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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                  For the fiscal year ending December 31, 1997

                                       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:  $973,100  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:  13,544,277  shares of common
stock,  $1 par value,  as of March 20,  1998,  excluding  12,228  shares held in
treasury.

                       DOCUMENTS INCORPORATED BY REFERENCE

Document                                                    Incorporated Part(s)
   *   Registrant's 1998 Annual Meeting Proxy Statement to
       be filed with the Securities and Exchange Commission       Part III
       pursuant to Regulation 14A

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<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..................................     9
                                            Employees.........................................     9
                                            Competition.......................................     9
                                            Regulation........................................    10
     Item 3 ....................            Legal Proceedings.................................    13
     Item 4 ....................            Not Applicable

PART II
     Item 5 ....................            Price Range of Common Stock and Dividends.........    14
     Item 6 ....................            Selected Consolidated Financial Information ......    15
     Item 7 ....................            Management's Discussion and Analysis of
                                      Financial Condition and Results of Operations...........    16
     Item 8 ....................            Index to Consolidated Financial Statements and
                                      Supplemental Data ......................................    25
     Item 9 ....................            Not Applicable

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


</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 is the  developer  of eleven  planned  communities  in
Florida, including the new TimberWalk community, which is located in the western
portion of Marion Oaks. Seven  communities are completed and four are in various
stages of development. The Company plans, designs and develops roads, waterways,
recreational  amenities,  grading and drainage systems within these communities.
Since  1962,  the  Company  has  sold  over  156,000   single-family   lots  and
multi-family  and  commercial  tracts in its  communities,  in  addition to over
13,000 single-family homes and over 4,300 multi-family housing units.

     The  Company  's  land   holdings  in  Florida   include  an  inventory  of
approximately  18,600 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

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

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

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

                                        1

<PAGE>

     3.  Scafholding  B.V.  ("Scafholding")  an  affiliate  of Selex and Yasawa,
purchased approximately $7.5 million in contracts receivable from the Company at
seventy-five  percent  (75%) of face value  with  recourse  for non-  performing
contracts.  This sale generated approximately $5.6 million,  $1,982,457 of which
was used to reduce  outstanding debt to Yasawa. The balance (of which $1 million
is in the form of a  promissory  note from  Scafholding  to the Company  with an
expected  satisfaction in mid-1998) will be used by the Company to pay a portion
of the delinquent  real estate taxes,  to implement its marketing  programs,  to
initiate  development  of TimberWalk and to meet the Company's  working  capital
requirements.

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

     5. As of December 31, 1997, the Company's remaining debt to Scafholding was
$2,293,950,  secured by a first lien on the Company's receivables; the Company's
remaining  debt  to  Yasawa  was  $6,692,732  secured  by a  second  lien on the
Company's  receivables  and a mortgage on all of the Company's  property.  As of
December 31, 1997, the total debt owed to Yasawa and  Scafholding is $8,986,682.
The  terms of  repayment  of this debt have been  restructured  to  provide  for
monthly  payments of principal in the amount of $100,000 payable monthly in cash
or with  contracts  receivable  at 100% of face  value,  plus  interest  payable
monthly on the  declining  balance at the rate of 9.6% per annum in cash or with
contracts receivable at 65% of face value.

     6. In the future,  if the Company  elects to do so, Yasawa and  Scafholding
have  agreed  to  purchase  contracts  receivable  at 65% of  face  value,  with
recourse, to meet the Company's ongoing capital requirements.

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

     Through Yasawa's acquisition of the 6,809,338 shares of Common Stock of the
Company referenced above, Mr. Antony Gram's beneficial  ownership increased from
3,109,703 shares to 9,919,041 shares (73.23% of the outstanding shares of Common
Stock of the Company as of March 20, 1998).

     During 1997,  the Company was  successful in settling the lawsuit  entitled
LEE SU WEN NI ET. AL. v. THE DELTONA  CORPORATION AND SCAFHOLDING B.V., Case No.
95-4422-CA-E,  which was filed in the Circuit Court of Marion County, Florida on
October  11,  1995.  The  plaintiff  had  alleged  that the  liquidated  damages
provision in the Company's  installment contracts for the sale of its properties
was  unenforceable  under Florida Law and  contested the method  utilized by the
Company to  calculate  actual  damages in the event of  contract  cancellations.
Pursuant  to the  settlement,  the  claims  and the  case  were  dismissed  with
prejudice.

     In December 1997, the Company  announced the start of  construction  on its
newest housing  development:  TimberWalk.  TimberWalk  will feature a model home
center with models built by three  premier  central  Florida home  builders.  At
TimberWalk,  home buyers  will enjoy the  benefits of  Deltona's  newest  design
concept,   "Everything  Included",   which  includes  features  that  are  often
considered  extra cost  upgrades  and  options by other  home  builders  but are
included in TimberWalk's  basic prices.  Models will range from one to two story
homes with two, three or four bedrooms ranging in size from 1,200 square feet to
over 2,200 square feet of living space.

                                        2

<PAGE>
Business Segments

     The following  table sets forth the total amounts of revenues and operating
profits  (losses)  from  continuing  operations  attributable  to  each  of  the
Company's  business  segments for the years ended as  indicated.  See Note 11 to
Consolidated Financial Statements:

<TABLE>
<CAPTION>
                                                                           Years ended
                                   --------------------------------------------------------------------------------------------
                                   December 31,        December 31,        December 31,        December 31,        December 31,
                                       1997                1996                1995                1994                1993
                                   ------------        ------------        ------------        ------------        ------------
                                                                          (in thousands)
<S>                                <C>                 <C>                 <C>                  <C>                <C>
Revenues
Real estate:
     Net land sales<F1>........   $ 4,045              $ 4,296             $ 2,394              $ 2,058            $  2,432
     Housing  revenues.........     1,214                1,202               1,382                2,543                 344
     Improvement revenues<F2>..     2,366                1,008               1,052                1,214               4,725
     Interest  income<F3>......     1,367                1,464               1,019                1,046               1,197
     Other.....................       -0-                  -0-                 -0-                  -0-                  67
                                   ------              -------             -------             --------            --------
          Total real estate....     8,992                7,970               5,848                6,861               8,765
 Other<F4>.....................       617                  963               1,030                1,832               3,447
 Intersegment sales<F5>........      (184)                (283)               (190)                (152)               (113)
                                   ------              -------             -------             --------            --------
        Total..................   $ 9,425              $ 8,650             $ 6,688             $  8,541            $ 12,099
                                  =======              =======             =======             ========            ========
     Operating profits (losses)
     Real estate................  $ 3,052              $ 3,077             $ 1,377             $  1,055            $ (3,072)
     Other <F4>.................      185                  443                 341                1,033                 279
     General corporate expense..   (3,018)              (2,966)             (2,981)              (4,147)             (4,721)
     Interest expense...........   (1,545)              (1,781)             (1,642)              (1,847)             (1,257)
                                  -------              -------             -------             --------            --------
     Income (loss) from
      continuing operations
      before income taxes
      and extraordinary items...  $(1,326)             $(1,227)            $(2,905)            $ (3,906)           $ (8,772)
                                  =======              =======             =======             ========            ========


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

<F1> 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).

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

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

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

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

</FN>
</TABLE>
                                        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, 1997.  For a detailed  description
of these communities, see "Existing Communities" and "Other Properties".

                              Existing Communities

<TABLE>
<CAPTION>
                                                                      Platted        Unimproved          Improved
                      Acreage      Initial                 Estimated  Lots & Tracts  Unsold Platted      Unsold Platted
                      in           Acquisition    Year     Current    in Masterplan  Lots & Tracts       Lots & Tracts   Unplatted
                      Masterplan   Year           Opened   Population     <F2>          <F2><F3>            <F2><F3>      Acreage
                      ----------   -----------    ------   ---------- -----------    --------------      --------------  ----------
 <S>                  <C>          <C>            <C>      <C>        <C>             <C>                  <C>           <C>
 <F1>Deltona Lakes...   17,203      1962           1962      69,500    34,964               -                  6             -
 <F1>Marco Island<F4>    7,844      1964           1965      39,000     8,657               -                  -             -
 <F1>Spring Hill<F5>.   17,240      1966           1967      73,300    32,909               -                  6             -
 <F1>Citrus Springs<F6> 15,954      1969           1970       6,500    33,783               -                  2<F9>         -
     St. Augustine
        Shores .......   1,985      1969           1970       7,500     3,130               -                  -<F9>         -
     Sunny Hills......  17,743      1968           1971       1,400    26,251          12,446                709             -
 <F1>Pine Ridge......    9,994      1969           1972       2,900     4,833               -                  3             -
     Marion Oaks<F6><F7>14,644      1969           1973       8,050    27,537            3,841<F7>           413<F7><F9>     -
 <F1>Seminole Woods..    1,554      1969           1979         500       262               -                  -             -

     Joint Venture Community:

 <F1>Tierra Verde....      666      1976           1977       4,860     1,036               -                  -             -
                       -------                              -------   -------        --------              -----          ----
     Total............ 104,827                              213,510   173,362          16,287              1,139             -
                       =======                              =======   =======        ========              =====          ====

     <CAPTION>
                                Other Properties

                                                                                                          Initial
                                                                                                          Acquisition
                                                                                                          Year             Acres
                                                                                                          -----------      -----
 <S>                                                                                                      <C>              <C>
     Other Land Assets:
     Other land adjacent to existing communities<F8>................................                      Various            92
                                                                                                                           ----
         Total......................................................................                                         92
                                                                                                                           ====

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

<F2> Excluded from these lots and tracts are  approximately  110 improved and 89
     unimproved  lots and tracts that are  required  for  drainage and cannot be
     sold, and  approximately  139 improved and 335  unimproved  lots and tracts
     that have  been  removed  from sale for  encumbrances  or  additional  site
     development,  which can only be sold when these issues are  resolved.  Also
     excluded are amenities  consisting of 2  administration  facility  sites, 2
     recreational  facility sites and 1 unimproved  golf course site, as well as
     approximately   433  tracts  reserved  for  community  usage  such  as  for
     greenbelts, buffer areas, church and school sites.

