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Genfinity Corp · 10-12G · On 7/16/99

Filed On 7/16/99 · SEC Files 0-22045, 0-30696 · Accession Number 1000096-99-387

This Filing was Corrected by the SEC on 4/13/0.

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 7/16/99  Genfinity Corp                    10-12G®               13:108                                    1000096

Registration of Securities (General Form) · Form 10
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-12G      Form 10                                               74    327K 
 2: EX-3.I      Certificate of Incorporation                          10     34K 
 3: EX-3.II     Bylaws of Apple Homes Corporation                     10     43K 
 4: EX-10.1     Employment Agreement                                   5     31K 
 5: EX-10.2.1   Agreement                                              1      8K 
 6: EX-10.2.2   Agreement                                              1      8K 
 7: EX-16.1     Letter From Accountant                                 1     10K 
 8: EX-16.2     Letter of Serotta Maddocks Evans & Co., Cpa's          1      8K 
 9: EX-21       Subsidiaries                                           1      6K 
10: EX-23.1     Consent                                                1      7K 
11: EX-23.2     Consent                                                1      8K 
12: EX-23.3     Consent                                                1      7K 
13: EX-27       Financial Data Schedule                                1     10K

10-12G · Form 10
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Business Certain Relationships and Related Transactions Changes in Registrant's Certifying Accountants Description of Registrant's Securities to be Registered Directors and Executive Officers Executive Compensation Financial Information Financial Statements and Exhibits Financial Statements and Supplementary Data Forward Looking Statements Indemnification of Directors and Officers Legal Proceedings Market Price and Dividends on the Registrant's Common Equity and Related Stockholder Matters Properties Recent Sales of Unregistered Securities Security Ownership of Certain Beneficial Owners and Management
1	1st Page
2	Item 1. Business
10	Item 2. Financial Information
13	Forward Looking Statements
"	Item 3. Properties
14	Item 4. Security Ownership of Certain Beneficial Owners and Management
16	Item 5. Directors and Executive Officers
18	Item 6. Executive Compensation
19	Item 7. Certain Relationships and Related Transactions
20	Item 8. Legal Proceedings
"	Item 9. Market Price and Dividends on the Registrant's Common Equity and Related Stockholder Matters
"	Item 10. Recent Sales of Unregistered Securities
21	Item 11. Description of Registrant's Securities to be Registered
22	Item 12. Indemnification of Directors and Officers
23	Item 13. Financial Statements and Supplementary Data
"	Item 14. Changes in Registrant's Certifying Accountants
24	Item 15. Financial Statements and Exhibits

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 Sponsored Ads...







SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549

 FORM 10

 GENERAL FORM FOR REGISTRATION OF SECURITIES

 Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

 Apple Homes Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)

 Delaware                                             13-3525328
 --------                                             ----------
(State or other jurisdiction of                            (I.R.S. Employer     
incorporation or organization)                            Identification No.)   

124 North Belair Road                                         
Evans Georgia                                         30809   
--------------------------------------                       --------         
(Address of principal executive offices                      (Zip Code)         

Registrant's telephone number, including area code  706-650-2015                

Securities to be registered pursuant to Section 12(b) of the Act                

None

Securities to be registered pursuant to Section 12(g) of the Act                

 Common Stock, $.002 Par Value

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Item 1.  Business                                                               

General Information                                                             

Apple Homes Corporation (the "Company") is a retailer of factory built
manufactured homes, known in the industry as manufactured housing. It presently 
operates 12 retail sales locations-four in Augusta, Georgia, two in Thomson,    
Georgia, and one each in Wrens, Washington, Statesboro and Waynesboro, Georgia  
and Aiken and Anderson, South Carolina. It also operates a reconditioning and   
used sales lot in Augusta, this lot houses its Mobile Air Systems subsidiary    
offering air conditioning sales and service to manufactured home owners. All of 
the Company's retail sales locations and other mobile home operations use the   
trade name "Apple Homes".                                                       

 The Company presently purchases homes for resale from six manufacturers
located in the southeastern United States. Purchases are financed through       
wholesale floor plan financing lines totaling $10,275,000 provided by three     
major financial institutions and three local banks. To promote retail sales and 
generate additional fee income, the Company assists its customers in finding    
mortgage financing for the purchase of homes and also places homeowners         
insurance for home buyers.                                                      

    The Company is also involved in development and sale of two adjoining real
estate subdivisions in Richmond County, Georgia. The sites, known as Mayfair    
Acres and The Timbers, consist of 47 developed lots, of which seven lots remain 
available for sale, and 10 rental homes owned by the Company. The Company also  
owns 6.3 acres of undeveloped land in the area which it is presently considering
developing by installing roads and utilities and obtaining the necessary zoning 
approval. The Company believes that the property may be subdivided into         
approximately 40 lots for sale to retail purchasers of its manufactured homes.  

     The Company was organized as a Delaware corporation on April 17, 1989 under
the name PLAM Properties, Inc. It changed its name to Mayfair Homes Corporation 
in 1993 and again to Apple Homes Corporation in 1997. It presently operates     
three of its retail sales centers and its used sales lot under its own name and 
the remaining nine retail sales centers through six wholly or partially owned   
subsidiaries: Augusta Housing Center, Inc., which is 100% owned and operates one
center; Big Daddy's Mobile Homes, Inc., 80% owned and operating two centers;    
Evans-Lanier, Inc., 80% owned and operating two centers; Apple Homes, Inc., 100%
owned and operating one center; J.C. Homes, Inc., 80% owned and operating one   
center; and Tim Phillips Homes, Inc., 100% owned and operating two centers.     

(2) 

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Industry Overview                                                               

     Manufactured homes are complete single family residences built in a factory
and transported to the site on which they are to be located. These homes consist
of two types: manufactured homes, which are constructed on a chassis equipped   
with wheels and are transported by tow trucks to their destination; and modular 
homes, which are not equipped with a chassis and are transported on flat bed    
trailers. Substantially all of the Company's sales are of manufactured homes.   
Manufactured homes offer most of the amenities of and are generally built with  
the same materials as site-built homes. They are produced in sections, also     
referred to as "floors;" finished homes may consist of one or more sections.    

Because of their lower costs of construction when compared to costs of
site-built homes, manufactured homes have historically served as one of the most
affordable alternatives for the home buyer. According to statistics compiled by 
the Georgia Manufactured Housing Institute for 1998, the average cost per square
foot of a single-section manufactured home in the state of Georgia (where 84% of
the Company's sales originated in that year) averaged $23 for a manufactured    
home, compared to an average cost of $55 per square foot for a site-built home  
(in each case excluding land costs).                                            

Since they are relatively less expensive than traditional housing,    
manufactured homes have been an attractive means for home buyers to overcome the
obstacle of large down payments and high monthly mortgage payments. According to
the Manufactured Housing Institute, industry wide domestic shipments accounted  
for 29.6% of the overall new housing market in the United States during 1998.   
The use of manufactured housing in the southeastern United States, in which the 
Company's primary market area is located, is even greater than for the nation as
a whole. The Georgia Manufactured Housing Association has reported that the     
State of Georgia alone has more than 30 plants manufacturing housing and over   
1,000 manufactured home retail sales locations. During 1997, according to the   
National Conference of States on Building Codes and Standards, the states of    
Georgia and South Carolina (which now comprise the principal market area for the
Company) ranked third and fifth in manufactured home shipments, and Georgia was 
the leading producer of manufactured homes, a ranking it has held since 1984.   

  Notwithstanding the increase in demand in recent years, the manufactured
housing industry is cyclical and is affected by many of the same factors that   
influence the housing industry generally, including inflation, interest rates,  
availability of financing, regional economic and demographic conditions and     

(3) 

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consumer confidence levels, as well as the affordability and availability of    
alternative housing such as apartments, condominiums and conventional site-built
homes. Accordingly, there can be no assurance that demand will continue at      
present levels or that the Company's plans of capitalizing upon it by expanding 
the size of its retail sales operations will be successful.                     

