  of  approximately
$792,700  (10% per annum on the  First  Selex  Loan,  11% per annum on the Third
Selex Loan and 12% per annum on the  $1,000,000  Empire Note assigned to Selex);
approximately $13,337,400, which is owed to Yasawa, including accrued and unpaid
interest of  approximately  $1,168,100  (11% per annum on the Yasawa Loan and 8%
per annum on the Second Yasawa Loan);  and  approximately  $2,228,000,  which is
owed to an  affiliate  of  Yasawa,  including  accrued  and unpaid  interest  of
approximately  $223,000 (12% per annum). The loans from Selex,  Yasawa and their
affiliates are secured by substantially all of the assets of the Company.

     On March 10, 1994, the Company was advised that Selex filed an Amendment to
its Schedule 13D filed with the  Commission.  In the  Amendment,  Selex reported
that it, together with Yasawa and their affiliates, were uncertain as to whether
they would  provide any further  funds to the  Company.  The  Amendment  further
stated that Selex,  Yasawa and their  affiliates  were seeking  third parties to
provide financing for the Company and that as part of any such transaction, they
would be willing  to sell or  restructure  all or a portion  of their  loans and
Common Stock in the Company.

     The  Company  has  stated  in  previous  filings  with the  Commission  and
elsewhere  herein that the  obtainment  of  additional  funds to  implement  its
marketing  program and achieve the  objectives of its business plan is essential
to enable the Company to maintain  operations  and continue as a going  concern.
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.  As previously  stated,
during the last nine months of 1993,  Selex,  Yasawa and their affiliates loaned
the Company an  aggregate  of  $4,400,000  pursuant  to Third Selex Loan.  Funds
advanced   under  the  Third   Selex  Loan   enabled  the  Company  to  commence
implementation  of the majority of its marketing program in the third quarter of
1993. The full benefits of the program were not realized in 1993 and the Company
was unable to secure financing in 1994 to meet its working capital  requirements
and  continue  its  marketing  program.  Commencing  in  1994,  Yasawa  advanced
additional  funds (the "Second Yasawa Loan") totaling  $6,012,000 as of December
31, 1996, to meet the Company's minimum working capital  requirements,  to pay a
portion of delinquent real estate taxes,  to pay settlements  with certain trade
creditors and to settle certain litigation.

     As a consequence  of its liquidity  position,  the Company has defaulted on
certain  obligations,  including its previously  described escrow obligations to
the Division  pursuant to the Company's 1992 Consent Order and its obligation to
make  required  payments  under loans from Selex,  Yasawa and their  affiliates.
Furthermore,  the  Company  has not paid  delinquent  real  estate  taxes  which
aggregate approximately $2,371,000 as of December 31, 1996; non-payment of these
delinquent taxes may adversely affect the financial condition of the Company.

     The Company is continuing to seek third parties to provide financing. There
can be no assurance, however, that any financing will be obtained.  Accordingly,
the Company's  Board of Directors will consider other  appropriate  action given
the severity of the Company's liquidity position including,  but not limited, to
filing for protection under the federal  bankruptcy laws. See "Business:  Recent
Developments" and Notes 1, 5 and 8 to Consolidated Financial Statements.


  CONTRACTS AND MORTGAGES RECEIVABLE SALES

     In December,  1992, as described  above,  the Company sold  $10,800,000  of
contracts  and  mortgages  receivable  to an  affiliate of Yasawa at face value,
applying the proceeds therefrom to reduce the Bank Loan acquired by Yasawa.

     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.  As of December 31, 1996,  the balance of the
holdback account as approximately $118,000.

     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

                                       26
<PAGE>

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 $2,183,000 as of December 31,
1996). 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 is unable to determine  what effect this will
have, if any, on future  cancellations,  since it is unable to determine how the
bankruptcy or the  subsequent  sale of the portfolio  will impact  servicing and
collection procedures and the customers'  determination to continue to pay under
those  contracts.  The Company has fully reserved for the amount of the holdback
account and the estimated future cancellations based on the Company's historical
experience for receivables the Company services. However, due to the uncertainty
noted  above,  the  Company  does not feel there is  sufficient  information  to
estimate  future  cancellations  and is unable to determine  the adequacy of its
reserves to replace or repurchase  receivables that become delinquent.  In 1996,
the Company replaced $293,000 in delinquent receivables. As of December 31, 1996
and 1995, $1,087,000 and $611,000 in receivables were delinquent, respectively.

     The Company was the  guarantor of  approximately  $11,319,000  of contracts
receivable  sold or transferred  as of December 31, 1996,  for the  transactions
described  above and had $118,000 on deposit with  purchasers of the receivables
as security to assure  collectibility  as of such date.  A provision of $650,000
has been established for the Company's  obligation under the recourse provisions
of which  $491,000  remains  at  December  31,  1996.  The  Company  has been in
compliance with all receivable transactions since the consummation of sales.

     The Company  anticipates  that it will be necessary to complete  additional
sales and/or financings of a portion of its receivables in 1997. There can be no
assurance, however, that such sales and/or financings can be accomplished.


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,  the Company,  in February,  1980,  entered into a
Consent Order with the Division which provided a program for notifying  affected
customers. The Consent Order, which was restated and amended, provided a program
for notifying  affected customers of the anticipated delays in the completion of
improvements (or, in the case of purchasers of unbuildable lots in certain areas
of the Company's Sunny Hills community,  the transfer of development obligations
to core growth areas of the community); various options which may be selected by
affected  purchasers;  a schedule for  completing  certain  improvements;  and a
deferral  of the  obligation  to install  water  mains  until  requested  by the
purchaser.  Under an agreement  with Topeka,  Topeka's  utility  companies  have
agreed to  furnish  utility  service to the future  residents  of the  Company's
communities  on  substantially  the same basis as such services were provided by
the Company. The Consent Order also required the establishment of an improvement
escrow account as assurance for completing such improvement obligations.

     In June,  1992,  the Company  entered into the 1992 Consent  Order with the
Division,  which replaced and superseded the original  Consent Order, as amended
and  restated.  Among other  things,  the 1992 Consent  Order  consolidated  the
Company's  development  obligations and provided for a reduction in its required
monthly escrow  obligation to $175,000 from  September,  1992 through  December,
1993.  Beginning  January,  1994 and until  development is completed or the 1992
Consent Order is amended,  the Company is required to deposit $430,000 per month
into the escrow account. As part of the assurance program under the 1992 Consent
Order,  the  Company  and its  lenders  granted  the  Division a lien on certain
receivables and future  receivables.  The Company defaulted on its obligation to
escrow  $430,000  per month for the period of January,  1994 through the present
and,  in  accordance  with the  1992  Consent  Order,  collections  on  Division
receivables  were  escrowed  for the  benefit of  purchasers  from March 1, 1994
through  April 30,  1994.  In May,  1994 the  Company  implemented  a program to
exchange  purchasers who contracted to purchase property which is undeveloped to
property  which is  developed.  As of March 21, 1997,  approximately  84% of the
customers  whose lots are currently  undeveloped  have opted to exchange or were
otherwise  resolved.  Consequently,  the  Division  has  allowed  the Company to
utilize  collections on receivables since May 1, 1994.  Because of the Company's
default,  the Division  could also exercise other  available  remedies under the
1992 Consent Order, which remedies entitle the Division,  among other things, to
halt all sales of registered property.

                                       27
<PAGE>


     The Company's  goal is to eliminate its  development  obligation  (with the
exception of its  maintenance  obligation in Marion Oaks) under the 1992 Consent
Order through this exchange program and settlement of all remaining  maintenance
and  improvements  obligations in Citrus Springs  through a final agreement with
Citrus County  (entered into in May 1995).  Pursuant to the 1992 Consent  Order,
the Company has limited the sale of single-family  lots to lots which front on a
paved street and are ready for immediate building.

     Based upon the Company's  experience with affected  customers,  the Company
believes that the total refunds  arising from delays in completing  improvements
will not materially exceed the amount provided for in the consolidated financial
statements. Approximately $5,000 of the provision for the total refunds relating
to the delays of improvements remained in accrued expenses and other at December
31, 1996.

     As of December 31, 1996, the Company had estimated development  obligations
of approximately  $1,134,000 on sold property, an estimated liability to provide
title insurance and deeding  costing  $1,139,000 and an estimated cost of street
maintenance,  prior to assumption of such obligations by local  governments,  of
$880,000,  all of which are  included  in  deferred  revenue.  The total cost to
complete  improvements  at December 31, 1996 to lots subject to the 1992 Consent
Order, including the previously mentioned obligations, and to all lots, sold and
unsold,  including  the St.  Augustine  Shores  community,  was  estimated to be
approximately  $15,152,000.  As of December  31, 1996 and  December 31, 1995 the
Company  had  in  escrow  approximately  $360,000  and  $489,000,  respectively,
specifically  for land  improvements at certain of its Central and North Florida
communities.

     The  Company's  continuing  liquidity  problems  have  precluded the timely
payment  of the full  amount  of its real  estate  taxes.  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. Delinquent real estate
taxes aggregated approximately $2,371,000 as of December 31, 1996.

     The  Company's  corporate  performance  bonds to assure the  completion  of
development at its St.  Augustine  Shores  community  expired in March and June,
1993. Such bonds cannot be renewed due to a change in the policy of the Board of
County  Commissioners of St. Johns County which precludes allowing any developer
to  secure  the  performance  of  development  obligations  by the  issuance  of
corporate  bonds.  In the event that St.  Johns County  elects to undertake  and
complete such  development  work, the Company would be obligated with respect to
1,000  improved  lots at St.  Augustine  Shores in the  amount of  approximately
$6,200,000.  The Company intends to submit an alternative  assurance program for
the  completion  of such  development  and  improvements  to the  County for its
approval.