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

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

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

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

                                       4
<PAGE>

<F7> Includes TimberWalk, the Company's newest housing development.

<F8> Excludes  3,829 acres of unplatted  natural  preserve in Washington  County
     restricted  for  recreational,  open space/ park use which can only be sold
     subject to the underlying land use restrictions

<F9> Not included are 598 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 474 lots in Citrus  Springs,  123
     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
approximate  156,000  lots  and  tracts  sold  since  the  Company's  inception,
contracts  receivable presently exist with respect to approximately 590 lots and
tracts with an outstanding  balance of approximately  $5,820,000 at December 31,
1997,  excluding contracts  receivable of which the Company is a guarantor.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and Note 2 to Consolidated Financial Statements.

  Housing

     Historically, the Company has been involved in the design, construction and
marketing  of  single-family  homes and  multi-family  housing,  including  both
condominium apartment complexes and a vacation ownership  (timesharing) project.
Since  commencing  operations,  the Company has constructed and sold over 13,000
single-family homes and over 4,300
                                       5
<PAGE>

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

     Single-Family Housing

     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 (now owned by Conquistador Development Corporation) 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 a build on your own lot program for those  customers who have previously
acquired a lot.

     In December 1997, the Company  announced the start of  construction  on its
newest housing  development:  TimberWalk.  TimberWalk  will feature a model home
center with models built by three  premier  central  Florida home  builders.  At
TimberWalk,  home buyers  will enjoy the  benefits of  Deltona's  newest  design
concept,   "Everything  Included",   which  includes  features  that  are  often
considered  extra cost  upgrades  and  options by other  home  builders  but are
included in TimberWalk's  basic prices.  Models will range from one to two story
homes with two, three or four bedrooms ranging in size from 1,200 square feet to
over 2,200 square feet of living space.

     In an effort to offset the negative cash effects of installment land sales,
the Company is now  attempting to direct its marketing  efforts to selling homes
and lots  together.  The success of this  direction  will be dependent  upon the
Company's  dealer  recruiting  program  and the  availability  of  funds  for an
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  included  at least one pool and patio  area;  many
featured 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 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, 1997,  sales by independent  dealers in the United States accounted
for  approximately  99% (in dollar  volume) of new land sales  contracts;  while
overseas dealers accounted for approximately 1% of such contracts.

     During the first  quarter of 1995,  the Company  initiated a new land sales
program, which utilizes a limited group of independent dealers. During 1997, the
Company reached a lot sales volume of over $5,359,000 of contracts written.

   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

                                       6
<PAGE>
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 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 sold out, 1998 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 Marco class action litigation.

     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.

     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
                                       7
<PAGE>

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,  which has now substantially
completed construction of this course. 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,  home 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.  In  December  1997,  the  Company  sold all of its
remaining  inventory at St.  Augustine  Shores to Swan  Development  Corporation
("Swan").  As part of the purchase,  Swan assumed the  liability for  completing
improvements within St. Augustine Shores.

     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 were completed by the Company.

     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 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 first quarter of 1993.

     The Company reopened Sunny Hills for retail lot sales in mid-1989. Revenues
in 1998 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  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 315 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 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 in debt.

     In December 1997, the Company  announced the start of  construction  on its
newest housing  development:  TimberWalk.  TimberWalk  will feature a model home
center with models built by three premier central Florida home builders. At

                                       8
<PAGE>

TimberWalk,  home buyers  will enjoy the  benefits of  Deltona's  newest  design
concept,   "Everything  Included",   which  includes  features  that  are  often
considered  extra cost  upgrades  and  options by other  home  builders  but are
included in TimberWalk's  basic prices.  Models will range from one to two story
homes with two, three or four bedrooms ranging in size from 1,200 square feet to
over 2,200 square feet of living space.

     Revenues in 1998 will be generated  from the sale of land  inventory,  from
housing sales,  from the  recognition of deferred  revenue as land  development,
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.

  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
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,  1997,  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 sales activities are carried out by independent contractors.

  Competition

     The  Company  faces  competition  within  its  communities  primarily  from
property   owners   seeking  to  resell  their  land.  The  Company  also  faces
competition,  on a local and regional level,  with other builders and developers
in the sale of land and  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.

                                       9
<PAGE>

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

  Environmental

     To varying  degrees,  certain  permits and  approvals  will be necessary to
complete the development of Marion Oaks and Sunny Hills communities. Despite the
fact  that  the  Company  has  obtained  substantially  all of the  permits  and
authorizations   necessary  to  proceed  with  its  development  work  on  these
communities,  additional  approvals may be required to develop  certain  platted
properties 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.

     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 owned above ground fuel storage tanks at its  communities.  The
Florida Department of Environmental  Regulation ("DER") was 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
registered  its  storage  tanks with the DER,  constructed  containment  devices
around above ground storage tanks,  replaced or properly  abandoned faulty tanks
or  equipment  and  conducted   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

                                       10
<PAGE>
to the  deadline  for  acceptance  into the Early  Detection  Incentive  ("EDI")
Program.  The EDI  Program  provides  for the  State  to  assume  the  financial
responsibility   for  any   necessary   clean-up   operations   when   suspected
contamination  has been voluntarily  reported by the facility owner and accepted
into the program by the DER. The  Company's  sites were  inspected  and reviewed
under  the  EDI  program  and  were  determined  to be in  compliance  with  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 was 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 had 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 November 1997.
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 have to  customers  who
contracted to purchase property which is undeveloped  exchange such property for
developed property. As of December 31, 1997, approximately 85% of such customers
have opted to exchange or have had their situations otherwise resolved.

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

     As of December 31, 1997, the Company had estimated development  obligations
of  approximately  $25,000 on sold property,  an estimated  liability to provide
title  insurance and deeding  costs of $676,000 and an estimated  cost of street
maintenance,  prior to assumption of such obligations by local  governments,  of
$458,000, all of which are included in deferred revenue. As of December 31, 1997
and  December  31,  1996 the  Company  had in escrow  approximately  $50,000 and
$360,000,  respectively,  specifically  for land  improvements at certain of its
Central and North Florida communities. The

                                       11
<PAGE>

Company's  development  obligation  was  substantially   reduced  in 1997 by the
consummation of the Agreement  approved by the stockholders on November 4, 1997.
Approximately  $7,400,000 of the development  obligation at St. Augustine Shores
was assumed by Swan. In addition,  the creation of a Lot Exchange  Trust reduced
the  development  obligation  at Marion  Oaks and Sunny  Hills by  approximately
$5,800,000.

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

     The Company has either  complied  with  applicable  statutory  requirements
relative  to the  properties  it is  offering  for sale 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 those properties for sale to the public.

     The Company's land sales activities are further subject to the jurisdiction
of the laws of various states in which the Company's  properties are offered for
sale.  In  addition,  Florida  and other  jurisdictions  in which the  Company's
properties  are  offered  for  sale  have   strengthened,   or  are  considering
strengthening,  their regulation of subdividers and subdivided lands in order to
provide  further  assurances  to the  public,  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  changes in statutes or regulations  affecting,  or which
may 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. 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.

                                       12
<PAGE>


ITEM 3

                                LEGAL PROCEEDINGS

     During 1997,  the Company was  successful in settling the lawsuit  entitled
LEE SU WEN NI ET. AL. V. THE DELTONA  CORPORATION AND SCAFHOLDING B.V., Case No.
95-4422-CA-E,  which was filed in the Circuit Court of Marion County, Florida on
October  11,  1995.  The  plaintiff  had  alleged  that the  liquidated  damages
provision in the Company's  installment contracts for the sale of its properties
was  unenforceable  under Florida Law and  contested the method  utilized by the
Company to  calculate  actual  damages in the event of  contract  cancellations.
Pursuant  to the  settlement,  the  claims  and the  case  were  dismissed  with
prejudice.