     Sales of manufactured homes are typically conducted in retail sales centers
whose operators range from small proprietors to large regional or national      
dealerships, many of whom manufacture their own retail products. Because of     
economies of scale, the ability to obtain larger rebates and discounts from     
manufacturers and better financing for inventory and customers, these large     
retail dealerships have a distinct advantage over small single location         
operators. The Company's goal is to move its operations toward the level of     
these large dealership networks.                                                

The Company's Retail Operations                                                 

Commencing in 1992 with the acquisition of its first two retail sales 
centers, the Company's sales operations have expanded substantially over the    
past five years. Sales during this period, which are not necessarily indicative 
of future performance by the Company, have been as follows:                     

                                                                · Download Table

                                  Year Ended March 31,           
                                  --------------------           

                     1999  1998  1997       1996       1995  1994
                     ----  ----  ----       ----       ----  ----

                                                                 
Home Units Sold (1)  792   639   399        278        195   112 

Retail Sales          12     9     6          3          3     2 
 Centers Owned (2)                                               

Weighted Average      66    71    67         93         65    56 
 Unit Sales per                                                  
 Center                                                          

(4) 

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

(1)  Sales are divided between single-section and multi-section homes, with     
    single-section homes accounting for 34% and multi-section homes accounting
for 66% of sales in fiscal 1999. The range of home sale prices during 
fiscal 1999 was $16,500 for the least expensive single-section unit to
  $94,000 for the most expensive multi-section home, excluding land costs.

(2)  Based on number of centers open at least three months during the period.   

The Company believes that these statistics are typical for retail sales         
dealerships in its primary market area. In addition to sales of new manufactured
homes, the Company also deals in used homes acquired in trade-ins, which account
for approximately 4% of sales.                                                  

Sales are conducted through commissioned retail sales representatives located at
each sales center. Each sales center typically has onsite at any given time from
15 to 20 manufactured home units in a variety of models and price ranges,       
although some sales centers carry a smaller inventory. All units are equipped   
with basic appliances and some are furnished, and every unit is ready to move   
onto the customer's site on purchase.                                           

To enhance sales, the Company provides assistance to its customers in locating  
purchase money financing. The Company has agreements with several large retail  
finance companies including Green Point, Bergen, Bombardier, Deutsche Bank and  
Dynex, under which it introduces its customers who require purchase money       
financing. The Company receives fees for these services in the form of financial
participation. Revenues from this source were $136,460 for fiscal 1998 and      
$430,000 for fiscal 1999.                                                       

As part of its placement of retail financing for its customers, applications and
supporting documentation required by the lenders are submitted by the Company.  
In certain cases, if a lender discovers a loan has been made on the basis of an 
erroneous application, it will look to the Company for recourse. This practice, 
which is common in the industry, has resulted in contingent recourse liability  
to the Company that, at March 31, 1999 amounted to $859,000. Industry statistics
and Company performance indicate that an average loss of 10-15% of this amount  
can be expected if the Company has to repossess a home. The Company does not    
believe that this contingent liabilty is significant to its operations or       
financial condition, however, as it is in a position to relieve itself of this  
liability in any given case by repossessing and reselling the home in question. 

The Company also receives significant revenues from various commissions and     
rebates. The sources of these revenues include the placement of homeowner's     
insurance for American Modern Insurance Company, the placement of advertising   
in-house (which commenced in fiscal 1999), rebates on freight contracts for the 
delivery of its inventory, the sale of repossessed homes for lending            
institutions, furniture sales and other miscellaneous items. Total commission   
and rebate income was $107,000 for fiscal 1998 and $231,000 for fiscal 1999.    

(5) 

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The Company's retail sales centers each consist of a tract of land ranging from 
one to six acres on which 15 to 20 manufactured home units are displayed, and a 
sales office. The land on which all centers are located is leased by the Company
with the exception of one lot in Thomson Georgia which it purchased in March    
1999 for $275,000 paid by a purchase money mortgage, and one lot formerly       
operated in Pelzer South Carolina which it purchased in September 1998 for a    
price of $50,000. The sales offices on the lots are manufactured homes used for 
that purpose. The Company owns or has financed 7 offices, rents 2 offices from  
unrelated parties, rents 3 offices from minority shareholders and rents 3       
offices from the Company President The Company also owns three tow trucks and   
two escort vehicles to transport units sold to customer sites, as well as other 
necessary equipment.                                                            

Each sales center has personnel available to transport each purchased home to   
the customer's site and to install and make it fully operational at the site.   
Some of these personnel are Company employees, while others are independent     
contractors who supply their own transportation equipment. The equipment and    
personnel used for these activities typically service more than one location,   
thus reducing overall costs of installation and transportation. The Company     
believes that by expanding its retail sales network to new locations, it will be
able to enhance its profitability per inventory unit by emphasizing integration 
of these activities among these new and existing sales centers.                 

In addition to its retail sales activities, the Company went into the air       
conditioning sales and service business in January 1999 with the purchase of    
Mobile Air Systems, Inc.("MAS"). The subsidiary was purchased from Robert Steed 
for a price of $257,500, of which $30,000 was paid in cash and the balance by   
issuing the owner 130,000 shares of Company Common Stock at its then market     
price of $1.75 per share. Gross revenues for MAS during calendar 1998 were      
$595,500 and its profit for the year was $76,349. As of the date of its purchase
by the Company, MAS had a net worth per its books of $76,449.                   

Real Estate Development Activities                                              

The Company's original business, commenced in 1989, involved a real estate      
subdivision and development in the Augusta, Georgia area known as Mayfair Acres.
The first phase of this development, which consists of 11 acres, contains 29    
developed lots, and the remaining 6.7 acres are not yet developed. The developed
lots were acquired by the Company in 1989 for $30,000 and were developed at a   
cost of $160,000. The Company is presently marketing the remaining seven        
developed lots on the site, four of which include a manufactured home installed 

(6) 

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on the lot. It is considering the development of the remaining 6.7 acres in     
Mayfair Acres into a subdivision with approximately 40 lots for sale to         
prospective retail purchasers.                                                  

In addition to its Mayfair Acres subdivision, the Company purchased 18 homes in 
The Timbers, a subdivision located near Mayfair Acres. Nine of the homes were   
purchased from Robert S. Wilson, a Company director and promoter, and Ted C.    
Smith, a stockholder of the Company, for a purchase price of $200,000           
(approximately the cost of these housing units to the sellers). The other nine  
houses were acquired from LEAP Associates, a partnership of which Mr. Wilson is 
an owner, for 70,500 shares of Common Stock. Ten of the 18 houses are rented and
eight have been sold under installment sales contracts for prices ranging from  
$30,000 to $42,000.                                                             

In May 1999, the Company sold installment contracts on 18 of the homes in       
Mayfair Acres and The Timbers for $320,000, leaving it with a total of 7 homes  
and/or lots and the undeveloped acreage owned in the two sites.                 