     On September 30, 1988,  the Company  entered into an agreement  with Citrus
County,  Florida to establish the procedure for transferring  final  maintenance
responsibilities for roads in the Company's Citrus Springs subdivision to Citrus
County. The agreement obligated the Company to complete certain remedial work on
previously completed  improvements within the Citrus Springs subdivision by June
1, 1991.  The Company was unable to complete this work by the specified date and
negotiated  another  agreement  with  Citrus  County for the  transfer  of final
maintenance responsibility for the roads to the County. This final agreement was
entered into in May 1995.

     The  Company  had  placed  certain  properties  in trust to meet its refund
obligations to Marco customers affected by the permit denials.  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,  not to exceed  $2,000,000.  Such settlement enabled the
Company to resolve the claims of an additional  12.7% of its affected  customers
and  re-evaluate  the  allowance  for Marco  permit  costs.  As a result of such
analysis,  the  Company  was  able to  reduce  such  allowance  by  $12,200,000,
resulting in a $3,983,000  extraordinary  gain in 1992 and a $500,000  credit to
accrued expenses to be credited to paid-in capital following issuance of 250,000
shares of restricted Common Stock of the Company to the class members. Following
the closing 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.  During  1996,
$993,000 of the amount loaned by Yasawa was used to


                                       28
<PAGE>

satisfy the remaining  obligation on the Marco class action settlement agreement
resulting  in an  extraordinary  gain of  $331,000.  As  part of the  settlement
agreement,  Swan Development Corporation,  an affiliate of Yasawa, acquired four
condominium  units from the class action  trustee for  $182,000,  the same value
that the trustee attributed to the units on September 14, 1992.

  LIQUIDITY

     Since 1986,  the Company has directed its  marketing  efforts to rebuilding
retail  land  sales in an  attempt  to obtain a more  stable  income  stream and
achieve a balanced growth of retail land sales and bulk land sales.  Retail land
sales  typically  have a higher gross profit margin than bulk land sales and the
contracts  receivable  generated  from  retail land sales  provide a  continuing
source of income.  However,  retail land sales also have traditionally  produced
negative cash flow through the point of sale.  This is because the marketing and
selling expenses have generally been paid prior to or shortly after the point of
sale,  while  the land is  generally  paid for in  installments.  The  Company's
ability to rebuild  retail land sales has been  substantially  dependent  on its
ability to sell or otherwise  finance  contracts  receivable and/or secure other
financing sources to meet its cash requirements.

     To alleviate the negative  cash flow impact  arising from retail land sales
while attempting to rebuild its sales volume,  the Company  implemented  several
new  marketing  programs  which,  among  other  things,  adjusted  the method of
commission payments and required larger down payments.  However,  the nationwide
economic recession, which was especially pronounced in the real estate industry,
adverse publicity surrounding the industry which existed in 1990, the resulting,
more stringent  regulatory  climate,  and worldwide economic  uncertainties have
severely  depressed  retail  land sales  beginning  in mid-1990  and  continuing
thereafter, resulting in a continuing liquidity crisis.

     In an attempt to offset  the  negative  cash  effects of  installment  land
sales, the Company is attempting to direct its marketing  efforts to its housing
product  in which a house and lot are sold as a  package.  The  success  of this
direction will be dependent  upon the Company's  dealer  recruiting  program and
availability of funds for a national advertising and promotion program.

     Because of this severe  liquidity  crisis,  the Company ceased  development
work late in the third quarter of 1990 and did not resume development work until
the third quarter of 1992. From September 29, 1990 through the fourth quarter of
1991,  when the Company ceased selling  undeveloped  lots,  sales of undeveloped
lots were  accounted  for using the  deposit  method.  Under  this  method,  all
payments were recorded as a customer deposit liability. In addition,  because of
the increasing trend in delinquencies  during 1990, since the beginning of 1991,
the Company has not  recognized  any sale until 20% of the contract  sales price
has been received.  As a result,  the reporting and  recognition of revenues and
profits on a portion of the  Company's  retail  land  sales  contracts  is being
delayed. See Note 1 to Consolidated Financial Statements.

     The continued economic recession and the increasing adverse effects of such
recession on the Florida real estate industry not only resulted in the Company's
sales remaining at depressed levels,  but caused greater contract  cancellations
in 1991,  particularly  in the second half of the year,  than were  anticipated.
Such cancellations required the Company to record an additional provision to its
allowance for uncollectible sales of approximately $12,200,000 in the 1991 third
quarter, impacting net income by approximately $8,900,000.  While the Company is
making every effort to reduce its  cancellations,  the Company could be required
to record additional provisions in the future.

     In December,  1992,  the  Company's  bank debt was acquired by Mr. Gram and
assigned  to  Yasawa.  Through  the sale of  certain  assets to  Yasawa  and its
affiliates,  including  certain  contracts  receivable,  and the exercise of the
warrants by Yasawa,  the Company  was able to reduce  such  remaining  debt from
approximately   $25,150,000  (including  interest  and  fees)  to  approximately
$5,106,000. During 1994, the Yasawa Loan was reduced to 4,764,600. The agreement
with Yasawa also provided the Company with a future line of credit, all of which
is drawn and outstanding as of December 31, 1996.  During 1993, Selex loaned the
Company an additional  $5,400,000  pursuant to the Second and Third Selex Loans.
The  loans  from  Selex,  Yasawa  and their  affiliates  are  collateralized  by
substantially all of the Company's assets.


                                       29


<PAGE>

     On March 10, 1994, the Company was advised that Selex filed an Amendment to
its Schedule 13D with the Commission. In the Amendment,  Selex reported that it,
together  with Yasawa and their  affiliates,  were  uncertain as to whether they
would provide any further funds to the Company.  The  Amendment  further  stated
that Selex,  Yasawa and their  affiliates  were seeking third parties to provide
financing for the Company and that as part of any such  transaction,  they would
be willing  to sell or  restructure  all or a portion of their  loans and Common
Stock in the Company.

     The  Company  has  stated  in  previous  filings  with the  Commission  and
elsewhere  herein that the  obtainment  of  additional  funds to  implement  its
marketing  program and achieve the  objectives of its business plan is essential
to enable the Company to maintain  operations  and continue as a going  concern.
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.  As previously  stated,
during the last nine months of 1993,  Selex,  Yasawa and their affiliates loaned
the Company an  aggregate  of  $4,400,000  pursuant  to Third Selex Loan.  Funds
advanced   under  the  Third   Selex  Loan   enabled  the  Company  to  commence
implementation  of the majority of its marketing program in the third quarter of
1993. The full benefits of the program were not realized in 1993 and the Company
was unable to secure financing in 1994 to meet its working capital  requirements
and  continue  its  marketing  program.  Commencing  in  1994,  Yasawa  advanced
additional  funds (the "Second Yasawa Loan") totaling  $6,012,000 as of December
31, 1996, to meet the Company's minimum working capital  requirements,  to pay a
portion of delinquent real estate taxes,  to pay settlements  with certain trade
creditors and to settle certain litigation.

     As a consequence  of its liquidity  position,  the Company has defaulted on
certain  obligations,  including its previously  described escrow obligations to
the Division  pursuant to the Company's 1992 Consent Order and its obligation to
make  required  interest  payments  under  loans  from  Selex,  Yasawa and their
affiliates.  Furthermore,  the Company has not paid delinquent real estate taxes
which aggregate approximately $2,371,000 as of December 31, 1996; non-payment of
these  delinquent  taxes may  adversely  affect the  financial  condition of the
Company.

     The Company is continuing to seek third parties to provide financing. There
can be no assurance, however, that any financing will be obtained.  Accordingly,
the Company's  Board of Directors will consider other  appropriate  action given
the severity of the Company's liquidity position including,  but not limited, to
filing for protection under the federal  bankruptcy laws. See "Business:  Recent
Developments" and Notes 1, 5 and 8 to Consolidated Financial Statements.


                                       30
<PAGE>


ITEM 8

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                              AND SUPPLEMENTAL DATA

<TABLE>
<CAPTION>


                                                                      Page
                                                                      -------
<S>                                                                   <C>
Independent Auditors' Report.................                          32

Consolidated Balance Sheets as of
 December 31, 1996 and December 31, 1995.....                          33

Statements of Consolidated Operations for
 the years ended December 31, 1996,
 December 31, 1995 and December 31, 1994.....                          35

Statements of Consolidated Stockholders'
 Equity (Deficiency) for the years
     ended December 31, 1996, December 31,
   1995 and December 31, 1994................                          36

Statements of Consolidated Cash Flows for
 the years ended December 31, 1996,
     December 31, 1995 and December 31, 1994....                       37

Notes to Consolidated Financial Statements....                         39

Supplemental Unaudited Quarterly Financial Data.                       55

</TABLE>

                                       31
<PAGE>


                          INDEPENDENT AUDITORS' REPORT






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


     We have audited the consolidated  balance sheets of The Deltona Corporation
and  subsidiaries  (the  "Company")  as of  December  31,  1996 and 1995 and the
related statements of consolidated operations, stockholders' equity (deficiency)
and cash flows for each of the three  years in the  period  ended  December  31,
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 audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are free 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, 1996 and 1995 and the  results of its  operations  and its cash
flows for each of the three  years in the  period  ended  December  31,  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, 1996. 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 & TOUCHE LLP
Certified Public Accountants
Miami, Florida
March 25, 1997


                                       32
<PAGE>


                           CONSOLIDATED BALANCE SHEETS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

                                     ASSETS
                                 (in thousands)


<TABLE>
<CAPTION>



                                                                 December 31,   December 31,
                                                                    1996           1995
                                                                 ----------     ------------
<S>                                                              <C>            <C>
Cash, including escrow deposits
 and restricted cash of $845 in 1996 and $855 in 1995
 (Note 7)...................................................     $   907        $    982
                                                                 -------        --------