     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.,  former 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.

                                       13
<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, 1997, the Company's Common Stock
was traded on a limited basis in the  over-the-counter  markets (on the bulletin
board) under the symbol DLTA. The weighted  average price per share at which the
common  stock  was  traded at the end of the  first,  second,  third and  fourth
quarters of 1997 is as follows:


                    March 31, 1997           $.227
                    June 30, 1997            $.1544
                    September 30, 1997       $.135
                    December 31, 1997        $.4933

     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.

                                       14
<PAGE>

ITEM 6

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>
                       Consolidated Income Statement Data
                     (in thousands except per share amounts)

                                   Years Ended
                                   ------------------------------------------------------------------------
                                   December 31,   December 31,   December 31,   December 31,   December 31,
                                       1997           1996           1995           1994           1993
                                   ------------   ------------   ------------   ------------   ------------
<S>                                <C>            <C>            <C>            <C>            <C>
Revenues ........................  $   9,425      $     8,650    $    6,688     $    8,541     $   12,099
Costs and expenses...............     10,751            9,877         9,593         12,447         20,871
                                   ---------      -----------    ----------     ----------     ----------
Loss from continuing operations
 before taxes and extraordinary
 items...........................     (1,326)          (1,227)       (2,905)        (3,906)        (8,772)
Provision for income taxes.......        -0-              -0-           -0-            -0-            -0-
                                   ---------      -----------    ----------     ----------     ----------
Loss from operations
 before extraordinary items......     (1,326)          (1,227)       (2,905)        (3,906)        (8,772)
                                   =========      ===========    ==========     ==========     ==========
Extraordinary items:
Gain on settlement related to
  the Marco refund obligation.....       -0-              331           702            -0-            -0-
                                   ---------      -----------    ----------     ----------     ----------
Net income (loss) applicable
  to common stock................. $  (1,326)     $      (896)   $   (2,203)    $   (3,906)    $   (8,772)
                                   =========      ===========    ==========     ==========     ==========
Basic earnings per share amounts:
    Continuing operations......... $    (.20)     $      (.18)   $     (.43)    $     (.59)    $    (1.45)
    Extraordinary items...........       .00              .05           .10            .00            .00
                                   ---------      -----------    ----------     ----------     ----------
Net income (loss)................. $    (.20)     $      (.13)   $     (.33)    $     (.59)    $    (1.45)
                                   =========      ===========    ==========     ==========     ==========
Weighted average common shares
 outstanding...................... 6,753,587        6,729,648     6,699,923      6,514,988      6,056,743
                                   =========      ===========    ==========     ==========     ==========
<CAPTION>
                         Consolidated Balance Sheet Data
                                 (in thousands)

                                   December 31,   December 31,   December 31,   December 31,   December 31,
                                       1997           1996           1995           1994           1993
                                   ------------   ------------   ------------   ------------   ------------
<S>                                <C>            <C>            <C>            <C>            <C>
Total assets...................... $    13,560    $   19,442     $  19,180      $  22,109      $  26,565
                                   ===========    ==========     =========      =========      =========
Liabilities....................... $    19,174    $   37,301     $  36,192      $  38,930      $  40,856
Stockholders' equity (deficiency).      (5,614)      (17,879)      (17,013)       (16,821)       (14,291)
                                   -----------    ----------     ---------      ---------      ---------
Total liabilities and stockholders'
 equity (deficiency).............. $    13,560    $   19,422     $  19,180      $  22,109      $  26,565
                                   ===========    ==========     =========      =========      =========

</TABLE>
                                       15
<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  International
B.V., a Netherlands corporation ("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.  Mr.  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.  In November,
1995, Messrs.  Muyres, van de Peppel,  Nipshagen and Zwaans resigned their board
seats.

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 carry forward.
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
(20.82% 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 20,
1998).

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  served  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").

                                       16
<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.

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.

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 Securities and Exchange Commission (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.

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

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

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



                                       17
<PAGE>
     3.  Scafholding  B.V.  ("Scafholding")  an  affiliate  of Selex and Yasawa,
purchased approximately $7.5 million in contracts receivable from the Company at
seventy-five  percent  (75%) of face  value  with  recourse  for  non-performing
contracts.  This sale generated approximately $5.6 million,  $1,982,457 of which
was used to reduce  outstanding debt to Yasawa. The balance (of which $1 million
is in the form of a promissory  note from  Scafholding  to the Company)  will be
used by the Company to pay a portion of the  delinquent  real estate  taxes,  to
implement its marketing programs,  to initiate  development of TimberWalk and to
meet the Company's working capital requirements.

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

     5. As of December 31, 1997, the Company's  outstanding  debt to Scafholding
was  $2,293,950,  secured  by a first  lien on the  Company's  receivables;  the
Company's  outstanding debt to Yasawa was $6,692,732 secured by a second lien on
the Company's receivables and a mortgage on all of the Company's property. As of
December  31,  1997,  loans  outstanding  to  Yasawa  and  Scafholding   totaled
$8,986,682.  The terms of  repayment  of this debt  have  been  restructured  to
provide for  monthly  payments of  principal  in the amount of $100,000  payable
monthly  in cash or  with  contracts  receivable  at  100% of face  value,  plus
interest payable monthly on the declining  balance at the rate of 9.6% per annum
in cash or with contracts receivable at 65% of face value.

     6. In the future,  if the Company  elects to do so, Yasawa and  Scafholding
have  agreed  to  purchase  contracts  receivable  at 65% of  face  value,  with
recourse, to meet the Company's ongoing capital requirements.

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

Through  Yasawa's  acquisition  of the  6,809,338  shares of Common Stock of the
Company referenced above, Mr. Antony Gram's beneficial  ownership increased from
3,109,703 shares to 9,919,041 shares (73.23% of the outstanding shares of Common
Stock of the Company as of March 20, 1998).

As a  consequence  of its  liquidity  position,  the  Company  has not paid
delinquent  real estate taxes which  aggregate  approximately  $1,485,000  as of
December 31, 1997;  non-payment of these  delinquent  taxes may adversely affect
the financial  condition of the Company.  Of the  $1,485,000 in delinquent  real
estate taxes,  approximately $112,000 relates to sold lots on which the customer
has assumed the obligation to pay but has not done so.

Results of Operations

  Years ended December 31, 1997 and December 31, 1996

     Revenues

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

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

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

                                       18
<PAGE>
     The following table reflects the Company's real estate product mix for 1997
and 1996 (in thousands):
<TABLE>
<CAPTION>
                                                                        Years Ended
                                                                 ---------------------------
                                                                 December 31,   December 31,
                                                                     1997          1996
                                                                 ------------   ------------
<S>                                                              <C>            <C>
Gross Land Sales:
     Retail sales<F1>.........................................   $ 6,093        $ 6,816
                                                                 -------        -------
         Total................................................     6,093          6,816
                                                                 -------        -------
Housing Sales:
     Single Family............................................     1,214          1,188
     Vacation Ownership.......................................       -0-             14
                                                                 -------        -------
         Total................................................     1,214          1,202
                                                                 -------        -------
         Total Real Estate....................................   $ 7,307        $ 8,018
                                                                 =======        =======
<FN>
------------
<F1> New retail land sales contracts  entered into,  including  deposit sales on
     which the Company has  received  less than 20% of the sales  price,  net of
     cancellations,  for the years ended December 31, 1997 and December 31, 1996
     were $5,359,000 and $6,612,000,  respectively. The Company had a backlog of
     $1,094,000 and $2,089,000 in unrecognized sales as of December 31, 1997 and
     December 31, 1996, 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  $2,366,000 in 1997 as compared to $1,008,000 for
1996.  The  increase  is a result  of the Lot  Exchange  Trust,  which  provided
sufficient developed inventory for exchanges to customers with undeveloped lots.

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

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

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

     In 1996 the Company  evaluated  its  property,  plant and  equipment.  As a
result, the Company wrote off approximately  $1,040,000 of obsolete assets, most
of which was fully  depreciated.  The Company  recognized a loss of $40,000 as a
result of this write off.

     Costs and Expenses

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

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

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

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

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

                                       19
<PAGE>
     Interest  expense was  $1,545,000  for 1997 as compared to  $1,781,000  for
1996.  The  decrease in interest  expense is the result of cessation of interest
accrual as of November, 1997 simultaneous with the stockholder's approval of the
debt  restructuring  at the 1997 annual  meeting.  Total  interest cost (none of
which represents  capitalized) was $1,545,000 for 1997 as compared to $1,781,000
for 1996.  No interest  was  capitalized  in 1997 and 1996.