Suppliers                                                                       

The Company currently purchases manufactured homes from six manufacturers, all  
located in the Southeastern United States. Two of these suppliers, General      
Housing of Waycross, Georgia and Bellcrest Homes of Millen, Georgia accounted   
for over 75% of inventory purchased in fiscal 1999. Eight of the Company's      
retail sales centers sell General Housing homes exclusively, and the inventory  
costs at those centers are borne by that supplier. The Company purchases        
inventory units on a deal-by-deal basis and has one year contracts with each    
supplier, the terms of which are reviewed annually. While the Company does not  
anticipate any problems in continued supply of product from these suppliers and 
believes that it can replace any of them by substituting the products of other  
manufacturers located in the Southeastern region, the loss of any of its major  
suppliers may have a material adverse effect on the Company's operations. Each  
supplier offers incentive payments to the Company based upon its volume of      
purchases. During fiscal 1999 these incentives amounted to an average of $2,150 
per unit.                                                                       

Dealer Financing                                                                

The Company finances purchases of manufactured housing units through "floor     
plan" financing. Under these financing arrangements, the Company borrows the    
purchase price for each manufactured home it acquires from a bank or other      

(7) 

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lending institution pursuant to a master contract, each loan being secured by   
the unit purchased with its proceeds. When the unit is sold to a retail         
customer, the Company must pay off the loan and obtain a release of the lender's
security interest, in order to give the buyer free and clear title to the       
property.                                                                       

The Company now has floor plan financing contracts with six lenders, three of   
whom are major financial institutions and three are local banks. The Company's  
floor plan financing lines now total $10.275 million at interest rates of 1% to 
2% over prime. The lines are reviewed and extended on an annual basis. E. Samuel
Evans, the Company's President, has personally guaranteed all of this financing 
for which he receives an annual fee from the Company.                           

The Company believes that its lines of credit are sufficient to finance         
purchases of inventory in its existing locations for the foreseeable future.    
However, if its retail operations continue to increase, it may have to increase 
them, as each retail sales center typically requires up to $500,000 to finance  
inventory units on hand. The Company believes that new floor plan financing will
be available as needed to cover the requirements for its proposed new sales     
centers, but there can be no assurance that this availability will continue to  
exist or that the present interest rates and other credit terms it now enjoys   
(which are subject to changes in lending practices of its present lenders and   
other general economic conditions) will continue to be available. The Company   
has no present commitments for any expanded dealer financing.                   

Competition                                                                     

The retail manufactured home sales business is highly competitive, as capital   
requirements for entry are relatively small. Competition is based primarily on  
price, reputation for service and quality, depth of field inventory, sales      
promotion and merchandising and terms and availability of retail customer       
financing. In its existing sales areas (the 150 mile radius around Augusta,     
Georgia) there are many manufactured home retail sales centers with which the   
Company competes. The Company generally expects that any areas in which it opens
new retail sales centers will have similar numbers of competitors in the market 
place. While the Company is larger than most of its competitors, at least one   
competitor in the Augusta, Georgia area is substantially larger than the        
Company, now operating over 30 retail sales locations. In addition, many        

(8) 

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national and regional manufactured home producers operate their own retail sales
locations throughout the country. At least two of these producers are currently 
operating in the Company's primary marketing areas and other companies (which   
because of their size and integrated operations may offer better pricing and    
terms of financing than the Company has available) may become competitors in the
future.                                                                         

Government Regulation                                                           

There are a number of federal, state and local laws and regulations affecting   
the manufacture, sale and financing of manufactured homes. Manufacturers are    
governed by federal laws including the Department of Housing and Urban          
Development's comprehensive national construction standards, affecting such     
items as structural integrity, fire, safety, thermal protection and ventilation.
State and local building and zoning codes may also affect the quality, type and 
number of manufactured homes the Company is permitted to sell within any given  
geographic area. The Company believes that the homes it is currently selling    
meet all of these federal, state and local laws and regulations.                

The sale and financing of manufactured homes are also the subject of extensive  
federal and local regulation. These include Federal Trade Commission rules      
involving unfair credit and collection practices, Federal Reserve rules         
requiring written disclosure of financing terms and information used as a basis 
for denial of credit, and laws prohibiting discrimination in sales and lending  
practices. In addition, the Company's activities as a mortgage broker and       
insurance agent require licenses from state agencies which also govern allowable
charges and sales practices. The Company believes that it is currently in       
compliance with all such governmental regulations.                              

Federal, state and local legislation and regulations are proposed from time to  
time that, if enacted, could significantly affect the regulatory climate for    
sales and financing of manufactured homes. It is not possible at this time to   
predict what if any changes such legislation and regulations may have upon the  
Company's business in the future.                                               

Employees                                                                       

At March 31, 1999, the Company had 94 full time employees, including 39 in      
sales, 13 in transportation, installation and repair, and 42 in general or      
administrative positions, as well as 110 independent contractors who are used   
for site preparation and installation of homes. The Company has no collective   
bargaining agreement with its employees and has not experienced any work        
stoppages as a result of labor disputes. It considers that its relations with   
its employees are good. All employees with the exception of sales personnel are 
salaried; sales employees are paid by commission based upon their production.   

(9) 

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Item 2. Financial Information                                                   

A. Summary Financial and Operating Data                                         

Summary operating and financial data for the Company's five fiscal years ended  
March 31,1995 through March 31, 1999 and balance sheets as of those dates are as
follows:                                                                        

                                                        · Enlarge/Download Table


                                                                  YEAR ENDED MARCH 31                           
                                     1995             1996             1997           1998               1999   
STMT OF OPERATIONS               ------------------------------------------------------------------------------ 
------------------                                                                                              
                                                                                                                
NET SALES (REVENUES)            $ 6,768,965       $ 8,442,228     $ 15,549,376    $ 25,615,535     $ 33,776,250 
INCOME (LOSS) FROM OPERATIONS       244,334           179,296          116,538          34,962         (247,196)
OTHER INCOME (LOSS)                (137,835)         (274,399)        (518,346)         37,785          434,228 
NET INCOME (LOSS)                   106,499           (93,434)        (439,526)        (51,531)         104,304 
INCOME (LOSS) PER COMMON SHARE         0.08             (0.10)           (0.40)          (0.03)            0.05 
WEIGHTED AVG SHARES O/S           1,269,087           946,264        1,109,669       1,491,423        1,925,012 

OPERATING DATA                                                                                                  
--------------                                                                                                  
HOMES SOLD                              195               278              399             639              792 
NUMBER OF RETAIL CENTERS                  3                 3                6               9               12 
WEIGHTED AVG UNITS SOLD / CTR            65                93               67              71               66 

BALANCE SHEET DATA                                                                                              
------------------                                                                                              
WORKING CAPITAL                                                                                                 
 (CURR ASSETS LESS CURR LIAB)   $  (103,648)      $   (36,090)     $  (143,743)     $  640,812     $  1,442,991 
TOTAL ASSETS                      3,804,957         3,442,001        6,628,919       8,331,753       12,906,584 
LONG TERM OBLIGATIONS               510,769           528,485        1,085,323         491,508        1,054,316 
SHAREHOLDERS' EQUITY                568,923           723,296          333,427       1,609,056        2,291,110 

B. Management's Discussion and Analysis of Financial Condition and Results of   
Operations                                                                

The following discussion and analysis should be read in conjunction with the    
Company's  consolidated  financial  statements  and the notes  thereto  included
elsewhere in this  Memorandum.  The  discussions  of results,  causes and trends
should not be construed to imply any conclusion that such results or trends will
necessarily continue in the future.                                             

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Results of Operations -- Fiscal Years ended March 31, 1997, March 31, 1998      
and March 31, 1999                                                              

The following table shows the components of the results of operations for fiscal
years 1997, 1998 and 1999 in amounts and percentage of revenues (000 omitted):  

                                                        · Enlarge/Download Table


                                                             YEAR ENDED MARCH 31                               
DESCRIPTION                               1997                        1998                         1999        
-------------------------------------------------------------------------------------------------------------  
                                                                                                               
Sales                              15,549        100.0%       25,616         100.0%       33,776        100.0% 
Cost of Sales                      12,327         79.3%       20,544          80.2%       27,849         82.5% 
                                   --------------------------------------------------------------------------  
Gross Profit                        3,222         20.7%        5,072          19.8%        5,927         17.5% 