Contracts receivable for land sales (Notes 2, 5 and 8)......      10,488           8,059


Less: Allowance for uncollectible contracts.................      (2,429)         (1,628)

      Unamortized valuation discount........................      (1,094)           (829)
                                                                 -------        --------


Contracts receivable - net..................................       6,965           5,602
                                                                 -------        --------


Mortgages and other receivables - net (Notes 2, 5 and 8)....         384             413
                                                                 -------        --------


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


Land and land improvements..................................     10,287           11,131


Other.......................................................         99              104
                                                                -------         --------


              Total inventories.............................     10,386           11,235
                                                                -------         --------



Property, plant and equipment - net (Notes 4 and 5).........        413              510
                                                                -------         --------


Prepaid expenses and other..................................        367              438
                                                                -------         --------


              Total..........................................   $19,422         $ 19,180
                                                                =======         ========

</TABLE>

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


                                       33
<PAGE>



                           CONSOLIDATED BALANCE SHEETS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

                                                                                December 31,   December 31,
                                                                                    1996           1995
                                                                                ------------   ------------
<S>                                                                             <C>            <C>
Mortgages and similar debt (Note 5):

     Mortgage notes  payable .................................                  $ 18,707       $ 16,717

     Other loans .............................................                     3,661          3,661
                                                                                --------       --------

         Total mortgages and similar debt.....................                    22,368         20,378

Accounts payable-trade .......................................                        94            152

Accrued interest payable (Note 5) ............................                     1,778            -0-

Accrued taxes, principally real estate taxes .................                     3,084          2,983

Accrued expenses and other (Notes 2 and 8) ...................                     1,421          1,812

Customers' deposits ..........................................                       792            754

Allowance for Marco permit costs (Note 9) ....................                       -0-          1,349

Deferred revenue (Notes 7 and 8) .............................                     7,764          8,765
                                                                                --------       --------

Total liabilities ............................................                    37,301         36,193
                                                                                --------       --------

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: 6,734,572 shares in 1996 and 6,719,244 shares
      in 1995 (excluding 12,228 shares held in treasury)..........                6,734           6,719

     Capital surplus .............................................               44,714          44,699

     Accumulated deficit .........................................              (69,327)        (68,431)
                                                                                -------        --------

Total stockholders' equity (deficiency) ..........................              (17,879)        (17,013)
                                                                                -------        --------

                      Total.......................................              $19,422        $ 19,180
                                                                                =======        ========

</TABLE>


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


                                       34
<PAGE>


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

<TABLE>
<CAPTION>

                                                                   Years Ended
                                                  ------------------------------------------
                                                  December 31,   December 31,   December 31,
                                                      1996           1995           1994
                                                  ------------   ------------   ------------
<S>                                               <C>            <C>            <C>
Revenues

 Gross land sales (Notes 2 and 7)..............   $  6,816       $  3,623       $  2,994
 Less: Estimated uncollectible sales...........     (1,706)          (850)          (712)
        Contract valuation discount............       (814)          (379)          (224)
                                                  --------       --------       --------
 Net land sales................................      4,296          2,394          2,058
 Sales-housing.................................      1,202          1,383          2,543
 Recognized improvement revenue-prior period
  sales........................................      1,008          1,052          1,214
 Interest income...............................      1,464          1,019          1,046
 Gain on settlement of lease obligation (Note 8)       -0-            -0-          1,051
 Other ........................................        680            840            629
                                                  --------       --------       --------
              Total............................      8,650          6,688          8,541
                                                  --------       --------       --------

Costs and expenses

 Cost of sales-land............................      1,212            635            574
 Cost of sales-housing.........................      1,005          1,135          2,169
 Cost of improvements-prior period sales.......        219            395            711
 Cost of sales-other...........................        237            267            391
 Provision for uncollectible contracts and
   recourse obligations (Note 2)...............        -0-            650            -0-
 Commissions, advertising, and other selling
  expenses.....................................      2,457          1,889          2,608
 General and administrative expenses...........      1,715          1,869          2,984
 Real estate tax...............................      1,251          1,111          1,163
 Interest expense..............................      1,781          1,642          1,847
                                                  --------       --------       --------

              Total..............................    9,877          9,593         12,447
                                                  --------       --------       --------
Loss from operations before income
 taxes and extraordinary items.................     (1,227)        (2,905)        (3,906)
Provision for income taxes (Note 6)............        -0-            -0-            -0-
                                                  --------       --------       --------

Loss from operations before
 extraordinary items...........................     (1,227)        (2,905)        (3,906)

Extraordinary item:
 Gain on settlement related to the Marco
  refund obligation (Note 9)...................        331            702            -0-
                                                  --------       --------       --------
Net income (loss)..............................   $   (896)      $ (2,203)      $ (3,906)
                                                  ========       ========       ========

Earnings (loss) per common and common
 equivalent shares from (Note 10):
 Operations....................................   $   (.18)      $  ( .43)      $   (.59)
 Extraordinary gain............................        .05            .10            -0-
                                                  --------       --------       --------
         Net income (loss)......................  $   (.13)      $  ( .33)      $   (.59)
                                                  ========       ========       ========
</TABLE>


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



                                       35
<PAGE>




          STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIENCY)

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)

For the years ended December 31, 1996, December 31, 1995 and December 31, 1994

<TABLE>
<CAPTION>
                                                  Common Stock        Capital   Accumulated
                                                  ($1 par value)      Surplus   Deficit        Total
                                                  --------------      -------   -----------    -------
<S>                                               <C>                 <C>       <C>            <C>

Balances, December 31, 1993...................    $ 5,951             $42,080   $(62,322)      $(14,291)
     Net proceeds from exercise of Warrants...        600                 540        -0-          1,140
     Issuance of Common Stock for Marco Permit
       Costs..................................        118                 118        -0-            236
     Net (loss) for the year..................        -0-                 -0-     (3,906)        (3,906)
                                                  -------             -------   --------       --------
Balances, December 31, 1994..................     $ 6,669             $42,738   $(66,228)      $(16,821)
     Issuance of Common Stock for Marco Permit
       Costs..................................         50                  50        -0-            100
     Gain from exchange of debt for land
       with related party (Note 5)............        -0-               1,911        -0-          1,911
     Net (loss) for the year..................        -0-                 -0-     (2,203)        (2,203)
                                                  -------             -------   --------       --------
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)
                                                  =======             =======   ========       ========

</TABLE>



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


                                       36
<PAGE>


                      STATEMENTS OF CONSOLIDATED CASH FLOWS

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)

<TABLE>
<CAPTION>



                                   Years Ended
                                                                           ------------------------------------------
                                                                           December 31,   December 31,   December 31,
                                                                               1996           1995           1994
                                                                           ------------   ------------   ------------
<S>                                                                        <C>            <C>            <C>
Cash flows from operating activities: Cash received from operations:
  Proceeds from sale of residential units...........                       $  1,182       $   1,416      $   2,543
  Collections on contracts and mortgages receivable.                          2,927           2,285          3,420
  Down payments on and proceeds from sales
   of homesites and tracts..........................                          1,517           1,261            592
  Proceeds from sale of Marco Trust property........                            -0-             -0-             22
  Proceeds (uses) from other sources................                            425              86            (44)
                                                                           --------       ---------      ---------
              Total cash received from operations......                       6,051           5,048          6,533
                                                                           --------       ---------      ---------

 Cash expended by operations:
  Cash paid for residential units......................                       1,005           1,135          2,169
  Cash paid for land and land improvements.............                         461             602            816
  Customer refunds.....................................                         931             874            136
  Commissions, advertising and other
   selling expenses....................................                       2,515           1,558          2,587
  General and administrative expenses..................                       1,892           2,721          2,728
  Interest paid........................................                         -0-             -0-            398
  Real estate taxes paid...............................                       1,314             984            192
                                                                           --------       ---------       --------
              Total cash expended by operations........                       8,118           7,874          9,026
                                                                           --------       ---------       --------
              Net cash provided by (used in) operating
                activities.............................                      (2,067)         (2,826)        (2,493)
                                                                           --------       ---------       --------

Cash flows from investing activities:
 Proceeds from sale of property, plant
  and equipment........................................                           6              29             24
 Payment for acquisition and construction of
  property, plant and equipment........................                          (4)            (43)           (26)
                                                                           --------       ---------       --------
              Net cash provided by (used in) investing
                activities.............................                           2             (14)           ( 2)
                                                                           --------       ---------       --------

Cash flows from financing activities:
 New borrowings........................................                       2,000           1,390          2,122
 Repayment of borrowings...............................                         (10)             (8)          (195)
                                                                           --------       ---------       --------
              Net cash provided by (used in) financing
                activities.............................                       1,990           1,382          1,927
                                                                           --------       ---------       --------
Net increase (decrease) in cash and short term
 investments...........................................                         (75)         (1,458)          (568)
Cash and short term investments, at beginning
 of year...............................................                         982           2,440          3,008
                                                                           --------       ---------       --------
Cash and short term investments, at end of year........                    $    907       $     982       $  2,440
                                                                           ========       =========       ========


</TABLE>


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


                                       37
<PAGE>


               STATEMENTS OF CONSOLIDATED CASH FLOWS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)


Reconciliation  of net income (loss) to net cash provided by (used in) operating
activities:
<TABLE>
<CAPTION>