     Net Income

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

  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.

     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 promotional 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<F1>.........................................$ 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>
 -----------
     <F1> 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 had 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.

     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.

                                       20
<PAGE>
     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 had curtailed 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.

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

                                      21
<PAGE>
its implications are constantly  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.

     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  changes in statutes or regulations  affecting,  or which
may 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. 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, 1996,  $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 loan  modifications  consummated  on December 30, 1997,  satisfied  all
Company obligations to Selex and the outstanding loans to Scafholding and Yasawa
were  restructured.  The following  table presents  information  with respect to
mortgages and similar debt (in thousands):
<TABLE>
<CAPTION>
                                                                      Years Ended
                                                              ------------------------------
                                                              December 31,      December 31,
                                                                 1997              1996
                                                              ------------      ------------
              <S>                                             <C>               <C>
              Mortgage Notes Payable ..................       $  6,693          $ 18,707
              Other Loans..............................          2,294             3,661
                                                              --------          --------
                  Total mortgages and similar debt.....       $  8,987          $ 22,368
                                                              ========          ========
</TABLE>

     Included in Mortgage  Notes  Payable is the Yasawa loan  ($6,693,000  as of
December 31, 1997);  included in Other Loans is the Scafholding loan ($2,294,000
as of December 31, 1997).

  Contracts and Mortgages Receivable Sales

     In June, 1992 and February,  1990, the Company completed sales of contracts
and mortgages  receivable  totaling  $13,500,000 and $17,000,000,  respectively,
which generated approximately  $8,000,000 and $13,900,000  respectively,  in net
proceeds to the Company.  The anticipated  costs of the June,  1992  transaction
were included in the extraordinary  loss from debt  restructuring for 1991 since
the  restructuring  was  dependent on the sale.  The Company  recorded a loss of
$600,000 on the February, 1990 sale. In conjunction with these sales the Company
granted  the  purchaser  a security  interest  in certain  additional  contracts
receivable of approximately $2,700,000 and conveyed all of its rights, title and
interest in the property  underlying such contracts to a collateral  trustee. In
addition,  these  transactions,  among  other  things  require  that the Company
replace or repurchase any receivable  that becomes 90 days  delinquent  upon the
request of the purchaser.  Such  requirement  can be satisfied from contracts in
which the purchaser holds a security interest (approximately $2,734,000 as

                                       22
<PAGE>
of December 31, 1997). 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 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 1997, the Company did not
replace any delinquent receivables. As of December 31, 1997 and 1996, $1,279,000
and $1,069,000 in receivables were delinquent, respectively.

     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, 1997,  the balance of the
holdback account as approximately $121,000.

     In  December  1997,  Scafholding  purchased  approximately   $7,500,000  in
contracts  receivable  from the Company at  seventy-five  percent  (75%) of face
value  with  recourse  for   non-performing   contracts.   This  sale  generated
approximately  $5.6 million,  $1,982,457 of which was used to reduce outstanding
debt to Yasawa.  The balance (of which $1 million is in the form of a promissory
note from  Scafholding to the Company expected to be satisfied by mid-1998) will
be used by the Company to pay a portion of the delinquent  real estate taxes, to
implement its marketing programs,  to initiate  development of TimberWalk and to
meet the Company's working capital requirements.

     The Company was the  guarantor of  approximately  $14,324,000  of contracts
receivable  sold or transferred  as of December 31, 1997,  for the  transactions
described  above and had $121,000 on deposit with  purchasers of the receivables
as  security to assure  collectibility  as of such date.  A  provision  has been
established for the Company's  obligation under the recourse provisions of which
$3,280,000 remains at December 31, 1997. The Company has been in compliance with
all receivable transactions since the consummation of receivable sales.

     In the future,  if the Company elects to do so, Yasawa and Scafholding have
agreed to purchase contracts receivable at 65% of face value, with recourse,  to
meet the Company's ongoing capital requirements.

Other Obligations

     As of December 31, 1997, the Company had estimated development  obligations
of  approximately  $25,000 on sold property,  an estimated  liability to provide
title  insurance and deeding  costing  $676,000 and an estimated  cost of street
maintenance,  prior to assumption of such obligations by local  governments,  of
$458,000,  all of which are  included  in  deferred  revenue.  The total cost to
complete  improvements  at December 31, 1997 was  estimated to be  approximately
$1,159,000.  As of December  31, 1997 and  December  31, 1996 the Company had in
escrow approximately $50,000 and $360,000,  respectively,  specifically for land
improvements  at certain  of its  Central  and North  Florida  communities.  The
Company's  development  obligation  was  substantially  reduced  in  1997 by the
consummation of the Agreement  approved by the stockholders on November 4, 1997.
Approximately  $7,400,000 of the development obligation for St. Augustine Shores
was assumed by Swan. In addition,  the creation of a Lot Exchange  Trust reduced
the  development  obligation  at Marion  Oaks and Sunny  Hills by  approximately
$5,800,000.

     The  Company's  continuing  liquidity  problems  have  precluded the timely
payment  of the full  amount  of 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  $1,485,000  as of December  31,  1997.  Of the
$1,485,000 in delinquent real estate taxes,  approximately  $112,000  relates to
sold lots on which the  customer has assumed the  obligation  to pay but has not
done so.

                                       23
<PAGE>
  Liquidity

     Retail land sales have  traditionally  produced  negative cash flow through
the  point of sale as a  result  of the  regulatory  requirement  to sell  fully
developed  lots and the  additional  requirement  to pay  marketing  and selling
expenses prior to or shortly after the point of sale. In an effort to offset the
negative cash effects of installment  land sales,  the Company is now attempting
to direct its marketing efforts to selling homes and lots together.  The success
of this direction will be dependent upon the Company's dealer recruiting program
and the availability of funds for an advertising and promotion program.

     In December 1997, the Company  announced the start of  construction  on its
newest housing  development:  TimberWalk.  TimberWalk  will feature a model home
center with models built by three  premier  central  Florida home  builders.  At
TimberWalk,  home buyers  will enjoy the  benefits of  Deltona's  newest  design
concept, "Everything  Included",  which includes  features that are often
considered  extra cost  upgrades  and  options by other  home  builders  but are
included in TimberWalk's  basic prices.  Models will range from one to two story
homes with two, three or four bedrooms ranging in size from 1,200 square feet to
over 2,200 square feet of living space.

     Due to its  liquidity  problems  over the last five years,  the Company has
been forced to delay payment of certain real estate taxes.  The Company has been
dependent  upon its ability to sell or otherwise  finance  contracts  receivable
and/or secure other financing sources to meet its cash requirements. Since 1992,
the  Company has been  largely  dependent  upon  Yasawa and related  parties for
financing of its operations.  Although Yasawa and Scafholding  have committed to
provide the Company with  financing of its contracts  receivables at the rate of
65% of face value,  with  recourse,  there can be no guarantee  that the Company
will  be  able  to  generate  sufficient  receivables  to  meet  its  cash  flow
requirements.


  Year 2000

     The Company  utilizes a number of software  systems in conjunciton with its
community  development,  contract processing and contract servicing  operations.
The Company has and will  continue to make certain  investments  in its software
systems  and  applications  to ensure the  Company is Year 2000  compliant.  The
financial  impact  of  becoming  Year  2000  compliant  has not  been and is not
expected  to be  material  to the  Company's  financial  position  or results of
operations in a given year.


                                       24
<PAGE>
ITEM 8

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                              AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
                                                                  Page
                                                                 -----
<S>                                                              <C>
Independent Auditors' Report....................................   26

Consolidated Balance Sheets as of December 31, 1997 and
   December 31, 1996............................................   27

Statements of Consolidated Operations for the years ended
 December 31, 1997, December 31, 1996 and December 31, 1995.....   29

Statements of Consolidated Stockholders' Equity (Deficiency)
 for the years ended December 31, 1997, December 31, 1996
 and December 31, 1995..........................................   30

Statements of Consolidated Cash Flows for the years ended
 December 31, 1997, December 31, 1996 and December 31, 1995.....   31

Notes to Consolidated Financial Statements......................   33

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

</TABLE>

                                       25
<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,  1997 and 1996 and the
related statements of consolidated operations, consolidated stockholders' equity
(deficiency)  and  consolidated  cash  flows for each of the three  years in the
period ended December 31, 1997. 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, 1997 and 1996 and the  results of its  operations  and its cash
flows for each of the three  years in the  period  ended  December  31,  1997 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 has incurred  substantial
operating losses and has continued to experience  liquidity crises,  causing the
Company  to  be  unable  to  meet  certain  contractual  obligations  and  has a
stockholders'  deficiency at December 31, 1997. These matters raise  substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans  concerning  these  matters  are  described  in Note 1.  The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


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

                                       26
<PAGE>
                           CONSOLIDATED BALANCE SHEETS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