Operating Expenses:                                                                                            
Compensation                        1,416          9.2%        2,355           9.2%        2,949          8.7% 
Advertising                           194          1.2%          353           1.4%          639          1.9% 
Occupancy and vehicle                 240          1.6%          358           1.4%          269          0.8% 
Depreciation and amortization          38          0.2%           70           0.3%           98          0.3% 
Insurance                             101          0.6%          196           0.8%          223          0.7% 
Professional fees                     147          1.0%          219           0.9%          126          0.4% 
Taxes and licenses                    141          0.9%          296           1.2%          301          0.9% 
Miscellaneous                         829          5.3%        1,190           4.6%        1,569          4.6% 
                                   --------------------------------------------------------------------------  
Total Operating Expenses            3,106         20.0%        5,037          19.7%        6,174         18.2% 

Other Income (Expense):                                                                                        
Commissions earned                     37          0.2%          108           0.5%          231          0.6% 
Rental income                                                                                 92          0.3% 
Interest income                        49          0.3%           27           0.1%           88          0.3% 
Other income (expense)                 (5)         0.0%          380           1.5%           18          0.1% 
Finance participation                                            137           0.5%          430          1.3% 
Interest expense                     (599)        (3.8%)        (614)         (2.4%)        (425)       (1.3%) 
                                   --------------------------------------------------------------------------  
Total Other Income (Expense)         (518)        (3.3%)          38           0.2%          434         1.3%  

Income (Loss) Before Income Tax                                                                                
  Provision and Minority Interest    (402)        (2.6%)          73           0.3%          187          0.5% 

Income tax provision                   33          0.2%          116           0.4%          (73)        (0.2%)
Minority interest in net income       (71)        (0.5%)        (240)         (0.9%)         (10)        (0.0%)
                                   --------------------------------------------------------------------------- 

Net Income                           (440)        (2.9%)         (51)         (0.2%)          104         0.3% 
                                   =========================================================================== 

Comparison of Fiscal 1999 to Fiscal 1998. Sales in 1999 rose by approximately $8
million, or 32%, on an increase of 153 units sold, or 24%, primarily due to a   
net increase of three sales lots in 1999. However, these greater sales did not  
result in an increase in gross profit margin, which decreased as a percentage of
sales to 17.5% in 1999 from 19.8% in 1998. This decrease was due primarily to a 
more competitive market which demands a decreased sales price per unit. Another 
factor is the additional costs to implement governmental restrictions related to
the set-up and placement of homes. The Company is using inventory management    
methods in an effort to address these conditions in fiscal 2000. Despite this   
adverse condition, net profit for 1999 increased by $155,000 in 1999, or over   
300%, due to two primary factors which offset the decrease in gross margin.     
These were a reduction in operating costs from 19.7% of sales in 1998 to 18.2%  
of sales in 1999 and an increase in other income from .1% of sales in 1998 to   
1.2% of sales in 1999. These resulted from the following factors: (i) spreading 
the operating costs over a greater sales base: (ii) an increase in commission,  
rental, interest and finance participation income; and (iii) a large decrease in
interest expense due to the assumption of floor plan expense by manufacturers at
a number of retail sales centers featuring their products exclusively. Minority 

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Interest in Net Income decreased from $240,392 in Fiscal 1998 to $9,989 in      
Fiscal 1999. This is due to an agreement between the Company and the minority   
shareholders to pay bonuses based on performance. As a result of this new plan, 
the Company paid $193,460 to the minority shareholders, which was recorded as   
compensation. The effect of this was to reduce the profits in the minority      
ownership subsidiaries, resulting in a reduction in the amount recorded as      
Minority Interest in Net Income of Consolidated Subsidiaries.                   

Comparison of Fiscal 1998 to Fiscal 1997. Sales rose by approximately $10       
million, or 65%, in 1998 on increased unit sales of 260, or 60%. This increase  
was primarily attributable to a net increase of three sales lots in that year.  
Gross margin dropped in 1998 by .9% from 20.7% in 1997 to 19.8% in 1998 due to  
the same factors adversely affecting gross margin in 1999, although the effect  
of these conditions was not as severe as in the latter year. The net loss was   
reduced from $440,000 in 1997 to $51,000 in 1998 due almost entirely to a very  
substantial increase in commission, interest and finance participation income   
from $86,000 in 1997 to $642,000 in 1998. This increase resulted from better    
terms the Company was able to negotiate with its suppliers because of the very  
large increase in Company purchases from them.                                  

Liquidity and Capital Resources                                                 

Since its formation in 1990, the Company has funded its operations and capital  
expenditures primarily through contributions from its founders and private      
placements of its equity securities and debt, including convertible notes. In   
the most recent placements of securities made by the Company (i) in 1997, it    
received a total of $ 485,000 in capital contributions through the conversion of
notes originally sold in 1996 and the sale of 200,000 shares of common stock in 
a private offering, and (ii) in fiscal 1999 it received $202,500 from the sale  
of convertible debentures and $100,000 from the sale of warrants in another     
private placement.                                                              

As an addition source of capital, the Company recently sold to a local finance  
company for $565,204 a total of 34 retail installment sales contracts held      
received from the sale of lots and homes.                                       

The Company has used these proceeds to open and supply inventory to new retail  
locations and to improve its working capital position. The Company believes that
the proceeds from these placements, together with cash flow from its operations 
and its present lines of floor plan financing, should provide it with sufficient
liquidity to conduct operations and maintain its expansion of sales for the next
several months. There can be no assurance that such will be the case, however,  
particularly if general economic conditions result in a downturn in the sale of 
housing in the Augusta Georgia market.                                          

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Forward Looking Statements                                                      

The discussion contained in this Section and elsewhere in this Memorandum       
contain certain "forward looking statements" (within the meaning of that term as
defined in the Securities Act and the Exchange Act), about the Company's future 
operations. These statements include, among other things, projections of        
revenues from existing and future retail sales centers, the Company's plans to  
open new sales centers and to obtain the needed floor plan financing for them,  
and the Company's anticipation that this expansion will result in a substantial 
increase in profitability. The likelihood of the Company's success in           
undertaking these activities and achieving these results is based upon a number 
of assumptions and estimates which are inherently subject to significant        
uncertainties and contingencies, many of which are beyond the control of the    
Company and which reflect business conditions that are subject to change. These 
include adverse changes in the financial markets, which may in turn adversely   
affect the Company's ability to borrow funds and the price at which those funds 
will be available, changes in the mortgage market, which may adversely affect   
the ability of the Company's customers to finance the purchase of new homes, and
in economic conditions in those areas in which the Company's retail sales       
centers are located. As a result of these uncertainties, actual results may vary
substantially from these forward looking statements contained herein and        
prospective investors should not place undue reliance on any of them.           

C. Qualitative and Quantitative Disclosures about Market Risk.                  

The Company does not hold and has not held any derivative securities such as    
options or other market risk sensitive instruments and, accordingly, is not     
presently subject to the risks of investment in such vehicles.                  

Item 3. Properties                                                              

The Company's principal offices are located in building at 124 North Belair     
Road, Evans, Georgia which it acquired in January 1999 for a price of $285,000. 
The property has 3,340 square feet of modern office space and is adequate for   
the Company's requirements for the foreseeable future. It was financed by a     
$230,000 mortgage loan from Suntrust Bank personally guaranteed by E. Samuel    
Evans, the Company's President and Robert S. Wilson, one of its directors and   
original promoters. The mortgage is due in monthly installments of $2,115,      
including interest at 7.25% per annum, with the balance of the principal due on 
December 5, 2001.                                                               

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The Company holds a continuing interest in the Mayfair Acres and Timbers        
properties consisting of seven lots for sale (four with mobile homes installed  
on them), 10 rental units and 6.7 acres of undeveloped land.                    