                                   Years Ended
                                                                      -------------------------------------------
                                                                      December 31,   December 31,   December 31,
                                                                           1996          1995           1994
                                                                      ------------   ------------   --------
<S>                                                                   <C>            <C>            <C>
Net income (loss)....................................                 $    (896)     $  (2,203)     $ (3,906)
                                                                      ---------      ---------      --------
Adjustments to  reconcile  net income  (loss) to net
 cash  provided by (used in)
  operating activities:
     Depreciation and amortization....................                       60             64            86
     Provision for estimated uncollectible sales and
     recourse obligations............................                     1,706          1,500           712
     Contract valuation discount, net of amortization.                      279             30            19
     Net (gain) loss on sale of property, plant
       and equipment..................................                       35            (19)          (34)
     Extraordinary gain on settlement related to the
       Marco refund obligation........................                     (331)          (702)          -0-
(Increase) decrease in assets and increase (decrease)
   in liabilities:
     Gross contracts receivable plus deductions from
      reserves........................................                   (3,349)          (936)          (13)
     Mortgages and other receivables..................                       29            830         2,513
     Land and land improvements.......................                      844             (8)          646
     Housing completed or under construction and other.                       5             44            15
     Prepaid expenses and other........................                      71           (154)          181
     Accounts payable, accrued expenses and other......                   1,461          1,244           377
     Customers' deposits...............................                      38             32          (329)
     Allowance for Marco permit costs..................                  (1,018)          (846)           11
     Deferred revenue..................................                  (1,001)        (1,702)       (2,771)
                                                                      ---------      ---------      --------
         Total adjustments and changes.................                  (1,171)          (623)        1,413
                                                                      ---------      ---------      --------
Net cash provided by (used in) operating activities....               $  (2,067)     $  (2,826)     $ (2,493)
                                                                      =========      =========      ========


Supplemental disclosure of non-cash investing and financing activities:

Assets  assigned or conveyed as a reduction of accrued  expenses,
 mortgages and notes payable and settlement of Marco refund
 obligation:
 Contracts and mortgages receivable (net).............                $     -0-      $      -0-     $     50
                                                                      =========      ==========     ========
Reduction of accrued interest as a result of the
  capitalization of interest to principal.............                $     -0-      $    4,200     $    -0-
                                                                      =========      ==========     ========
Reduction of accrued interest and mortgage notes
  payable as a result of an exchange of
  land and property...................................                $     -0-      $    2,694     $    -0-
                                                                      =========      ==========     ========
Reduction of property, plant and equipment as a result
  of exchange of debt.................................                $     -0-      $      112     $    -0-
                                                                      =========      ==========     ========
Reduction of land as a result of an exchange of debt..                $     -0-      $      674     $    -0-
                                                                      =========      ==========     ========
Reduction of accrued expenses as a result of the
  settlement of an obligation with a prior landlord...                $     -0-      $      500     $    -0-
                                                                      =========      ==========     ========
Common Stock issued for reduction of long-term debt...                $     -0-      $      -0-     $  1,140
                                                                      =========      ==========     ========
Common stock issued for Marco permit costs............                $      30      $      101     $    236
                                                                      =========      ==========     ========

</TABLE>


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



                                       38
<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 1994 of $3,906,000, for
1995 of  $2,905,000  and for 1996 of  $1,227,000,  resulting in a  stockholders'
deficiency of  $17,879,000 as of December 31, 1996. The Company has continued to
experience  liquidity  problems,  causing it to be unable to fully meet  certain
contractual obligations, primarily relating to the repayment of debt, payment of
real estate taxes and the  completion of  improvements.  The Company must obtain
additional financing to accomplish the objectives of satisfying or substantially
reducing its current debt  obligations and provide the financial  stability that
will allow the Company to accomplish  the  objectives  of a successful  business
plan.

     Following the completion of the restructuring of its bank debt in 1992 (see
Note 5), the  Company  commenced  the  implementation  of its  business  plan by
undertaking a new marketing  program which included the Company's  re-entry into
the single-family housing business. To accomplish the objectives of its business
plan  required  the  Company to obtain  financing  during 1995 and 1996 and will
require the Company to obtain  additional  financing in 1997.  The  transactions
described in Note 5 with Selex  International,  B.V., a Netherlands  corporation
("Selex"), Yasawa Holdings, N.V., a Netherlands Antilles corporation ("Yasawa"),
and their  affiliates  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,  but
additional  financing  will  be  required  in  1997.  Selex,  Yasawa  and  their
affiliates  are  uncertain as to whether they will provide any further  funds to
the  Company.  While  the  Company,   together  with  Selex,  Yasawa  and  their
affiliates,  is seeking third parties to provide  financing for the Company and,
as part of any  such  transaction,  Selex,  Yasawa  and  their  affiliates  have
indicated  their  willingness to sell or  restructure  all or a portion of their
loans  and  Common  Stock in the  Company,  such  financing  has not yet  become
available. As a consequence of its liquidity position, the Company has defaulted
on certain obligations, including its escrow account obligations to the State of
Florida, Department of Business Regulation, Division of Land Sales, Condominiums
and Mobile Homes (the  "Division")  pursuant to the Company's 1992 Consent Order
with the Division (the "1992 Consent Order"), its obligation to pay certain real
estate taxes,  and its  obligation to make  required  payments  under loans from
Selex, Yasawa and their affiliates. (See Notes 5 and 8.)

     There can be no assurance  that the Company  will be able to timely  secure
the  necessary  financing  to  resolve  its  liquidity  situation  or that a new
business plan will be successfully  implemented.  Consequently,  there can be no
assurance  that the Company can continue as a going  concern.  In the event that
these matters are not successfully  addressed,  the Company's Board of Directors
will  consider  other  appropriate  action given the  severity of the  Company's
liquidity position,  including,  but not limited to, filing for protection under
the federal  bankruptcy  laws.  See  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations" and Notes 5 and 8 to Consolidated
Financial Statements.

     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.

                                       39
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES


1.   Basis of Presentation and Significant Accounting Policies -
     (Continued)

     Significant Accounting Policies

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

     Since  1986,  the  Company  has used a 52-53 week fiscal year ending on the
last Friday of the year.  The year ended  December 31, 1993  contained 53 weeks,
and the years ended  December 25, 1992 and December 27, 1991 contained 52 weeks.
Commencing in 1994, the Company returned to a fiscal year ended December 31.

     The Company sells homesites under  installment  contracts which provide for
payments  over  periods  ranging  from 2 to 10  years.  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 it has
received 20% of the contract  sales price.  During 1996 and 1995,  approximately
94% and 72% respectively,  of sales were through a single  independent dealer in
New York.

     Because of the severe  liquidity  crisis  faced by the Company as discussed
above,  the Company ceased  development  work late in the third quarter of 1990.
From  September  29,  1990  through  the fourth  quarter  of 1991,  all sales of
undeveloped  lots were accounted for using the deposit method.  Since the fourth
quarter of 1991 and in compliance  with the 1992 Consent Order,  the Company has
been offering only developed lots for sale (see Note 8).

     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,  future adjustments to the
allowance  may be  necessary 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 will
be 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.

     Bulk land sales are recorded and profit is recognized  in  accordance  with
FASB No. 66. Bulk land sales of  approximately  $315,000  are  included in gross
land sales for the year ended December 31, 1994.

     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 1994,
1995 and 1996.

                                       40
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

1.   Basis of Presentation and Significant Accounting Policies -
     (Continued)

     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.  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 under the
Company's  Marco  Island-Marco  Shores  customer  programs  (see  Note  9),  any
resulting loss is charged to the allowance for Marco permit costs. When property
exchanges and refund  transactions are consummated  under the Consent Order (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 various 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.  During  1996,  SFAS No. 121 was adopted  with no
material impact to the Company.

     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.


                                       41
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES


2.   Contracts and Mortgages Receivable

     At December 31, 1996,  interest rates on contracts  receivable  outstanding
ranged  from 5% to 12% per annum  (weighted  average  approximately  8.2%).  The
approximate principal maturities of contracts receivable were:

<TABLE>
<CAPTION>
                                                                      December 31,
                                                                           1996
                                                                     --------------
                                                                     (in thousands)
               <S>                                                    <C>
               1997.................................................  $ 1,566
               1998.................................................    1,562
               1999.................................................    1,470
               2000.................................................    1,248
               2001.................................................    1,098
               2002 and thereafter..................................    3,544
                                                                      -------
                    Total...........................................  $10,488
                                                                      =======
</TABLE>


     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, 1996 and 1995  approximate  $910,000 and
$1,360,000, respectively.

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

<TABLE>
<CAPTION>

                                                        Average            Average Stated      Discounted
                           Years ended                   Term              Interest Rate        to Yield
                         ---------------               ---------           ---------------     -----------

          <S>                                          <C>                 <C>                 <C>
          December 31, 1996.............                89 months             7.8%                 13.5%
          December 31, 1995.............                92 months             8.2%                 13.5%
          December 31, 1994.............                92 months             8.4%                 13.5%

</TABLE>

     In December,  1992, as described  above,  the Company sold  $10,800,000  of
contracts  and  mortgages  receivable  to an  affiliate of Yasawa at face value,
applying the proceeds  therefrom to reduce the  Company's  bank loan,  which had
been acquired by Yasawa.

     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.  As of December  31, 1996 the balance of the
holdback account was $118,000.

     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 and
mortgages 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


                                       42
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

2.       Contracts and Mortgages Receivable - (Continued)

(approximately  $2,183,000  as of December  31,  1996).  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  assigned the portfolio to a third party, who now owns the
portfolio and will service and collect the receivables. The Company is unable to
determine what effect this will have, if any, on future cancellations,  since it
is unable to  determine  how the  bankruptcy  or the  servicing  and  collection
procedures  of the third  party will  impact  the  customers'  determination  to
continue to pay under those  contracts.  The Company has fully  reserved for the
amount of the holdback account and the estimated future  cancellations  based on
the  Company's  historical  experience  for  receivables  the Company  services.
However,  due to the uncertainty noted above, the Company does not feel there is
sufficient  information  to  estimate  future  cancellations  and is  unable  to
determine the adequacy of its reserves to replace or repurchase receivables that
become  delinquent.  In  1996,  the  Company  replaced  $293,000  in  delinquent
receivables.  As of  December  31,  1996 and 1995,  $1,087,000  and  $611,000 in
receivables were delinquent, respectively.