                                     ASSETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                      December 31,   December 31,
                                                                          1997           1996
                                                                      ------------   ------------
<S>                                                                   <C>            <C>
Cash, including escrow deposits
 and restricted cash of $1,293 in 1997 and $845 in 1996
    (Note 7)................................................          $ 1,397        $   907
                                                                      -------        -------
Contracts receivable for land sales (Notes 2, 5 and 8)......            4,356         10,488

Less: Allowance for uncollectible contracts.................           (1,150)        (2,429)

      Unamortized valuation discount........................             (508)        (1,094)
                                                                      -------        -------
Contracts receivable - net..................................            2,698          6,965
                                                                      -------        -------

Mortgages and other receivables - net (Notes 2, 5 and 8)....            1.291            384
                                                                      -------        -------


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


Land and land improvements..................................           7,449          10,287


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


              Total inventories...............................         7,548          10,386
                                                                      ------         -------


Property, plant and equipment - net (Notes 4 and 5)...........           374             413
                                                                      ------         -------

Prepaid expenses and other....................................           252             367
                                                                      ------         -------

              Total...........................................       $13,560         $19,422
                                                                     =======         =======

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

                                       27
<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,
                                                                          1997           1996
                                                                      ------------   ------------
<S>                                                                   <C>            <C>
Mortgages and similar debt (Note 5):

     Mortgage notes  payable .................................        $  6,693       $ 18,707

     Other loans .............................................           2,294          3,661
                                                                      --------       --------

         Total mortgages and similar debt.....................           8,987         22,368

Accounts payable-trade .......................................              75             94

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

Accrued taxes, principally real estate taxes .................           1,917          3,084

Accrued expenses and other (Notes 2 and 8) ...................           3,995          1,421

Customers' deposits ..........................................             689            792

Deferred revenue (Notes 7 and 8) .............................           3,511          7,764
                                                                      --------       --------

Total liabilities ............................................          19,174         37,301
                                                                      --------       --------

Commitments and contingencies (Notes 1, 2, 5, 7, 8 and 9)

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

     Common  stock,  $1  par  value-authorized  15,000,000  shares;  issued  and
      outstanding:13,544,277 shares in 1997 and 6,734,572 shares
      in 1996 (excluding 12,228 shares held in treasury)..........      13,544         6,734

     Capital surplus .........................................          51,495        44,714

     Accumulated deficit .....................................         (70,653)      (69,327)
                                                                      --------       -------
Total stockholders' equity (deficiency) ......................          (5,614)      (17,879)
                                                                      --------       -------
                      Total.......................................    $ 13,560       $19,422
                                                                      ========       =======

 </TABLE>

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

                                       28
<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,
                                                     1997         1996        1995
                                                 ------------ -----------  ------------
<S>                                              <C>          <C>          <C>
Revenues

 Gross land sales (Notes 2 and 7)..............  $  6,093     $  6,816     $  3,623
 Less: Estimated uncollectible sales...........    (1,528)      (1,706)        (850)
        Contract valuation discount............      (520)        (814)        (379)
                                                 --------     --------     --------
 Net land sales................................     4,045        4,296        2,394
 Sales-housing.................................     1,214        1,202        1,383
 Recognized improvement revenue-prior period
  sales........................................     2,366        1,008        1,052
 Interest income...............................     1,367        1,464        1,019
 Other ........................................       433          680          840
                                                  -------     --------     --------
              Total............................     9,425        8,650        6,688
                                                  -------     --------     --------
Costs and expenses

 Cost of sales-land............................     1,121        1,212          635
 Cost of sales-housing.........................       917        1,005        1,135
 Cost of improvements-prior period sales.......       545          219          395
 Cost of sales-other...........................       248          237          267
 Provision for uncollectible contracts and
   recourse obligations (Note 2)...............       840          -0-          650
 Commissions, advertising, and other selling
  expenses.....................................     2,517        2,457        1,889
 General and administrative expenses...........     1,680        1,715        1,869
 Real estate tax...............................     1,338        1,251        1,111
 Interest expense..............................     1,545        1,781        1,642
                                                  -------     --------     --------
              Total............................    10,751        9,877        9,593
                                                  -------     --------     --------
Loss from operations before income
 taxes and extraordinary items.................    (1,326)      (1,227)      (2,905)
Provision for income taxes (Note 6)............       -0-          -0-          -0-
                                                  -------     --------     --------
Loss from operations before
 extraordinary items...........................    (1,326)      (1,227)      (2,905)

Extraordinary item:
 Gain on settlement related to the Marco
  refund obligation (Note 9)...................       -0-          331          702
                                                  -------     --------    ---------
Net income (loss)..............................  $ (1,326)    $   (896)   $  (2,203)
                                                 ========     ========    =========

Basic earnings (loss) per common and common
 equivalent shares from (Note 10):
 Operations....................................  $   (.20)    $  ( .18)   $   (.43)
 Extraordinary gain............................       .00          .05         .10
                                                 --------     --------    --------
         Net income (loss)...................... $   (.20)    $  ( .13)   $   (.33)
                                                 ========     ========    ========

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

                                       29
<PAGE>

          STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIENCY)

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)

 For the years ended December 31, 1997, December 31, 1996 and December 31, 1995

<TABLE>
<CAPTION>



                                                  Common Stock      Capital      Accumulated
                                                  ($1 par value)    Surplus      Deficit          Total
                                                  --------------    -------      ------------     ---------

<S>                                               <C>               <C>          <C>              <C>
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)
     Issuance of Common Stock with Related
      Party...................................      6,810               -0-           -0-            6,810
     Gain from Exchange of Land and Contracts
       Receivables with Related Party.........        -0-             6,781           -0-            6,781
     Net (loss) for the year..................        -0-               -0-        (1,326)          (1,326)
                                                  -------           -------      --------         --------
Balances, December 31, 1997...................    $13,544           $51,495      $(70,653)        $ (5,614)
                                                  =======           =======      ========         ========

</TABLE>


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


                                       30
<PAGE>

                      STATEMENTS OF CONSOLIDATED CASH FLOWS

                    THE DELTONA CORPORATION AND SUBSIDIARIES
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                     Years Ended
                                                      ------------------------------------------
                                                      December 31,    December 31,  December 31,
                                                          1997            1996          1995
                                                      ------------    ------------  ------------
<S>                                                    <C>            <C>          <C>
Cash flows from operating activities:
 Cash received from operations:
  Proceeds from sale of residential units............  $   1,272      $   1,182    $  1,416
  Collections on contracts and mortgages receivable..      3,245          2,927       2,285
    Down payments on and proceeds from sales
       of homesites and tracts.......................      1,476          1,517       1,261
      Proceeds from the sale of Contracts Receivables      4,625            -0-         -0-
      Proceeds (uses) from other sources.............         (8)           425          86
                                                       ---------      ---------    --------
              Total cash received from operations....     10,610          6,051       5,048
                                                       ---------      ---------    --------
  Cash expended by operations:
      Cash paid for residential units................        917          1,005       1,135
      Cash paid for land and land improvements.......        621            461         602
      Customer refunds...............................         28            931         874
      Commissions, advertising and other
      selling expenses...............................      2,414          2,515       1,558
     General and administrative expenses.............      1,803          1,892       2,721
      Interest paid..................................        -0-            -0-         -0-
      Real estate taxes paid.........................      2,504          1,314         984
                                                       ---------      ---------   ---------
              Total cash expended by operations......      8,287          8,118       7,874
                                                       ---------      ---------   ---------
              Net cash provided by (used in) operating
                activities...........................      2,323         (2,067)     (2,826)
                                                       ---------      ---------   ---------
Cash flows from investing activities:
 Proceeds from sale of property, plant
  and equipment......................................         18              6          29
 Payment for acquisition and construction of
   property, plant and equipment.....................         (6)            (4)        (43)
                                                       ---------      ---------   ---------
              Net cash provided by (used in) investing
                activities...........................         12              2         (14)
                                                       ---------      ---------   ---------

Cash flows from financing activities:
 New borrowings......................................        137          2,000       1,390
 Repayment of borrowings.............................     (1,982)           (10)         (8)
                                                       ---------      ---------   ---------
              Net cash provided by (used in) financing
                activities............................    (1,845)         1,990       1,382
                                                       ---------      ---------   ---------
Net increase (decrease) in cash and short term
 investments..........................................       490            (75)     (1,458)
Cash and short term investments, at beginning
 of year..............................................       907            982       2,440
                                                       ---------      ---------   ---------
Cash and short term investments, at end of year....... $   1,397      $     907   $     982
                                                       =========      =========   =========