Eleven of the Company's retail mobile home sales lots, consisting of            
approximately two to five acres each, are leased for a total rental of $260,852 
per year. One lot at Thomson Georgia, consisting of 1.5 acres, was purchased by 
the Company in March 1999 for a price of $275,000, payable in monthly           
installments of $2,663 each, or the same amount the Company was formerly paying 
as rent for the property to its owner. The Company also owns a lot in Pelzer    
South Carolina formerly used a sales center. The property was acquired in 1998  
for a price of $50,000.                                                         

The sales offices on the lots are manufactured homes used for that purpose.     
Three of these offices are leased from E. Samuel Evans, the Company's president 
and three are leased from other shareholders. The Company owns three tow trucks 
and two escort vehicles to transport units sold to customer sites, as well as   
five service trucks and other necessary sales and office equipment. Total book  
value of these vehicles and equipment was $120,898 at March 31, 1999 against    
outstanding financing owing by the Company of $114,962.                         

Item 4. Security Ownership of Certain Beneficial Owners and Management.         

The following table sets forth information regarding the beneficial ownership of
the Company's Common Stock at June 1, 1999, of (i) each person who is known by  
the Company to own beneficially more than five percent of its Common Stock, (ii)
each executive officer and director of the Company, and (iii) all officers and  
directors of the Company as a group. The Company has been advised by each       
stockholder identified in the table that he possesses all voting and investment 
power with respect to the stock beneficially owned by him.                      

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Name, Address                         Shares                   Percentage of    
and Affiliation                    Beneficially                 Outstanding     
with Company                          Owned                       Shares        
---------------                    ------------                --------------   

E. Samuel Evans,                    195,000(1)                     9.3%         
President and Director                                                          
845 Vivian Court                                                                
Evans GA 30809                                                                  

Robert S. Wilson,                   194,138(2)                     9.3%         
Director(2)                                                                     
4715 Lake Front Drive                                                           
Martinez, Georgia 30907                                                         

Richard Belz, Director                   -0-                       -0-          
101 Fairchild Avenue                                                            
Plainview NY 11803                                                              

Laura Rollins, Chief                  3,000                        0.1%         
Financial Officer,                                                              
Secretary and Treasurer                                                         
3690 Inverness Way                                                              
Martinez GA 30907                                                               

Bryce N. Batzer,                        -0-(3)                     -0-%         
Director                                                                        
2263 N.E. 26th Street                                                           
Lighthouse Point, FL                                                            
33064                                                                           

All officers and                    392,138                       18.7%         
directors as a group                                                            
(five persons)                                                                  

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

(1)  Does not include 200,000 shares issuable on exercise of Class A Warrants   
owned by Mr. Evans.                                                   

(2)  Mr. Wilson resigned as Chairman of the Board of the Company as of June 30  
     1999 but remains a director. This table does not include 51,000 shares held
by Mr. Wilson's wife, 2,813 shares held by Stock Builders Corp., a    
 corporation of which Mr. Wilson and members of his immediate family own
     41.67%, and 328,000 shares issuable upon exercise of Class A Warrants owned
by him.                                                               

(3)  Does not include 128,672 shares held by trusts agreement for the benefit of
   members of his family, 33,000 shares issuable on conversion of $90,000 in
    Convertible Debentures and 50,000 shares issuable upon exercise of Class A
Warrants issued to him as a director.                                 

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Item 5. Directors and Executive Officers                                        

The directors and executive officers of the Company are:                        

Name                         Age                        Position                
----                         ---                        --------                

E. Samuel Evans              50                         President, CEO and      
                                        Director

Robert S. Wilson             76                         Director                

Bryce N. Batzer              78                         Director                

Richard Belz                 43                         Director                

Cynthia D. Holley            36                         Vice President-         
                                          Operations

Chester C. Helmick           57                         General Sales Director  

Laura H. Rollins             43                         CFO, Secretary and      
                                         Treasurer

E. Samuel Evans has served as president and a director of the Company since     
1992. Prior to that date his principal occupation was as president and owner of 
Augusta Housing Center Inc. from its formation in 1982 until its sale to the    
Company in 1992. Mr. Evans is a graduate of Augusta College with a degree in    
business administration in 1971 and a graduate of Woodrow Wilson College of Law 
in Atlanta, Georgia in 1979. He is licensed to practice law in the State of     
Georgia.                                                                        

Robert S. Wilson has been chairman of the board of the Company since its        
founding in 1989. He has resigned as Chairman effective June 30. 1999. He served
as its president and chief executive officer until 1992 and as secretary and    
treasurer until 1998. Prior to his founding of the Company, Mr. Wilson was      
active for 34 years in the securities industry as an executive with S.D. Cohn & 
Company, a retail broker/dealer in New York City from 1981 to 1984 and, prior to
that date, as a sales representative or wholesaler of mutual funds with several 
other firms. From 1986 to 1989, he was self-employed as a real estate broker and
from 1984 to 1986, he was an employee of Lease/Purchase Corporation, a real     
estate dealer and developer. Until 1999, he held a real estate sales license in 
the State of New York and is a 1947 graduate of Cornell University.             

Bryce N. Batzer has been a director of the Company since 1994. He is currently  
the owner of Cedarbrook Development Company Inc., a Florida land and home       
developer which he organized in 1987. He is also vice president of American     
Marine Products Inc., a manufacturer of marine windows, boat windshields and    
other marine products. Mr. Batzer was the president of Plastiline Inc., a       
publicly held company, from 1955 through 1976, and until 1996 he served Florida 
Coast Banks Inc. for over 25 years as a member of the executive committee,      
chairman of the loan committee and chairman of the compensation committee. Mr.  
Batzer was a founder and board member of the Broward Manufacturers Association  

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and a founder, director and chairman of the Broward Industrial Development      
Board, both of which are instrumental in developing an industrial economic base 
for Broward County, Florida. He is a graduate of Syracuse University, holding a 
bachelor's degree in industrial engineering.                                    

Laura H. Rollins joined the Company as Comptroller in August, 1998. She         
previously worked for the Company's auditors, Serotta, Maddox, Evans & Co. for  
one year and for C. C. McGregor & Co. of Columbia, South Carolina for the prior 
two and one-half years. She is a certified public accountant licensed in South  
Carolina and Georgia and a graduate of the University of North Carolina. She is 
a member of the AICPA and the South Carolina and Georgia Societies of CPA's.    

Richard Belz was elected a director of the Company in November 1998. He has been
a principal and officer of Redstone Securities, Inc. since 1989. He is a        
licensed securities representative and certified public accountant.             

Cynthia D. Holley has been an employee of the Company since October 1995 as     
office manager and administrative assistant and was promoted to her present     
position in April 1999. She is a graduate of Mercer University with a BBA in    
marketing management and holds certificates as human relations specialist and   
GMHA housing consultant.                                                        

Chester C. Helmick joined Augusta Housing Center, one of the Company's          
subsidiaries, in 1984 as a housing consultant and has served the Company in     
various managerial positions since its acquisition of that subsidiary. He was   
elected to his present position with the Company in March 1999. Mr. Helmick is  
retired from the United States Army in which he served for 20 years.            

Mr. Wilson and Mr. Evans may be deemed promoters of the Company. They, members  
of their families, and Mr. Batzer have been involved in several transactions    
with the Company, described in "Certain Transactions".                          

Each director serves for a term of one year and is elected at the annual meeting
of shareholders. The Company's officers are appointed by its Directors and hold 
office at their discretion.                                                     

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Item 6. Executive Compensation                                                  

  The following table sets forth information  concerning total compensation paid
by the  Company  during  its last  three  fiscal  years to the  Company's  chief
executive officer and its officers and directors as a group:                    

Year Ended
Name                         Position       March 31         Compensation (1)   
----                         --------      --------         ----------------    

E. Samuel Evans              President       1999              $   110,332      
                                       1998              $   105,741
                                       1997              $    94,259

All directors and officers                   1999              $   307,182      
as a group (6 in number)                     1998              $   259,211      
                                       1997              $   156,759
----------------                                                                

(1)  This compensation consisted entirely of salary. It did not include         
    automobile allowances in the amount of $18,000 paid to Mr. Evans in fiscal
1998, the cost of health insurance benefits, or the guarantee fee paid
 annually to Mr. Evans for his personal guarantee of the Company's floor
plan financing. See "Certain Relationships and Related Transactions". 