     The Company was the  guarantor of  approximately  $11,319,000  of contracts
receivable  sold or transferred  as of December 31, 1996,  for the  transactions
described  above, and had $118,000 on deposit with purchasers of the receivables
as security to assure  collectibility  as of such date. During 1995, a provision
of $650,000 was  established  for the  Company's  obligation  under the recourse
provisions of which $491,000  remains at December 31, 1996. The Company has been
in compliance with all receivable transactions since the consummation of sales.

     The Company  anticipates  that it will be necessary to complete  additional
sales and/or financings of a portion of its receivables in 1997. There can be no
assurance, however, that such sales and/or financings can be accomplished.

3.       Inventories

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

<TABLE>
<CAPTION>

                                                            December 31,   December 31,
                                                                1996           1995
                                                            ------------   ------------
                                                                          (in thousands)
     <S>                                                    <C>            <C>
     Unimproved Land..................................      $    420       $    444
     Land in various stages of development............         3,708          4,014
     Fully improved land..............................         6,159          6,673
                                                            --------       --------
                  Total...............................      $ 10,287       $ 11,131
                                                            ========       ========

</TABLE>

     Land and land improvements include approximately $202,000 of land placed in
the Marco  Island and Marco  Shores  trusts for the Marco  refund  program as of
December 31, 1996 and 1995 (see Note 9). Other inventories consists primarily of
vacation ownership units completed.


                                       43
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

4.       Property, Plant and Equipment

     Property,  plant and equipment and accumulated  depreciation consist of the
following:

<TABLE>
<CAPTION>

                                                  December 31, 1996            December 31, 1995
                                             ---------------------------   ---------------------------
                                                            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......................        1,013            717         1,257            877
     Construction and other equipment...          713            670         1,509          1,453
                                             --------       --------       -------        -------
         Total..........................     $  1,800       $  1,387       $ 2,840        $ 2,330
                                             ========       ========       =======        =======

</TABLE>

     Depreciation  charged to operations  for the years ended December 31, 1996,
1995 and 1994 was approximately $60,000, $64,000 and $86,000,  respectively.  In
1996 the Company  evaluated  its  property,  plant and  equipment  and wrote off
approximately  $1,044,000 in obsolete  equipment and  furniture,  resulting in a
loss of $40,000.


5.       Mortgages and Similar Debt

     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, Selex and Yasawa entered into loan modification  agreements in
which all accrued interest was converted into non-interest  bearing principal at
the earlier of the maturity date or the default date.  Accordingly,  at December
31,  1995,  $4,200,000  of  accrued  interest  due to  Selex,  Yasawa  and their
affiliates was reclassified as non-interest  bearing  principal.  The loans were
also  modified  to  formalize  the  elimination  of the  default  interest  rate
provisions in each of the applicable loan agreements.

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

<TABLE>
<CAPTION>

                                                            December 31,        December 31,
                                                                1996               1995
                                                            ------------        ----------
     <S>                                                    <C>                 <C>
     Mortgage Notes Payable .........................       $ 18,707            $ 16,717
         Other Loans.................................          3,661               3,661
                                                            --------            --------
              Total mortgages and similar debt.......       $ 22,368            $ 20,378
                                                            ========            ========

</TABLE>

     Included in Mortgage Notes Payable are the First Selex Loan  ($2,722,000 as
of December  31,  1996),  the Third Selex Loan  ($3,816,000  as of December  31,
1996),  the Yasawa  Loan  ($5,829,000  as of December  31,  1996) and the Second
Yasawa  Loan  ($6,340,000  as of December  31,  1996).  Other loans  include the
$1,656,000 Empire note and the $2,005,000 Scafholding Loan.


                                       44
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

5.       Mortgages and Similar Debt - (Continued)

     These  mortgage notes payable and other loans are in default as of December
31, 1996 due to the non-payment of principal and interest.  The lenders have not
taken any other action as a result of these defaults.

     On June 19, 1992,  Selex loaned the Company the sum of $3,000,000  pursuant
to the First  Selex  Loan.  The First  Selex Loan is  collateralized  by a first
mortgage on certain of the  Company's  unsold,  undeveloped  property in its St.
Augustine  Shores,  Florida  community.  The Loan  matures on June 15,  1996 and
provides for  principal to be repaid at 50% of the net proceeds per lot for lots
requiring release from the mortgage, with the entire unpaid balance becoming due
and payable at the end of the four year term. It initially bears interest at the
rate of 10% per annum,  with  payment of  interest  deferred  for the initial 18
months of the Loan and interest  payments due quarterly  thereafter.  As part of
the Selex transaction, Selex was granted an option, approved by the holders of a
majority  of  the  outstanding  shares  of the  Company's  Common  Stock  at the
Company's 1992 Annual Meeting, which, as modified,  enabled Selex to convert the
First Selex Loan, or any portion  thereof,  into a maximum of 600,000  shares of
the Company's  Common Stock at a per share conversion price equal to the greater
of (i) $1.25 or (ii) 95% of the market  price of the  Company's  Common Stock at
the time of  conversion,  but in no event  greater  than  $4.50 per  share  (the
"Option").  On February 17, 1994,  Selex  exercised  the Option,  in full,  at a
conversion  price of $1.90 per share,  such that  $1,140,000  in  principal  was
repaid under the First Selex Loan through  such  conversion.  As of December 31,
1996, the Company was in default of the First Selex Loan.

     One million  dollars of the proceeds  from the First Selex Loan was used by
the Company to acquire  certain  commercial and  multi-family  properties at the
Company's St. Augustine Shores community at their net appraised value,  from Mr.
Muyres and certain entities affiliated with Messrs.  Zwaans and Muyres.  Namely,
(i) $416,000 was used to acquire 48 undeveloped condominium units (twelve 4 unit
building sites) and 4 completed (and rented) condominium units from Conquistador
Development  Corporation  ("Conquistador"),  in which Messrs.  Zwaans and Muyres
serve as directors, as well as President and Secretary/Treasurer,  respectively;
(ii) $485,000 was used to acquire 4 commercial  lots from Swan, in which Messrs.
Zwaans and Muyres also serve as directors,  as well as President and  Secretary,
respectively;  and (iii) approximately  $99,000 was used to reacquire,  from Mr.
Muyres, all of his rights, title and interest in that certain contracts with the
Company for the purchase of a commercial tract in St. Augustine Shores, Florida.
None of the commercial and  multi-family  property  acquired by the Company from
Mr.  Muyres and  certain  entities  affiliated  with  Messrs.  Zwaans and Muyres
collateralizes the First Selex Loan. In March, 1994,  Conquistador exercised its
right to repurchase certain multi-family  property from the Company (which right
had been granted in connection with the June, 1992 Selex transaction) at a price
of $312,000,  of which  $260,000 was paid in cash to the Company and $52,000 was
applied to reduce  interest due to Selex under the Second Selex Loan (the "First
Conquistador Acquisition").

     On December 2, 1992, the Company entered into various  agreements  relating
to certain of its assets and the restructuring of its debt with Yasawa, which is
beneficially  owned by Mr. Antony Gram. The  consummation  of these  agreements,
which are further described below, was conditioned upon the acquisition by Mr.
Gram of the Company's outstanding bank loan.

     On December 4, 1992,  Mr. Gram entered into an agreement  with the lenders,
pursuant  to  which  he  acquired  the bank  loan of  approximately  $25,150,000
(including  interest and fees) for a price of $10,750,000.  In conjunction  with
such  transaction,  the lenders  transferred to Mr. Gram the warrants which they
held that entitled the holder to purchase an aggregate of 277,387  shares of the
Company's  Common  Stock at an  exercise  price of $1.00 per share.  Immediately
after the acquisition of the bank loan, Mr. Gram transferred all of his interest
in the bank loan, including the warrants, to Yasawa.

                                       45
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

5.       Mortgages and Similar Debt - (Continued)

     On  December  11,  1992,  the  Company  consummated  the  December  2, 1992
agreements with Yasawa.  Under these agreements,  Yasawa, its affiliates and the
Company agreed as follows:  (i) the Company sold certain  property at its Citrus
Springs  community  to an  affiliate  of Yasawa in  exchange  for  approximately
$6,500,000 of debt reduction credit; (ii) an affiliate of Yasawa and the Company
entered  into a joint  venture  agreement  with  respect to the  Citrus  Springs
property,  providing  for the  Company to market  such  property  and receive an
administration  fee from the  venture  (in  March,  1994,  the  Company  and the
affiliate  agreed to  terminate  the  venture);  (iii) the Company  sold certain
contracts  receivable at face value to an affiliate of Yasawa for debt reduction
credit of  approximately  $10,800,000;  (iv) the Company  sold the Marco  Shores
Country Club and Golf Course to an  affiliate  of Yasawa for an aggregate  sales
price of $5,500,000,  with the affiliate  assuming an existing first mortgage of
approximately  $1,100,000 and the Company  receiving  debt  reduction  credit of
$2,400,000,  such that the Company  obtained cash proceeds from this transaction
of $2,000,000,  which amount was used for working  capital;  (v) an affiliate of
Yasawa  agreed to lease the Marco  Shores  Country  Club and Golf  Course to the
Company for a period of approximately  one year; (vi) an affiliate of Yasawa and
the Company  agreed to amend the terms of the warrants to increase the number of
shares issuable upon their exercise from 277,387 shares to 289,637 shares and to
adjust the  exercise  price to an  aggregate of  approximately  $314,000;  (vii)
Yasawa  exercised  the  warrants  in  exchange  for  debt  reduction  credit  of
approximately  $314,000;  (viii) Yasawa released certain collateral held for the
bank loan;  (ix) an affiliate of Yasawa agreed to make an additional  loan of up
to $1,500,000 to the Company,  thus  providing the Company with a future line of
credit (all of which was drawn and outstanding as of December 31, 1996); and (x)
Yasawa agreed to  restructure  the payment terms of the remaining  $5,106,000 of
the bank loan as a loan from Yasawa (the "Yasawa Loan").