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

                                       31
<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,
                                                                1997           1996           1995
                                                            ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>
Net income (loss)........................................   $ (1,326)      $   (896)      $ (2,203)
                                                            --------       --------       --------
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
     Depreciation and amortization.......................         46             60             64
     Provision for estimated uncollectible sales and
      recourse obligations...............................      1,528          1,706          1,500
     Contract valuation discount, net of amortization....        238            279             30
     Net (gain) loss on sale of property, plant
       and equipment.....................................        (18)            35            (19)
     Extraordinary gain on settlement related to the
       Marco refund obligation...........................        -0-           (331)          (702)
     Provision for recourse obligations..................        840            -0-            -0-
(Increase) decrease in assets and increase (decrease) in
   liabilities:
     Gross contracts receivable plus deductions from
      reserves...........................................      2,501         (3,349)          (936)
     Mortgages and other receivables.....................       (907)            29            830
     Land and land improvements..........................        673            844             (8)
     Housing completed or under construction and other...        -0-              5             44
     Prepaid expenses and other..........................        115             71           (154)
     Accounts payable, accrued expenses and other........      1,086          1,461          1,244
     Customers' deposits.................................       (103)            38             32
     Allowance for Marco permit costs....................        -0-         (1,018)          (846)
     Deferred revenue....................................     (2,350)        (1,001)        (1,702)
                                                            --------       --------       --------
         Total adjustments and changes...................      3,649         (1,171)          (623)
                                                            --------       --------       --------
Net cash provided by (used in) operating activities......   $  2,323       $ (2,067)      $ (2,826)
                                                            ========       ========       ========

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-       $   -0-
                                                            ========       ========       =======
Reduction of accrued interest as a result of the
  capitalization of interest to principal................   $  1,130       $    -0-       $ 4,200
                                                            ========       ========       =======
Reduction of accrued interest as a result of forgiveness
 of interest.............................................   $  2,050       $    -0-       $   -0-
                                                            ========       ========       =======
Reduction of accrued interest and mortgage notes
  payable as a result of an exchange of
  land, property and common stock........................   $ 11,689       $    -0-       $ 2,694
                                                            ========       ========       =======
Reduction of property, plant and equipment as a result
  of exchange of debt....................................   $    -0-       $    -0-       $   112
                                                            ========       ========       =======
Reduction of land as a result of an exchange of debt.....   $  1,953       $    -0-       $   674
                                                            ========       ========       =======
Reduction of deferred revenue as a result of assumption
 of the development obligation by a related party........   $  1,901       $    -0-       $   -0-
                                                            ========       ========       =======
Reduction of accrued expenses as a result of the
  settlement of an obligation with a prior landlord......   $    -0-       $    -0-       $   500
                                                            ========       ========       =======
Common Stock issued for reduction of long-term debt......   $  6,810       $    -0-       $   -0-
                                                            ========       ========       =======
Common stock issued for Marco permit costs...............   $    -0-       $     30       $   101
                                                            ========       ========       =======
</TABLE>
               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                       32
<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 1995 of $2,905,000, for
1996 of  $1,227,000  and for 1997 of  $1,326,000,  resulting in a  stockholders'
deficiency of $5,614,000 as of December 31, 1997.

     Following the completion of the restructuring of its debt in 1997 (see Note
5), the Company commenced the implementation of its business plan by redirecting
its focus to  single-family  housing with the  development of TimberWalk.  Since
1992, the Company has been largely dependent upon Yasawa and related parties for
financing of its operations.  The  transactions  described in Note 5 with Selex,
Yasawa,  Scafholding  and Swan,  provided  the  Company  with a  portion  of its
financing  requirements  enabling the Company to commence  implementation of the
marketing program and attempt to accomplish the objectives of its business plan,
but  additional  financing  will be required in 1998.  As a  consequence  of its
liquidity  position,   the  Company  continues  to  be  in  default  on  certain
obligations,  principally its obligation to pay certain real estate taxes.  (See
Note 5.)

     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.

     Due to its  liquidity  problems  over the last five years,  the Company has
been forced to delay payment of certain real estate taxes.  The Company has been
dependent  upon its ability to sell or otherwise  finance  contracts  receivable
and/or secure other financing sources to meet its cash requirements. Since 1992,
the  Company has been  largely  dependent  upon  Yasawa and related  parties for
financing of its operations.  Although Yasawa and Scafholding  have committed to
provide the Company with  financing of its contracts  receivables at the rate of
65% of face value,  with  recourse,  there can be no guarantee  that the Company
will  be  able  to  generate  sufficient  receivables  to  meet  its  cash  flow
requirements.

     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.

     The Company sells homesites under  installment  contracts which provide for
payments over periods  ranging from 2 to 10 years.  Since the fourth  quarter of
1991, the Company has offered only  developed lots for sale.  Sales of homesites
are  recorded  under  the  percentage-of-completion  method in  accordance  with
Statement of Financial  Accounting  Standards No. 66,  "Accounting  for Sales of
Real Estate" ("FASB No. 66").  Since 1991, the Company has not recognized a sale
until it has  received 20% of the contract  sales price.  During 1997,  1996 and
1995,  approximately  87%,  94% and 72%,  respectively,  of sales were through a
single independent dealer in New York.

     At the time of recording a sale the Company  records an  allowance  for the
estimated cost to cancel the related  contracts  receivable  through a charge to
the  provision for  uncollectible  sales.  The amount of this  provision and the
adequacy of the allowance is determined by the Company's  continuing  evaluation
of the portfolio and past cancellation experience.  While

                                       33

<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


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

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.

     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 1995,
1996 and 1997.

     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
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 customer refund programs.

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

     In accordance with Financial  Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
( SFAS No. 121), long-lived assets, such as inventories and property,  plant and
equipment to be held and used are to be reviewed for impairment  whenever events
or changes in  circumstances  indicate that the carrying amounts of an asset may
not be  recoverable.  As of December 31, 1997,  there were no assets  considered
impaired under the provisions of the Statement.

     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.

                                       34

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES

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

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

2.   Contracts and Mortgages Receivable

     At December 31, 1997,  interest rates on contracts  receivable  outstanding
ranged  from 5% to 12% per annum  (weighted  average  approximately  8.5%).  The
approximate principal maturities of contracts receivable were:

<TABLE>
<CAPTION>
                                                                       December 31,
                                                                           1997
                                                                      --------------
                                                                      (in thousands)
                  <S>                                                  <C>
                  1998.................................................$    755
                  1999.................................................     728
                  2000.................................................     670
                  2001.................................................     677
                  2002.................................................     613
                  2003 and thereafter..................................     913
                                                                       --------
                           Total.......................................$  4,356
                                                                       ========

</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, 1997 and 1996  approximate  $1,151,000 and
$910,000, 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, 1997.........................                91 months        8.8%            13.5%
              December 31, 1996.........................                89 months        7.8%            13.5%
              December 31, 1995.........................                92 months        8.2%            13.5%

</TABLE>

     In June, 1992 and February,  1990, the Company completed sales of contracts
and mortgages  receivable  totaling  $13,500,000 and $17,000,000,  respectively,
which generated approximately  $8,000,000 and $13,900,000  respectively,  in net
proceeds to the Company.  The anticipated  costs of the June,  1992  transaction
were included in the extraordinary  loss from debt  restructuring for 1991 since
the  restructuring  was  dependent on the sale.  The Company  recorded a loss of
$600,000 on the February, 1990 sale. In conjunction with these sales the Company
granted  the  purchaser  a security  interest  in certain  additional  contracts
receivable of approximately $2,700,000 and conveyed all of its rights, title and
interest in the property  underlying such contracts to a collateral  trustee. In
addition,  these  transactions,  among  other  things  require  that the Company
replace or repurchase any receivable  that becomes 90 days  delinquent  upon the
request of the purchaser.  Such  requirement  can be satisfied from contracts in
which the purchaser holds a security  interest  (approximately  $2,734,000 as of
December 31, 1997).  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

                                       35

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



2.   Contracts and Mortgages Receivable - (Continued)

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  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 1997, the Company did not replace any delinquent receivables.  As
of December 31, 1997 and 1996,  $1,279,000 and  $1,069,000 in  receivables  were
delinquent, respectively.

     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, 1997,  the balance of the
holdback account as approximately $121,000.

     In  December  1997,  Scafholding  purchased  approximately   $7,500,000  in
contracts  receivable  from the Company at  seventy-five  percent  (75%) of face
value  with  recourse  for   non-performing   contracts.   This  sale  generated
approximately  $5.6 million,  $1,982,457 of which was used to reduce outstanding
debt to Yasawa.  The balance (of which $1 million is in the form of a promissory
note from  Scafholding to the Company expected to be satisfied by mid-1998) will
be used by the Company to pay a portion of the delinquent  real estate taxes, to
implement its marketing programs,  to initiate  development of TimberWalk and to
meet the Company's working capital requirements.