In fiscal 1997, 1998 and 1999, the Company granted a total of 200,000 Class A   
Warrants each to Messrs. Wilson and Evans. These grants were made in            
consideration for services they rendered to the Company. The Warrants had no    
significant value at the dates they were issued.                                

Mr. Batzer and Mr. Belz serve as directors for minimal cash compensation but are
reimbursed for out-of-pocket expenses in attending to the affairs of the        
Company. Mr. Batzer has also been granted 50,000 Class A Warrants for his       
services.                                                                       

The Company has entered into an employment agreement terminating on March 31,   
2000 with Mr. Evans calling for compensation of $96,000 per year plus bonuses to
be determined by the Board of Directors based upon profitability of the         
Company's operations. The employment contract also contains a covenant not to   
compete with the Company for a period of one year following termination of      
employment.                                                                     

Equity Incentive Plan                                                           
---------------------                                                           

On April 26, 1996 the Company adopted an Equity Incentive Plan and reserved 1   
million shares for issuance pursuant to options and awards granted under the    
Plan. All full time employees are eligible for participation in the Plan,       
including senior management and directors. All awards and options issued under  
the Plan must be approved by a committee of the Board of Directors not including
members of senior management, which will fix the terms of the options and awards
granted. At this date no such awards or options remain in effect.               

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Item 7. Certain Relationships and Related Transactions                          

The Company and its subsidiaries have engaged in the following transactions with
officers and directors of the Company and members of their immediate families   
since April 1, 1998:                                                            

1.   On May 24, 1999, the Company paid off a mortgage loan in the amount of     
   $114,424 from McDuffie Bank & Trust Co. of Thomson, Georgia, the proceeds
    of which were used to repay a loan of $40,000 made to purchase the Mayfair
Acres property and to pay for the development of the lots and site    
     improvements on the property. This bank loan had been personally guaranteed
     by Messrs. Evans and Wilson, and in consideration for giving their personal
    guarantees, the Company had issued to each of them 20,000 shares of Common
Stock in March 1994.                                                  

2.   Mr. Evans has personally guaranteed payment of the Company's obligations   
  under its existing floor plan lines of credit. For these guarantees, the
   Company has paid him a fee which during fiscal 1999 amounted to $147,560.

3.   The Company employs Sheryl Evans, wife of Mr. Evans, as consultant in the  
     decoration and furnishing of mobile homes it sells to its retail customers.
  During fiscal 1999, Mrs. Evans received $152,725 for her services to the
  Company in this capacity, and incurred approximately $24,000 in expenses
for the purchase of materials used in Company displays.               

4.   On April 28, 1999, the Company purchased two manufactured homes from Bryce 
   Batzer, a director of the Company, for a total purchase price of $62,349,
     which was approximately his cost in the homes. On that day, Mr. Batzer used
  the proceeds from the sale to acquire a $65,000 convertible debenture of
     the Company. The remaining $2,651 was treated as a miscellaneous expense of
the Company.                                                          

5.   The Company rents three mobile homes from E. Samuel Evans for use as sales 
    offices on its lots in Augusta and Statesboro, Georgia and Anderson, South
Carolina. Total rental for these homes is $33,446 per year.           

6.   On October 1, 1998, the Company acquired Southern States Lenders, Inc. a   
     local Augusta Georgia mortgage lender and servicer, for a price of $20,000.
  After coming to the conclusion that this acquisition would not serve the
     Company's best interests, in April, 1999 it distributed to its shareholders
   the shares it held in Southern States, and certain directors and officers
    of the Company, including Messrs. Evans and Wilson, acquired the remaining
    shares of that company. No transactions undertaken by Southern States have
been recorded on the Company's books. The Company has recovered from  
    Southern States its entire investment in that company and has no remaining
connections with it.                                                  

The Company believes that these transactions with its officers and shareholders 
have been and will be on terms no less favorable to the Company than those      
available from unaffiliated parties.                                            

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Item 8. Legal Proceedings                                                       

The Company is currently a defendant in several lawsuits, none of which is      
material to its operations or would, in the event of an adverse decision, be    
materially adverse to its business.                                             

Item 9. Market Price and Dividends on the Registrant's Common Equity and        
Related Stockholder Matters                                                     

The Company's Common Stock have traded on the OTC Bulletin Board since May 11,  
1998. The following table sets forth the high and low bid and asked prices for  
both securities and the volume of trading on a quarterly basis since that date. 

Quarter Ended                   Bid                    Asked            
-------------                   ---                    -----            

June 30, 1998                3.00--9.12               4.00--9.62          
September 30, 1998           3.50--5.62               3.62--6.00          
December 31-1998             0.94--3.68               1.75--4.50          
March 31, 1999               1.75--3.25               1.75--4.00          
June 30 1999                 1.62--2.37               1.87--3.00          

On June 30 1999 the Common Stock was quoted at 2.12 bid and 2.37 asked.         

Item 10 Recent Sales of Unregistered Securities                                 

Since April 1, 1996, the Company has issued shares of Common Stock, warrants to 
purchase Common Stock and debentures convertible into Common Stock in the       
following transactions. None of these securities was registered under the       
Securities Act of 1933 on the basis of the exemptions stated below.             

1.   In June 1996 the Company issued to 19 purchasers a total of $600,000 in    
     debentures convertible at $2.00 per share into Common Stock; the purchasers
    also acquired for no additional consideration warrants to purchase 600,000
shares of Common Stock for an exercise price of $6.50 per share. This 
    issuance was made pursuant to the provisions of the Rules of Regulation D,
including Rule 504,and was consequently exempt from registration.     

2.   In June 1997 $481,500 of the foregoing debentures were converted into      
    240,750 shares of Common Stock at the conversion price of $2.00 per share.
     This issuance was exempt from registration pursuant to Section 3(a)9 of the
Act.                                                                  

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3.   During 1998 a total of $77,500 in debentures issued by the Company in a    
    private offering in 1993 were converted into 62,000 shares of Common Stock
in accordance with their terms. The issuance of these shares was also 
exempt from registration by reason of the provisions of Section 3(a)9.

4.   In December 1997 the Company issued to 12 purchasers a total of 201,172    
shares of Common Stock for a price of $5.00 per share, or a total of  
    $1,005,860. As part of the transaction, the agent placing these shares was
   granted the right to purchase for a price of 10 cents per warrant 100,000
   warrants to purchase shares of Common Stock at $6.50 per share and issued
   75,000 shares of Common Stock. This transaction was conducted pursuant to
Regulation D, including Rule 504, and was therefore exempt from       
registration under the Act.                                           

5.   From January to April 1999, the Company issued to a total of eight         
investors, including Bryce Batzer, one of its directors, a total of   
  $202,500 in debentures convertible into Common Stock at a price of $4.00
per share. This issuance was conducted pursuant to the provisions of  
 Regulation D, including Rule 506, and was thus exempt from registration
under the Act. The debentures have been legended as "restricted       
securities", as that term is defined in Rule 144, and may not be      
transferred except in accordance with the provisions of that Rule.    