     The Yasawa Loan bears  interest at the rate of 11% per annum,  with payment
of interest  deferred until December 31, 1993, when only accrued interest became
payable.  Commencing  January 31, 1994,  principal and interest  became  payable
monthly, with all unpaid principal and accrued interest being due and payable on
December 31, 1997. As of December 31, 1996,  $6,362,000 in principal and accrued
interest was in default under the Yasawa Loan.

     On April 30,  1993  Selex  loaned  the  Company  an  additional  $1,000,000
collateralized  by a first mortgage on certain of the Company's  property in its
Marion Oaks,  Florida  community  (the "Second Selex Loan").  Interest under the
Second Selex Loan was 11% per annum,  deferred  until  December  31,  1993,  and
principal was to be repaid at $3,000 per lot for lots requiring release from the
mortgage,  with the entire unpaid principal  balance and interest  accruing from
January 1, 1994 to April 30,  1994 due and payable on April 30,  1994.  Although
Selex had certain conversion rights under the Second Selex Loan in the event the
Company sold any Common Stock or Preferred Stock prior to payment in full of all
amounts due to Selex under the Second Selex Loan,  such rights were voided.  The
Second  Selex Loan was  satisfied  on May 22,  1995  through  the closing of the
Second Conquistador Acquisition, discussed below.

     From July 9, 1993 through  December  31, 1993,  Selex loaned the Company an
additional  $4,400,000  collateralized  by a second  mortgage  on certain of the
Company's  property on which Selex and/or Yasawa hold a first mortgage  pursuant
to a Loan Agreement dated July 14, 1993 and amendments thereto (the "Third Selex
Loan").  The Third  Selex Loan bears  interest at 11% per annum,  with  interest
deferred  until  December 31, 1993.  Principal is to be repaid at $3,000 per lot
for lots requiring  release from the mortgage,  with the entire unpaid principal
balance and  interest  accruing  from  January 1, 1994 to April 30, 1994 due and
payable on April 30, 1994. The Second Conquistador Acquisition, discussed below,
closed on May 22, 1995,  provided a reduction of the debt due and payable  under
the Third  Selex  Loan.  As of  December  31,  1996,  the  remaining  balance of
$4,155,000 in principal and accrued interest remained unpaid and in default.


                                       46
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

5.       Mortgages and Similar Debt - (Continued)

     In  February,  1994,  Yasawa  loaned the  Company an  additional  amount of
approximately  $514,900 at an interest rate of 8% per annum (the "Second  Yasawa
Loan").  Since May, 1994,  additional amounts were advanced to the Company under
the Second Yasawa Loan to enable the Company to pay certain essential  expenses,
including payment of certain real estate taxes, and effectuate  settlements with
the Company's principal creditors.  As of December 31, 1996, an aggregate amount
of $6,012,000  had been advanced to the Company under the Second Yasawa Loan and
the balance of $6,752,000 in principal and accrued interest remains unpaid.

     On May 22, 1995, the Company closed a transaction  with  Conquistador  (the
"Second  Conquistador  Acquisition") for the sale of an administration  building
and a multi-family  site in the Company's St. Augustine Shores community as well
as the remaining lot inventory in the Company's  FeatherNest community at Marion
Oaks in  consideration  for the  satisfaction  of  $2,599,300  of principal  and
accrued interest on the Second and Third Selex Loans. In a separate  transaction
which also closed on the same date, the Company sold to Conquistador (the "Third
Conquistador  Acquisition")  four  single  family  residential  lots  in the St.
Augustine  Shores  community  for  $100,000  in cash.  These  transactions  were
accounted for in accordance with generally  accepted  accounting  principles for
these types of related party  transactions.  Accordingly,  the resulting gain of
$1,900,000  was treated as a  contribution  of capital and recorded  directly to
capital surplus.

     As previously stated, Messrs. Muyres and Zwaans also serve as directors and
executive  officers of M&M First Coast  Realty  ("M&M").  The Company had leased
certain office space to M&M at its St. Augustine Shores community  pursuant to a
Lease  Agreement  dated August 10, 1990. A payment of  approximately  $21,300 in
delinquent  rental  payments  was made on May 22,  1995 upon the  closing of the
Second  Conquistador  Acquisition,  which included the sale of the St. Augustine
Administration Building to which the lease pertained.

     At December 31, 1995,  $4,200,000 of accrued interest due to Selex,  Yasawa
and their affiliates was reclassified as non-interest bearing principal pursuant
to an agreement  with the lenders.  Through  December  31, 1996,  $1,140,000  in
principal  was repaid  under the First Selex Loan  through  the  exercise of the
above described Option, the Second Selex Loan was repaid in full,  $1,380,900 in
principal  was repaid under the Third Selex Loan,  and $136,000 in principal and
$346,000 in accrued  interest was repaid  under the Yasawa loan.  As of December
31,  1996,  the  Company  had loans  outstanding  from  Selex,  Yasawa and their
affiliates  in the  aggregate  amount of  approximately  $24,147,000,  including
accrued  interest  of  $1,778,000,  all  of  which  are  in  default,  including
approximately $8,845,000,  which is owed to Selex, including accrued interest of
approximately  $650,500 (10% per annum on the First Selex Loan, 11% per annum on
the Third  Selex Loan and 12% per annum on the Empire  Note  assigned to Selex);
approximately  $13,114,000,  which is owed to Yasawa, including accrued interest
of approximately  $945,000 (11% per annum on the Yasawa Loan and 8% per annum on
the Second  Yasawa  Loan);  and  approximately  $2,188,000,  which is owed to an
affiliate of Yasawa,  including accrued interest of approximately  $183,000 (12%
per annum).  The loans from Selex,  Yasawa and their  affiliates  are secured by
substantially all of the assets of the Company.


                                       47
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES



6.       Income Taxes

     Effective  December 26, 1992, the Company  adopted  Statement of Accounting
Standard No. 109  "Accounting  for Income  Taxes."  There was no effect from the
adoption  of this  standard.  Under this  standard  deferred  income  assets and
liabilities  are  computed   annually  for  the  difference   between  financial
statements  and the tax  bases of assets  and  liabilities  that will  result in
taxable  or  deductible  amounts in the  future  bases on enacted  tax and rates
applicable to periods in which the  differences  are expected to affect  taxable
income.  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, 1996 and 1995, the Company had a net loss
for tax purposes and, as a result,  there was no tax payable or  refundable  and
there was no change in the net deferred tax asset. Accordingly, there was no tax
provision for such years.

     As of  December  31,  1996,  the Company  had a net  deferred  tax asset of
approximately  $22,356,000  which primarily  resulted from the tax effect of the
Company's  net  operating  loss   carryforward  of  $16,489,000  and  losses  on
subsidiaries  sold in prior  years  of  $3,960,000.  A  valuation  allowance  of
$22,356,000 has been established against the net deferred tax asset.

     As of  December  31,  1995,  the Company  had a net  deferred  tax asset of
approximately  $23,615,000  which primarily  resulted from the tax effect of the
Company's  net  operating  loss   carryforward  of  $17,561,000  and  losses  on
subsidiaries  sold in prior  years  of  $3,960,000.  A  valuation  allowance  of
$23,615,000 has been established against the net deferred tax asset.

     The  Company's  regular net  operating  loss  carryover for tax purposes is
estimated  to be  $42,740,000  at December 31, 1996,  of which  $11,022,000  was
available  through  1999,  $364,000  through  2002,   $9,189,000  through  2005,
$4,780,000 through 2006,  $5,029,000 through 2008,  $5,402,000 through 2009, and
the remainder  through 2011.  In addition to the net operating  loss  carryover,
investment tax credit  carryovers of approximately  $116,000,  which expire from
1997 through 2001, 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, 1996 and 1995 was  approximately  $15,152,000  and  $15,666,000 (as
adjusted for the 1992 Consent  Order),  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  $1,134,000 and $1,295,000,  respectively,  a liability to
provide  title  insurance  and  deeding   costing   $1,139,000  and  $1,217,000,
respectively,  and an estimated cost of street maintenance,  prior to assumption
of  such  obligations  by  local   governments,   of  $880,000  and  $1,150,000,
respectively, all of which are included in deferred revenue. Included in cash at
December 31, 1996 and December 31, 1995, are escrow


                                       48
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

7. Liability for Improvements - (Continued)

deposits of $360,000 and $489,000,  respectively,  restricted  for completion of
improvements in certain of the Company's communities.

     In May, 1994 the Company  implemented a program to exchange  purchasers who
contracted  to purchase  property  which is  undeveloped  to  property  which is
developed.  As of December 31, 1996,  approximately  84% of the customers  whose
lots are currently undeveloped have opted to exchange.  The Company's goal is to
eliminate its development obligation (with the exception of its road maintenance
obligations  in Marion Oaks) under the 1992 Consent  Order through this exchange
program and settlement of all remaining maintenance and improvements obligations
in Citrus Springs  through a final agreement with Citrus County (entered into in
May 1995).