     The Company was the  guarantor of  approximately  $14,324,000  of contracts
receivable  sold or transferred  as of December 31, 1997,  for the  transactions
described  above and had $121,000 on deposit with  purchasers of the receivables
as  security to assure  collectibility  as of such date.  A  provision  has been
established for the Company's  obligation under the recourse provisions of which
$3,280,000 remains at December 31, 1997. The Company has been in compliance with
all receivable transactions since the consummation of receivable sales.

     In the future,  if the Company elects to do so, Yasawa and Scafholding have
agreed to  purchase  future  contracts  receivable  at 65% of face  value,  with
recourse, to meet the Company's ongoing capital requirements.

3.   Inventories

     Information  with  respect to the  classification  of inventory of land and
improvements  including  land held for sale or  transfer  is as  follows  (other
inventories consists primarily of vacation ownership units completed):

<TABLE>
<CAPTION>
                                                          December 31,      December 31,
                                                             1997              1996
                                                          ------------      ------------
                                                                  (in thousands)
         <S>                                              <C>              <C>
         Unimproved land..................................$    420         $    420
         Land in various stages of development............   1,888            3,708
         Fully improved land..............................   5,141            6,159
                                                          --------         --------
                  Total...................................$  7,449         $ 10,287
                                                          ========         ========
</TABLE>

                                       36

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    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, 1997       December 31, 1996
                                             ----------------------   ----------------------
                                                       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        746         1,013       717
     Construction and other equipment...         675        642           713       670
                                            --------   --------       -------   -------
         Total..........................    $  1,762   $  1,388       $ 1,800   $ 1,387
                                            ========   ========       =======   =======

</TABLE>

     Depreciation  charged to operations  for the years ended December 31, 1997,
1996 and 1995 was approximately $46,000, $60,000 and $64,000,  respectively.  In
1996 the Company  evaluated its property,  plant and equipment  resulting in the
write off of  approximately  $1,044,000  in obsolete  equipment  and  furniture,
resulting in a loss of $40,000.

5.   Mortgages and Similar Debt

     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 principal.  The
loans were also modified to formalize the  elimination  of the default  interest
rate provisions in each of the applicable loan agreements.

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

     Effective  December  30,  1997,  the Company  and its  lenders  consummated
several  transactions that resulted in a reduction in the Company's  outstanding
debt  obligation  through the  conveyance  of all remaining  land  inventory and
obligations in the Company's St. Augustine  Shores  Subdivision and the issuance
of  approximately  6.8  million  shares of Common  Stock at $1.00 per share (par
value).  Additionally,  the lenders purchased $7,500,000 in contracts receivable
from the  Company  to  generate  working  capital  and  further  reduce the debt
obligation.  Selex sold its remaining  debt  ($2,664,736),  including the Empire
note,  to Yasawa and the Company  owes no further duty or  obligation  to Selex,
which provided the Company a release. The debt purchased by Yasawa was satisfied
through  Yasawa's  purchase of  2,664,736  shares of Common  Stock issued by the
Company at a per share conversion price of One Dollar ($1.00), which is equal to
par value.  Swan had previously  acquired  $5,529,501 of the Company's debt from
Selex. This $5,529,501 was satisfied through the Company's  conveyance of all of
the Company's  remaining  land inventory and  obligations  in its St.  Augustine
Shores Subdivision to Swan . The price, based upon appraised value, was adjusted
to take into account the  development  obligations on sold lots assumed by Swan.
Scafholding purchased approximately  $7,500,000 in contracts receivable from the
Company  at  seventy-five   percent  (75%)  of  face  value  with  recourse  for
non-performing  contracts.  This  sale  generated  approximately  $5.6  million,
$1,982,457 of which was used to reduce  outstanding debt to Yasawa.  The balance
(of which $1 million is in the form of a promissory note from Scafholding to the
Company expected to be satisfied by mid-1998) will


                                       37
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


5.   Mortgages and Similar Debt - (Continued)

be used by the Company to pay a portion of the delinquent  real estate taxes, to
implement its marketing programs,  to initiate  development of TimberWalk and to
meet the Company's  working capital  requirements.  A $4,144,602  portion of the
Company's debt to Yasawa was satisfied  through  Yasawa's  purchase of 4,144,602
shares of Common Stock issued by the Company at a per share  conversion price of
One Dollar ($1.00), which is equal to par value.

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

<TABLE>
<CAPTION>
                                                                                December 31,          December 31,
                                                                                    1997                  1996
                                                                                ------------          ------------
         <S>                                                                    <C>                   <C>
         Mortgage Notes Payable ...................................             $  6,693              $ 18,707
         Other Loans...............................................                2,294                 3,661
                                                                                --------              --------
              Total mortgages and similar debt......................            $  8,987              $ 22,368
                                                                                ========              ========

</TABLE>

     Included in Mortgage  Notes  Payable is the Yasawa Loan  ($6,693,000  as of
December 31, 1997;  included in Other Loans is the Scafholding  Loan ($2,294,000
as of December 31, 1997). The Scafholding Loan is secured by a first lien on the
Company's  receivables.  The  Yasawa  Loan is  secured  by a second  lien on the
Company's  receivables  and a mortgage on all of the Company's  property.  As of
December  31,  1997,  loans  outstanding  to  Yasawa  and  Scafholding   totaled
$8,987,000.  The terms of  repayment  of this debt  have  been  restructured  to
provide for  monthly  payments of  principal  in the amount of $100,000  payable
monthly  in cash or  with  contracts  receivable  at  100% of face  value,  plus
interest payable monthly on the declining  balance at the rate of 9.6% per annum
in cash or with contracts receivable at 65% of face value.

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

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

     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.

     The  Company's  regular net  operating  loss  carryover for tax purposes is
estimated  to be  $38,603,000  at December  31, 1997,  of which  $6,862,000  was
available  through  1999,  $364,000  through  2002,   $9,189,000  through  2005,
$9,780,000 through 2006,  $5,029,000 through 2008,  $5,402,000 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

                                       38

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


6.   Income Taxes - (Continued)

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 carry
forwards 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 of the
remaining development obligation to sold lots and tracts as of December 31, 1997
and  1996  was  approximately  $1,159,000  and  $15,152,000,  respectively.  The
foregoing  estimates  reflect the  Company's  current  development  plans at its
communities  (see  Note  8).  These  estimates  include:  estimated  development
obligations  applicable to sold lots of  approximately  $25,000 and  $1,134,000,
respectively;  a liability  to provide  title  insurance  and  deeding  costs of
$676,000  and  $1,139,000,   respectively;  and  an  estimated  cost  of  street
maintenance,  prior to assumption of such obligations by local  governments,  of
$458,000  and  $880,000,  respectively;  all of which are  included  in deferred
revenue. Included in cash at December 31, 1997 and December 31, 1996, are escrow
deposits of $50,000 and $360,000,  respectively,  restricted  for  completion of
improvements in certain of the Company's communities.  The Company's development
obligation was  substantially  reduced in 1997 by  consummation of the Agreement
approved by the  Stockholders on November 4, 1997.  Approximately  $7,400,000 of
the  development  obligation  at St.  Augustine  Shores was assumed by Swan.  In
addition,  the  creation  of  a  Lot  Exchange  Trust  reduced  the  development
obligation at Marion Oaks and Sunny Hills by approximately $5,800,000.

     In May, 1994 the Company  implemented  a program to have  customers who had
contracted to purchase property which is undeveloped  exchange such property for
developed property. As of December 31, 1997, approximately 85% of such customers
have opted to  exchange  or have had their  situations  otherwise  resolved.  On
December 30, 1997,  the Division  approved the formation of a Lot Exchange Trust
into  which the  Company  conveyed  sufficient  exchange  inventory  to  provide
exchanges  to  customers  with  undeveloped  lots.  Concurrently,  the  Division
released its lien on the Company's contracts receivable,  satisfied its mortgage
on the  Company's  property and approved a settlement  of all  remaining  issues
under the 1992 Deltona Consent Order.

     The anticipated  expenditures  for land  improvements,  title insurance and
deeding to complete  areas from which sales have been made through  December 31,
1997 are as follows:

<TABLE>
<CAPTION>
                                                              December 31, 1997
                                                              -----------------
                                                               (in thousands)
                      <S>                                     <C>
                      1998....................................$    354
                      1999....................................     350
                      2000....................................     160
                      2001+...................................     295
                                                              --------
                           Total..............................$  1,159
                                                              ========
</TABLE>

                                       39

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES


8.   Commitments and Contingent Liabilities

     Total rental  expense for the years ended  December 31, 1997,  December 31,
1996 and December 31, 1995 was  approximately  $121,000,  $148,000 and $172,000,
respectively.

     The Company has no real estate  leases that extend  beyond 1998.  Estimated
rental  expense  under these  leases is expected  to be  approximately  $103,000
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.

     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 was 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 had 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 November 1997.
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 have  customers who had
contracted to purchase property which is undeveloped  exchange such property for
developed property. As of December 31, 1997, approximately 85% of such customers
have opted to exchange or have had their situations otherwise resolved.