6.   During fiscal 1999 the Company issued a total of 12,000 shares to two      
  persons for the performance of internal financial reporting services and
25,000 shares to a financial public relations firm for assistance in  
 preparing press releases and reports to stockholders. These shares were
   issued as "restricted shares" under Section 4(2) of the Act and Rule 144,
     are legended as such and may not be sold or trasferred except in compliance
with Rule 144.                                                        

Item 11. Description of Registrant's Securities to be Registered                

Common Stock                                                                    

The Company is authorized to issue 10,000,000 shares of Common Stock, $.002 par 
value. At June 30, 1999, there were 2,091,539 shares of Common Stock issued and 
outstanding, owned by 61 stockholders of record. Based on its inquiries with the
market makers for the Common Stock, the Company believes there to be at least   
250 beneficial owners holding their shares in brokerage accounts. The following 
description of the Company's securities does not purport to be complete and is  
subject to and qualified in its entirety by reference to the Certificate of     
Incorporation and By-laws of the Company and the provisions of applicable law.  

Each holder of Common Stock is entitled to all rights and privileges of holders 
of common stock under Delaware law, which provides that: (1) such holders are   
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of legally available funds; (2) in the    
event of the liquidation, dissolution or winding up of a corporation, such      
holders are entitled to share ratably in all assets remaining after the payment 
of liabilities and (3) such holders do not have preemptive rights or other      

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rights to subscribe for additional shares. There are no redemption or sinking   
fund provisions applicable to the Common Stock. Each Common Stock holder has the
right to one vote for each share he owns. As there is no cumulative voting for  
the election of directors or any other purpose, the persons holding a majority  
of the outstanding shares voted in any election of directors will be able to    
elect all directors. All outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and non-assessable. All shares of Common Stock are   
issued in registered form and are freely transferable, subject to applicable    
securities laws and to restrictive agreements between the Company and the       
holders of such shares.                                                         

Transfer Agent                                                                  

The Transfer Agent for the Common Stock and Class A Warrants is OTC Corporate   
Transfer Service Company, P.O. Box 501, Hicksville, New York 11801              
(516-433-6503).                                                                 

Item 12. Indemnification of Directors and Officers                              

Section 102(b)(7) of the Delaware General Corporation Law grants corporations   
the right to limit or eliminate the personal liability of their directors for   
monetary damages for breach of their fiduciary duty except for breaches of the  
director's duty of loyalty to the corporation or its stockholders, for acts or  
omissions not in good faith or which involve intentional misconduct or knowing  
violation of law, for certain transactions involving unlawful payments on       
account of dividends or repurchase or redemption of the corporation's stock, and
for transactions in which the directors derive an improper personal benefit. The
Company's Certificate of Incorporation provides for the elimination of personal 
liability of a director to the Company and its stockholders for monetary damages
for the breach of the director's fiduciary duty to the full extent allowable    
under Section 102(b)(7).                                                        

Section 145 of the Delaware General Corporation Law grants corporations the     
right to indemnify their directors, officers, employees and agents against      
expenses, judgment, fines and other amounts paid pursuant to settlement of any  
pending, completed or threatened legal action to which any of such persons      
becomes a party by reason of the fact that he is or was a director, officer,    
employee or agent of the corporation so long as the indemnity has acted in good 
faith and in a manner he reasonably believes to be or not opposed to the best   
interests of the corporation and, with respect to any criminal action or        
proceeding, has had no reasonable cause to believe that his conduct was         
unlawful. The Company's Certificate of Incorporation provides for               
indemnification of such persons to the full extent allowable under applicable   
law.                                                                            

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Item 13. Financial Statements and Supplementary Data                            

See the attached financial statements listed in Item 15.                        

Item 14. Changes in Registrant's Certifying Accountants                         

The Company's consolidated financial statements were previously audited by      
Cherry Bekaert & Holland LLP as of and for the year ended March 31, 1997 and by 
Serotta Maddocks Evans & Co. as of and for the year ended March 31, 1998. The   
Company in March, 1998 decided, with approval by the Board of Directors, to     
dismiss Cherry Bekaert & Holland LLP and change to Serotta Maddocks Evans & Co. 
On March 18, 1999, the Company, with the approval by the Board of Directors,    
decided to change audit services from Serotta Maddocks Evans & Co. to Gifford,  
Hillegass & Ingwersen, P.C. This decision was based on the fact that Serotta    
Maddocks Evans & Co. does not provide audit services to SEC reporting entities. 

The reports of Cherry Bekaert & Holland LLP and Serotta Maddocks Evans & Co.    
over the past two fiscal years contained no adverse opinion or disclaimer of    
opinion and were not qualified or modified as to uncertainty, audit scope or    
accounting principle.                                                           

In connection with the audits for the two most recent fiscal years and through  
March 18, 1999, there have been no disagreements with Cherry Bekaert & Holland  
LLP or Serotta Maddocks Evans & Co. on any matter of accounting principles or   
practices, financial statements disclosure, or auditing scope or procedure,     
which disagreements if not resolved to the satisfaction of Cherry Bekaert &     
Holland LLP and Serotta Maddocks Evans & Co. would have caused them to make     
reference thereto in their report on the financial statements for such years.   
There have been no reportable events during the two most recent fiscal years and
through March 18, 1999.                                                         

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Item 15. Financial Statements and Exhibits                                      

Financial Statements                                                            

Item                                                                 Page No.   
----                                                                 --------   

Report of Gifford Hillegass & Ingwersen, P.C.                          F-1      
Independent Accountants                                                     
Consolidated Balance Sheets as of March 31, 1998                       F-3      
and March 31, 1999                                                          
Consolidated Statement of Operations for the                           F-5      
years ended March 31, 1997,  March                                          
31, 1998 and March 31, 1999                                                 
Consolidated Statement of Changes in                                   F-6      
Shareholders' Equity for the years ended                                    
March 31, 1997, March 31, 1998 and March 31, 1999                           
Consolidated Statement of Cash Flows for the year                      F-7      
ended March 31, 1997, March 31, 1998 and March 31, 1999                     
Notes to Financial Statements                                          F-9      

Report of Serotta Maddocks Evans & Co., CPA's                          F-23     
Independent Accountants                                                     
Consolidated Balance Sheet as of March 31, 1998                        F-24     
Consolidated Statement of Operations                                   F-25     
for the year ended March 31, 1998                                           
Consolidated Statement of Changes in Shareholders' Equity              F-26     
for the year ended March 31, 1998                                           
Consolidated Statements of Cash Flows for the year ended               F-27     
March 31, 1998                                                              
Notes to Financial Statements                                          F-28     

Report of Cherry Bekaert & Holland LLP,                                F-35     
Independent Accountants                                                     
Consolidated Balance Sheet as of March 31, 1997                        F-36     
Consolidated Statement of Operations                                   F-38     
for the year ended March 31, 1997                                           
Consolidated Statement of Changes in Shareholders' Equity              F-39     
for the year ended March 31, 1997                                           
Consolidated Statements of Cash Flows for the year ended               F-40     
March 31, 1997                                                              
Notes to Financial Statements                                          F-41     

Exhibits                                                                        

3(i)    Certificate of Incorporation of the Company,                 E-1    
as amended                                                
3(ii)   By-laws of the Company                                       E-11   
10.1    Employment Agreement between the Company and E.              E-21   
Samuel Evans dated April 26, 1996                         
10.2.1  Rental  Agreement  between the Company and E.                E-26   
Samuel Evans dated  February  15, 1995                    
covering the rental of manufactured home sales            
office                                                    
10.2.2  Rental Agreement between the Company and                     E-27   
E. Samuel Evans dated January 1, 1997 covering            
the rental of a manufactured home sales office            
16.1    Letter re changes in certifying accountants                  E-28   
from Cherry, Bekaert & Holland, LLP                       
16.2    Letter re changes in certifying accountants                  E-29   
from Serotta Maddocks Evans & Co., CPA'S                  
21      List of subsidiaries of the Company                          E-30   
23.1    Consent of Independent Accountants                           E-31   
Cherry Bekaert & Holland, LLP                             
23.2    Consent of Independent Accountants                           E-32   
Serotta Maddocks Evans & Co., CPA'S                       
23.3    Consent of Independent Accountants                           E-33   
Gifford Hillegass & Ingwersen, P.C.                       
27      Financial Data Schedule                                             