     The anticipated  expenditures  for land  improvements,  title insurance and
deeding to complete  areas from which sales have been made through  December 31,
1996 are as follows:

<TABLE>
<CAPTION>

                                                             December 31, 1996
                                                            ------------------
                                                              (in thousands)
                      <S>                                        <C>
                      1997....................................   $    689
                      1998....................................      1,135
                      1999....................................      1,192
                      2000+...................................     12,136
                                                                 --------
                           Total..............................   $ 15,152
                                                                 ========

</TABLE>

8.       Commitments and Contingent Liabilities

     Total rental  expense for the years ended  December 31, 1996,  December 31,
1995 and December 31, 1994 was  approximately  $148,000,  $172,000 and $773,000,
respectively.

     The Company has no real estate  leases that extend  beyond 2000.  Estimated
rental  expense  under these  leases is expected  to be  approximately  $148,000
annually. The Company has no material equipment leases.

     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.
The aggregate amount of all monies paid in (including  paid-in  interest) on all
homesite  contracts having  outstanding  contractual  obligations  (primarily to
complete improvements) at December 31, 1996 was approximately $5,121,000.

     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,  the Company,  in February,  1980,  entered into a
Consent Order with the Division which provided a program for notifying  affected
customers. The Consent Order, which was restated and amended, provided a program
for notifying  affected customers of the anticipated delays in the completion of
improvements (or, in the case of purchasers of unbuildable lots in certain areas
of the Company's Sunny Hills community,  the transfer of development obligations
to core growth areas of the community); various options which may be selected by
affected purchasers; a schedule for completing certain


                                       49
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES


8.       Commitments and Contingent Liabilities - (Continued)

improvements;  and a deferral  of the  obligation  to install  water mains until
requested by the purchaser.  Under an agreement  with Topeka Group  Incorporated
("Topeka"),  which purchased the Company's  utilities in 1989,  Topeka's utility
companies have agreed to furnish utility service to the future  residents of the
Company's  communities  on  substantially  the same basis as such  services were
provided by the Company. The Consent Order also required the establishment of an
improvement   escrow  account  as  assurance  for  completing  such  improvement
obligations.

     In June,  1992,  the Company  entered into the 1992 Consent  Order with the
Division,  which replaced and superseded the original  Consent Order, as amended
and  restated.  Among other  things,  the 1992 Consent  Order  consolidated  the
Company's  development  obligations and provided for a reduction in its required
monthly escrow  obligation to $175,000 from  September,  1992 through  December,
1993.  Beginning  January,  1994 and until  development is completed or the 1992
Consent Order is amended,  the Company is required to deposit $430,000 per month
into the escrow account. As part of the assurance program under the 1992 Consent
Order,  the  Company  and its  lenders  granted  the  Division a lien on certain
receivables and future  receivables.  The Company defaulted on its obligation to
escrow  $430,000  per month for the period of January,  1994 through the present
and,  in  accordance  with the  1992  Consent  Order,  collections  on  Division
receivables  were  escrowed  for the  benefit of  purchasers  from March 1, 1994
through  April 30,  1994.  In May,  1994 the  Company  implemented  a program to
exchange  purchasers who contracted to purchase property which is undeveloped to
property which is developed.  As of December 31, 1996,  approximately 84% of the
customers  whose lots are currently  undeveloped  have opted to exchange or were
otherwise  resolved.  Consequently,  the  Division  has  allowed  the Company to
utilize  collections on receivables since May 1, 1994.  Because of the Company's
default,  the Division  could also exercise other  available  remedies under the
1992 Consent Order, which remedies entitle the Division,  among other things, to
halt all sales of registered property.

     The Company's  goal is to eliminate its  development  obligation  (with the
exception of its  maintenance  obligation in Marion Oaks) under the 1992 Consent
Order through this exchange program and settlement of all remaining  maintenance
and  improvements  obligations in Citrus Springs  through a final agreement with
Citrus County  (entered into in May 1995).  Pursuant to the 1992 Consent  Order,
the Company has limited the sale of single-family  lots to lots which front on a
paved street and are ready for immediate building.

     Based upon the Company's  experience with affected  customers,  the Company
believes that the total refunds  arising from delays in completing  improvements
will not materially exceed the amount provided for in the consolidated financial
statements. Approximately $5,000 of the provision for the total refunds relating
to the delays of improvements remained in accrued expenses and other at December
31, 1996.

     As of December 31, 1996, the Company had estimated development  obligations
of approximately  $1,134,000 on sold property, an estimated liability to provide
title insurance and deeding  costing  $1,139,000 and an estimated cost of street
maintenance,  prior to assumption of such obligations by local  governments,  of
$880,000,  all of which are  included  in  deferred  revenue.  The total cost to
complete  improvements  at December 31, 1996 to lots subject to the 1992 Consent
Order, including the previously mentioned obligations, and to all lots, sold and
unsold,  including  the St.  Augustine  Shores  community,  was  estimated to be
approximately  $15,152,000.  As of December  31, 1996 and  December 31, 1995 the
Company  had  in  escrow  approximately  $360,000  and  $489,000,  respectively,
specifically  for land  improvements at certain of its Central and North Florida
communities.

                                       50
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES


8.       Commitments and Contingent Liabilities - (Continued)

     The  Company's  continuing  liquidity  problems  have  precluded the timely
payment  of the full  amount  of its real  estate  taxes.  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. Delinquent real estate
taxes aggregated approximately $2,371,000 as of December 31, 1996.

     The  Company's  corporate  performance  bonds to assure the  completion  of
development at its St.  Augustine  Shores  community  expired in March and June,
1993. Such bonds cannot be renewed due to a change in the policy of the Board of
County  Commissioners of St. Johns County which precludes allowing any developer
to  secure  the  performance  of  development  obligations  by the  issuance  of
corporate  bonds.  In the event that St.  Johns County  elects to undertake  the
completion of such development work, the Company would be obligated with respect
to 1,000  unimproved lots at St. Augustine Shores in the amount of approximately
$6,200,000.  The Company intends to submit an alternative  assurance program for
the  completion  of such  development  and  improvements  to the  County for its
approval.

     In the action styled Lee Su Wen Ni et. al. v. The Deltona  Corporation  and
Scafholding  B.V., Case No.  95-4422-CA-E,  filed in the Circuit Court of Marion
County,  Florida on October 11, 1995, the plaintiff  alleges that the liquidated
damages  provision in the  Company's  installment  contracts for the sale of its
properties is  unenforceable  under Florida Law and contests the method utilized
by  the  Company  to  calculate   actual   damages  in  the  event  of  contract
cancellations.  As part of the complaint, the plaintiff is seeking certification
as a class action, as well as unspecified  compensatory  damages,  together with
interest,  costs and fees.  The Company filed a Motion to Dismiss in response to
the  plaintiff's  complaint.  The trial court  dismissed  the claim of the class
representative  against the Company and against  Scafholding B.V. An appeal from
that dismissed is pending.  There has been no ruling by the appellate  court. In
the event  that  this  appeal  is  successful  and if,  class  certification  is
authorized,  and if the Company is not successful in its defenses, a substantial
claim could be asserted against the Company.

     In addition to the matters  discussed above and in Note 9, 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
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,


                                       51
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES

9.       Marco Island-Marco Shores Permits - (Continued)

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

     Under the  Company's  1987 Stock  Incentive  Plan (the  "Stock  Plan"),  an
aggregate of 500,000  shares of Common Stock have been reserved for the granting
of  non-qualified  stock  options  and the  award of  incentive  shares  to such
executive  officers and other key  employees of the Company as may be determined
by the Committee  administering  the Stock Plan.  The extent to which  incentive
shares are earned and charged to expense  will be  determined  at the end of the
three-year  award cycle,  based on the  achievement  of the Company's net income
goal for the award  cycle.  Payment of  incentive  shares  earned may be made in
shares of the Company's  Common Stock and/or cash. If paid in cash, such payment
will be based on the average daily  closing price of the Company's  Common Stock
during the last month of the award cycle.  The option features of the Stock Plan
are  substantially  the  same  as the  Company's  incentive  stock  option  plan
described above. A total of 79,940 shares were issued and $233,412 was paid with
respect to awards  earned  under the Stock Plan as of  December  29, 1989 and no
additional  awards were  granted  until March 1993 when Bruce Weiner was granted
20,000 shares of the Company's Common Stock at a price of $4.00 per share, which
was in excess of the market  value of the  Company's  Common  Stock on the grant
date.  Such option  expired  unexercised  following Mr.  Weiner's  removal as an
officer of the Company in 1994.


                                       52
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES


10.      Common Stock and Earnings per Share Information - (Continued)

     On June 18,  1992,  the  Company  issued  warrants  to its  lenders for the
purchase of 277,387  shares of Common Stock at $1.00 per share (the  Warrants").
The Warrants  became  exercisable  on June 18,  1992,  were subject to mandatory
repurchase  by the  Company  at the  request  of the  holder  at any time  after
December 18, 1993 at 75% of the market price of the  Company's  Common Stock and
expired on the later of: (i) 30 days after payment in full of all debt under the
Sixth Restatement;  (ii) July 31, 1997, or (iii) such later date as to which the
expiration date had been extended to implement the provisions  applicable to the
mandatory repurchase option.

     On December 2, 1992, the Company  entered into a Warrant  Exercise and Debt
Reduction  Agreement  with Yasawa,  providing for the number of shares  issuable
upon  acquisition of the Warrants by Yasawa and the exercise of such Warrants by
Yasawa to be increased  from 277,387 shares of Common Stock to 289,637 shares of
Common Stock,  and adjusting the exercise price to an aggregate of approximately
$314,000.  On December 11, 1992, following the acquisition of the Company's bank
loan and the  Warrants by Gram and the  immediate  transfer of the bank loan and
the Warrants by Gram to Yasawa,  Yasawa  exercised  the Warrants in exchange for
debt reduction credit to the Company of approximately $314,000.