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

     As of December 31, 1997, the Company had estimated development  obligations
of  approximately  $25,000 on sold property,  an estimated  liability to provide
title  insurance and deeding  costing  $676,000 and an estimated  cost of street
maintenance,  prior to assumption of such obligations by local  governments,  of
$458,000,  all of which are  included  in  deferred  revenue.  The total cost to
complete improvements at December 31, 1997, including the previously mentioned


                                       40

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



8.   Commitments and Contingent Liabilities - (Continued)

obligations,  was estimated to be approximately  $1,159,000. As of December
31, 1997 and December 31, 1996 the Company had in escrow  approximately  $50,000
and $360,000,  respectively,  specifically  for maintenance and  improvements at
certain of its Central and North Florida communities.  The Company's development
obligation  was  substantially  reduced  in  1997  by  the  consummation  of the
Agreement  approved  by the  stockholders  on  November  4, 1997.  Approximately
$7,400,000 of the development  obligation at St. Augustine Shores was assumed by
Swan. In addition,  the creation of a Lot Exchange Trust reduced the development
obligation at Marion Oaks and Sunny Hills by approximately $5,800,000.

     The  Company's  continuing  liquidity  problems  have  precluded the timely
payment of the full amount of certain real estate taxes.  Delinquent real estate
taxes aggregated approximately $1,485,000 as of December 31, 1997. On properties
where  customers  have  contractually  assumed the  obligation to pay into a tax
escrow  maintained  by the  Company,  the Company  has and will  continue to pay
delinquent  real estate taxes as monies are  collected  from  customers.  Of the
$1,485,000 in delinquent real estate taxes,  approximately  $112,000  relates to
sold lots on which the  customer has assumed the  obligation  to pay but has not
done so.

     During 1997,  the Company was  successful in settling the lawsuit  entitled
Lee Su Wen Ni et. al. v. The Deltona  Corporation and Scafholding B.V., Case No.
95-4422-CA-E,  which was filed in the Circuit Court of Marion County, Florida on
October  11,  1995.  The  plaintiff  had  alleged  that the  liquidated  damages
provision in the Company's  installment contracts for the sale of its properties
was  unenforceable  under Florida Law and  contested the method  utilized by the
Company to  calculate  actual  damages in the event of  contract  cancellations.
Pursuant  to the  settlement,  the  claims  and the  case  were  dismissed  with
prejudice.

     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 the 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,  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.





                                       41

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES



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


     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 Basic earnings per Share Information

     Effective  December 30, 1997, the Company  entered into agreements with its
lenders to  substantially  reduce the  Company's  outstanding  debt  obligation.
Yasawa purchased 6,809,338 shares of Common Stock issued by the Company at a per
share  conversion  price of One Dollar ($1.00),  which is equal to par value, in
satisfaction  of $6,809,338 of the Company's  debt to Yasawa.  Through  Yasawa's
acquisition  of the 6,809,338  shares of Common Stock of the Company  referenced
above, Mr. Antony Gram's beneficial ownership increased from 3,109,703 shares to
9,919,041  shares  (73.23%  of the  outstanding  shares of  Common  Stock of the
Company as of March 20, 1998).

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

     The net loss and the  average  number of shares of common  stock and common
stock  equivalents  used to calculate  basic earnings (loss) per share for 1997,
1996 and 1995 were  $(1,326,000),  $(896,000)  and  $(2,203,000)  and 6,753,587,
6,729,748 and 6,699,923, respectively.


                                       42

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    THE DELTONA CORPORATION AND SUBSIDIARIES




11.  Business Segments

         <TABLE>
         <CAPTION>
                                                                           Years ended
                                            -------------------------------------------------------------------------
                                            December 31,    December 31,   December 31,   December 31,   December 25,
                                                1997            1996           1995           1994           1993
                                            ------------    ------------   ------------   ------------   ------------
                                                                          (in thousands)
         <S>                                <C>             <C>            <C>            <C>            <C>
        Revenues
         Real estate:
           Net land sales<F1>.......        $  4,045        $  4,296       $  2,394       $  2,058       $  2,432
           Housing revenues.........           1,214           1,202          1,383          2,543            344
           Improvement revenues<F2>.           2,366           1,008          1,052          1,214          4,725
           Interest income<F3>......           1,367           1,464          1,019          1,046          1,197
           Other....................             -0-             -0-            -0-            -0-             67
                                            --------        --------       --------       --------       --------
             Total real estate......           8,992           7,970          5,848          6,861          8,765
         Other<F4>..................             617             963          1,030          1,832          3,447
         Intersegment sales<F5>.....            (184)           (283)          (190)          (152)          (113)
                                            --------        --------       --------       --------       --------
             Total..................        $  9,425        $  8,650       $  6,688       $  8,541       $ 12,099
                                            ========        ========       ========       ========       ========
         Operating profits (losses)
         Real estate................        $  3,052        $  3,077       $  1,377       $  1,055       $ (3,073)
         Other......................             185             443            341          1,032            279
         General corporate expense..          (3,018)         (2,966)        (2,981)        (4,147)        (4,721)
         Interest expense...........          (1,545)         (1,781)        (1,642)        (1,847)        (1,257)
                                            --------        --------       --------       --------       --------
         Income (loss) from
          continuing operations
          before income taxes
          and extraordinary items...        $ (1,326)       $ (1,227)      $ (2,905)      $ (3,906)      $ (8,772)
                                            ========        ========       ========       ========       ========

         <CAPTION>
                                                               Real
                                                              Estate            Other            Corporate           Total
                                                              ------            --------         ---------         --------
         <S>                                <C>               <C>               <C>              <C>               <C>
         Identifiable assets........        1997              $ 13,107          $    404         $     49          $ 13,560
                                            1996                18,864               502               56            19,422
                                            1995                18,623               289              268            19,180

         Depreciation expense.......        1997              $     25          $      5         $     16          $     46
                                            1996                    38                 5               17                60
                                            1995                    34                 5               25                64

         Capital expenditures.......        1997              $      6          $    -0-         $    -0-          $      6
                                            1996                     2               -0-                2                 4
                                            1995                    24               -0-               19                43

<FN>
-----------------------
<F1>     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).

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

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

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

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

</FN>
</TABLE>
                                       43

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

<TABLE>
<CAPTION>

                                                       Extraordinary
                             (Loss)                    Item: Gain on
                             From                      Settlement
                             Operations                Relating to
                             Before     (Loss)         the            Net
                             Income     From           Marco Refund   Income
                  Revenues   Taxes      Operations     Obligation     (Loss)
                  --------   ---------- ----------     -------------  -------
<S>                 <C>      <C>        <C>            <C>            <C>
1997
  First....         $  2,072  $   (429) $   (429)      $    -0-       $  (429)
  Second...            2,291      (174)     (174)           -0-          (174)
  Third....            1,631      (627)     (627)           -0-          (627)
  Fourth...            3,431       (96)      (96)           -0-           (96)
                    --------  --------  --------       --------       -------
Total......         $  9,425  $ (1,326) $ (1,326)      $    -0-       $(1,326)
                    ========  ========  ========       ========       =======

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

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)
                    ========  ========  ========       ========       =======



<CAPTION>

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

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

1995
         First......................                   $  (.10)       $    .10       $    .00
         Second.....................                      (.05)            .00           (.05)
         Third......................                      (.11)            .00           (.11)
         Fourth.....................                      (.17)            .00           (.17)
                                                       -------        --------       --------
Total...............................                   $  (.43)       $    .10       $   (.33)
                                                       =======        ========       ========

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

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

</FN>
</TABLE>

                                       44

<PAGE>
ITEM 14

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


(a)      1. Financial Statements

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


(a)      2.   Financial Statement Schedules
                                                                            Page
                                                                           -----
         Independent Auditors' Report..........................             46


         Schedule VIII - Valuation and qualifying accounts for
           the three years ended December 31, 1997.............             47



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 1998 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, 1997.


                                       45
<PAGE>

                          INDEPENDENT AUDITORS' REPORT





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


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




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


                                       46

<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, 1997

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

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

Year ended December 31, 1996

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

  Unamortized contract valuation discount<F2>     $      829        $     814         $     549        $ 1,094
                                                  ==========        =========         =========        =======
Year ended December 31, 1995

  Allowance for uncollectible contracts<F1>.      $    1,373        $     850         $     594        $ 1,629
                                                  ==========        =========         =========        =======

  Unamortized contract valuation discount<F2>     $      913        $     379         $     463        $   829
                                                  ==========        =========         =========        =======

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

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

     <F2> Represents the unamortized  discount generated from initial valuations
          of contracts  receivable (see Notes 1 and 2 to Consolidated  Financial
          Statements).
</FN>
</TABLE>
                                       47
<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, 1998
     -----------------------------
     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, 1998


                                       48
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