     As part of the Selex  transaction,  Selex was  granted an option  which was
approved by the holders of a majority of the outstanding shares of the Company's
Common Stock at the Company's 1992 Annual Meeting, to convert the Selex Loan, or
any portion  thereof,  into a maximum of 850,000 shares of the Company's  Common
Stock at a per share  conversion price equal to the greater of (i) $1.25 or (ii)
95% of the market price of the Company's Common Stock at the time of conversion,
but in no event  greater  than  $4.50  per share  (the  "Option").  However,  on
September 14, 1992, Selex formally waived and relinquished its right to exercise
the  Option as to 250,000  shares of the  Company's  Common  Stock to enable the
Company to settle certain litigation  involving the Company through the issuance
of approximately  250,000 shares of the Company's Common Stock to the claimants,
without  jeopardizing  the  utilization  of the  Company's  net  operating  loss
carryforward.

     On February 17, 1994,  Selex  exercised  the  remaining  full 600,000 share
Option  at a  conversion  price of $1.90 per  share,  such  that  $1,140,000  in
principal  was repaid under the First Selex Loan through such  conversion.  As a
consequence of such  conversion,  Selex holds 2,820,066  shares of the Company's
Common  Stock  (41.9% of the  outstanding  shares of Common Stock of the Company
based upon the number of shares of the Company's Common Stock  outstanding as of
December 31, 1996).

      Earnings  (loss) per common and common  equivalent  share were computed by
dividing net income  (loss) by the weighted  average  number of shares of Common
Stock and common stock equivalents  outstanding during each period. The net loss
and the average  number of shares of Common Stock and common  stock  equivalents
used to  calculate  earnings  (loss)  per  share  for  1996,  1995 and 1994 were
$(896,000),   $(2,203,000)  and   $(3,906,000)  and  6,729,648,   6,699,923  and
6,668,765, respectively.


                                       53
<PAGE>


            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                    THE DELTONA CORPORATION AND SUBSIDIARIES


11.      Business Segments
<TABLE>
<CAPTION>

                                                                              Years ended
                                             ----------------------------------------------------------------------------------
                                             December 31,   December 31,        December 31,        December 31,   December 25,
                                                1996             1995              1994               1993            1992
                                             ------------   -------------       -------------       ------------   ------------
                                                                                (in thousands)
     <S>                                     <C>            <C>                 <C>                 <C>            <C>
     Revenues
     Real estate:
      Net land sales(a).........             $  4,296       $  2,394            $  2,058            $  2,432       $  2,092
      Housing revenues..........                1,202          1,383               2,543                 344            -0-
      Improvement revenues(b)...                1,008          1,052               1,214               4,725          2,404
      Interest income(c)........                1,464          1,019               1,046               1,197          3,584
      Other.....................                  -0-            -0-                 -0-                  67            -0-
                                             --------       --------            --------            --------       --------
         Total real estate......                7,970          5,848               6,861               8,765          8,080
     Other(d)...................                  963          1,030               1,832               3,447          4,372
     Intersegment sales(e)......                 (283)          (190)               (152)               (113)          (235)
                                             --------       --------            --------            --------       --------
         Total..................             $  8,650       $  6,688            $  8,541            $ 12,099       $ 12,217
                                             ========       ========            ========            ========       ========
     Operating profits (losses)
     Real estate................             $  3,077       $  1,377            $  1,055            $ (3,073)      $  1,486
     Other......................                  443            341               1,032                 279          2,209
     General corporate expense..               (2,966)        (2,981)             (4,147)             (4,721)        (7,057)
     Interest expense...........               (1,781)        (1,642)             (1,847)             (1,257)        (3,356)
     Income (loss) from
      continuing operations
      before income taxes
      and extraordinary items...             $ (1,227)      $ (2,905)           $ (3,906)           $ (8,772)      $ (6,718)
                                             ========       ========            ========            ========       ========

<CAPTION>

                                      Real
                                                            Estate         Other     Corporate      Total
                                                            --------       --------- ---------      ---------
     <S>                                     <C>            <C>            <C>       <C>            <C>
     Identifiable assets........             1996           $ 18,864       $    502  $     56       $ 19,422
                                             1995             18,623            289        268        19,180
                                             1994             21,515            248        346        22,109

     Depreciation expense.......             1996           $     38       $      5  $     17       $     60
                                             1995                 34              5        25             64
                                             1994                 49              8        29             86

     Capital expenditures.......             1996           $      2       $    -0-  $      2       $      4
                                             1995                 24            -0-        19             43
                                             1994                -0-            -0-        26             26

<FN>

-----------------------
(a)      Net land sales consist of gross land sales less estimated uncollectible
         installment sales and contract  valuation  discount and, prior to 1992,
         deferred  revenue  (see  Notes  1,  2 and 7 to  Consolidated  Financial
         Statements).

(b)      Improvement revenues consist of revenue recognized due to completion of
         improvements  on prior period sales and exchanges  from  undeveloped to
         developed lots.

(c)      Interest income primarily  consists of interest earned on contracts and
         mortgages   receivable  and  on  temporary  cash  investments  and  the
         amortization of valuation discounts.

(d)      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.

(e)      Intersegment  sales consist  primarily of sales between the Company and
         its title insurance subsidiary.

</FN>
</TABLE>

                                       54
<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>
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)
                    ========       ========  ========       ========       ========

1995
  First....         $  1,829       $   (667) $   (667)      $    702       $     35
  Second...            1,920           (363)     (363)           -0-           (363)
  Third....            1,218           (743)     (743)           -0-           (743)
  Fourth...            1,721         (1,132)   (1,132)           -0-         (1,132)
                    --------       --------  ---------      --------       --------
Total......         $  6,688       $ (2,905) $ (2,905)      $    702       $(2,203)
                    ========       ========  ========       ========       ========

1994
  First....         $  1,831       $ (1,802) $ (1,802)      $    -0-       $(1,802)
  Second...            1,740         (1,072)   (1,072)           -0-        (1,072)
  Third....            2,105           (791)     (791)           -0-          (791)
  Fourth...            2,865           (241)     (241)           -0-          (241)
                    --------       --------  --------       --------       =======
Total......         $  8,541       $ (3,906) $ (3,906)      $    -0-       $(3,906)
                    ========       ========  ========       ========       =======


<CAPTION>

Earnings (Loss) Per Share
                                                            Extraordinary  Net Income
                                   Operations                   Items        (Loss)
                                   -----------              -------------  ----------
<S>                                <C>                      <C>            <C>
1996
  First......................      $  (.06)                 $    -0-       $  (.06)
  Second.....................      $  (.03)                 $    -0-       $  (.03)
  Third......................      $  (.02)                 $    .05       $   .03
  Fourth.....................      $  (.07)                 $    -0-       $  (.07)
                                   -------                  --------       -------
Total........................      $  (.18)                 $    .05       $  (.13)
                                   =======                  =========      =======

1995
  First......................      $  (.10)                 $    .10       $   -0-
  Second.....................         (.05)                      -0-          (.05)
  Third......................         (.11)                      -0-          (.11)
  Fourth.....................         (.17)                      -0-          (.17)
                                   -------                  --------       -------
Total........................      $  (.43)                 $    .10       $  (.33)
                                   =======                  ========       =======

1994
  First......................      $  (.28)                 $    -0-       $  (.28)
  Second.....................         (.16)                      -0-          (.16)
  Third......................         (.12)                      -0-          (.12)
  Fourth.....................         (.04)                      -0-          (.04)
                                    -------                 --------       -------
Total........................      $  (.59)(a)              $    -0-       $  (.59)
                                   ========                 ========       ========

<FN>

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

          (a)  Total shown does not agree with  earnings  per share set forth in
               the Company's  Statement of Consolidated  Operations for the year
               ended December 31, 1994 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>

                                       55
<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..................                57


         Schedule VIII - Valuation and qualifying
          accounts for the three years ended
         December 31, 1996.............................                58



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 1997 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

         No Reports on Form 8-K were filed for the year ended December 31, 1996.



                                       56
<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, 1996 and 1995,
and for each of the three years in the period ended  December 31, 1996, and have
issued our report  thereon dated March 25, 1997 (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, 1997


                                       57
<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, 1996

  Allowance for uncollectible contracts(a)..$ 1,629           $  1,706          $   906          $ 2,429
                                            =======           ========          ========         =======

  Unamortized contract valuation discount(b)$   829           $    535          $   800          $ 1,094
                                            =======           =========         ========         =======

Year ended December 31, 1995

  Allowance for uncollectible contracts(a)..$ 1,373           $   850           $   594          $ 1,629
                                            =======           ========          =======          =======

  Unamortized contract valuation discount(b)$   913           $   379           $   463          $   829
                                            =======           =======           =======          =======
Year ended December 31, 1994

  Allowance for uncollectible contracts(a)..$ 1,456           $   712           $   795          $ 1,373
                                            =======           =======           =======          =======
  Unamortized contract valuation discount(b)$   895           $   223           $   205          $   913
                                            =======           =======           =======          =======
  Unamortized mortgage valuation discount(d)$   100           $   -0-           $   100          $   -0-
                                            =======           =======           =======          =======

<FN>

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

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

     (b) Represents the unamortized  discount  generated from initial valuations
of  contracts   receivable  (see  Notes  1  and  2  to  Consolidated   Financial
Statements).

     (c) Represents  allowance for estimated  uncollectible  mortgages and other
receivables.

     (d) Represents the unamortized  discount  generated from initial valuations
of  mortgages   receivable  (see  Notes  1  and  2  to  Consolidated   Financial
Statements).

</FN>
</TABLE>

                                       58
<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 25, 1997
     -----------------------------
     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


       /s/ Neil E. Bahr
     ------------------------------
      Neil E. Bahr, Director


       /s/Earle D. Cortright, Jr.
     ------------------------------
     Earle D. Cortright, Jr.,
      President, Chief Operating
      Officer & 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 25, 1997


                                       59
<PAGE>