(24)

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors                                                       
Apple Homes Corporation and Subsidiaries                                        
Evans, Georgia                                                                  

     We have audited the accompanying  consolidated balance sheet of Apple Homes
Corporation  and  Subsidiaries  at March 31, 1999, and the related  consolidated
statements of operations,  changes in stockholders'  equity,  and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  based on our  audit.  The
consolidated  financial  statements of Apple Homes  Corporation  as of March 31,
1998 were audited by other auditors whose report dated June 15, 1998 (except for
Notes 13 and 16, dated June 23, 1999) expressed an unqualified  opinion on those
statements.  The consolidated financial statements of Apple Homes Corporation as
of March 31, 1997 were audited by other auditors, whose report dated January 26,
1998 expressed an unqualified opinion on those statements.  As discussed in Note
M  to  these  consolidated  financial  statements,  the  consolidated  financial
statements for March 31, 1998 and 1997 have been adjusted to reflect  correction
of errors related to these years.                                               

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.                                               

F-1 

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     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects,  the financial position of Apple Homes
Corporation  and  Subsidiaries  as of March 31,  1999,  and the results of their
operations  and their  cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.                                       

                                       /s/  Gifford, Hillegass & Ingwersen, P.C.
                                       -----------------------------------------
                                            GIFFORD, HILLEGASS & INGWERSEN, P.C.

June 23, 1999                                                                   

F-2 

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APPLE HOMES CORPORATION AND SUBSIDIARIES                                                                                            

Consolidated Balance Sheets                                                                                                         

====================================================================================                                                

                                         Assets                                                                                     
                                                                    March 31,                                                       
                                                           -------------------------                                                
                                                              1999           1998                                                   
------------------------------------------------------------------------------------                                                

                                                                                                                                    
Current assets                                                                                                                      
       Cash                                                $   683,452   $   922,176                                                
       Accounts receivable                                     781,723       240,445                                                
       Rebates receivable                                      409,011          --                                                  
       Other receivable                                         57,645       165,766                                                
       Inventories (Notes C and F)                           8,317,210     5,251,617                                                
       Other current assets                                     18,116        95,087                                                
       Deferred taxes (Note J)                                 107,520        74,531                                                
       Notes receivable, current portion (Note E)              544,955        42,883                                                

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

            Total current assets                            10,919,632     6,792,505                                                
                                                           -----------   -----------                                                

Property and equipment, net (Notes D and H)                  1,235,876       402,160                                                
                                                           -----------   -----------                                                

Other assets                                                                                                                        
       Notes receivable, net of current portion (Note E)       184,215       679,761                                                
       Deferred taxes (Note J)                                    --          78,102                                                
       Deferred loan costs, net of accumulated                                                                                      
         amortization of $92,954 and $74,954                    89,325        87,050                                                
       Goodwill, net of accumulated amortization                                                                                    
         of $39,747 and $29,979 (Note P)                       434,341       292,175                                                
       Other assets                                             43,195          --                                                  
                                                           -----------   -----------                                                

            Total other assets                                 751,076     1,137,088                                                
                                                           -----------   -----------                                                

       TOTAL ASSETS                                        $12,906,584   $ 8,331,753                                                
                                                           ===========   ===========                                                

====================================================================================                                                

                                       F-3                                                                                          

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====================================================================================                                                

                            Liabilities and Stockholders' Equity                                                                    
                                                                  March 31,                                                         
                                                       -----------------------------                                                
                                                            1999             1998                                                   
------------------------------------------------------------------------------------                                                

Current liabilities                                                                                                                 
       Floorplan payable (Note F)                       $  7,993,154    $  4,641,509                                                
       Accounts payable                                      746,969         421,493                                                
       Sales tax payable                                     170,749         207,009                                                
       Accrued salaries and commissions                       90,926         230,799                                                
       Other accrued liabilities                             195,640         309,490                                                
       Customer deposits                                     132,037          96,704                                                
       Income tax payable                                     18,826            --                                                  
       Due to minority stockholders                           40,407         128,440                                                
       Notes payable, current portion (Notes G and H)         87,933         116,249                                                
                                                        ------------    ------------                                                

            Total current liabilities                      9,476,641       6,151,693                                                
                                                        ------------    ------------                                                

Long term liabilities                                                                                                               
       Notes payable (Notes G and H)                       1,054,316         491,508                                                
                                                        ------------    ------------                                                

Minority interest in net assets of                                                                                                  
       consolidated corporation                               84,517          79,496                                                
                                                        ------------    ------------                                                
Commitments and contingencies (Note O)                                                                                              

Stockholders' equity                                                                                                                
       Common stock, $.002 par value; authorized                                                                                    
            10,000,000 shares; 2,091,539 and                                                                                        
            1,790,614 issued and outstanding                   4,183           3,581                                                
       Additional paid-in capital                          2,727,809       2,150,661                                                
       Retained deficit                                     (440,882)       (545,186)                                               
                                                        ------------    ------------                                                

            Total stockholders' equity                     2,291,110       1,609,056                                                
                                                        ------------    ------------                                                

       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $ 12,906,584    $  8,331,753                                                
                                                        ============    ============                                                

=====================================================================================                                               
      The accompanying notes are an integral part of these financial statements.                                                    

                                       F-4                                                                                          

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APPLE HOMES CORPORATION AND SUBSIDIARIES                                                                                            

Consolidated Statements of Operations                                                                                               

======================================================================================================================              

                                                                                   Year ended March 31,                             
                                                                        1999               1998               1997                  
----------------------------------------------------------------------------------------------------------------------              

Sales                                                               $ 33,776,250       $ 25,615,535       $ 15,549,376              
Cost of Sales                                                         27,849,088         20,543,498         12,327,352              
                                                                    ------------       ------------       ------------              

      Gross Profit                                                     5,927,162          5,072,037          3,222,024              
                                                                    ------------       ------------       ------------              

Operating expenses                                                                                                                  
      Compensation                                                     2,948,697          2,354,711          1,416,052              
      Occupancy and vehicle                                              269,482            357,735            239,413              
      Advertising                                                        639,072            352,610            194,151              
      Insurance                                                          223,001            196,223            101,373              
      Taxes and licenses                                                 301,447            296,081            140,489              
      Professional fees                                                  125,805            219,417            147,383              
      Depreciation and amortization                                       97,562             70,059             37,980              
      Other                                                            1,569,292          1,190,239            828,645              
                                                                    ------------       ------------       ------------              

           Total operating expenses                                    6,174,358          5,037,075          3,105,486              
                                                                    ------------       ------------       ------------              

           Operating income (loss)                                      (247,196)            34,962            116,538              

Other income (expense)                                                                                                              
      Finance participation                                              429,814            136,460               --                
      Rental income                                                       92,200               --                 --                
      Interest income                                                     88,140             27,137             49,457              
      Commissions                                                        231,183            107,666             36,851              
      Other income (expense)                                              17,528            380,082             (5,332)             
      Interest expense                                                  (424,637)          (613,560)          (599,322)             
                                                                    ------------       ------------       ------------              

           Total other income (expense)                                  434,228             37,785           (518,346)             
                                                                    ------------       ------------       ------------              

Income (loss) before income tax provision and minority interest          187,032             72,747           (401,808)             

Income tax (provision) benefit                                           (72,739)           116,114             33,333              

Minority interest in net income of consolidated subsidiaries              (9,989)          (240,392)           (71,051)             
                                                                    ------------       ------------       ------------              

           NET INCOME (LOSS)                                        $    104,304       $    (51,531)      $   (439,526)             
                                                                    ============       ============       ============              

Per share data: (Note I)                                                                                                            
      Weighted average number of shares outstanding                    1,925,012          1,491,423          1,109,669              

      Net income (loss) per share                                   $       0.05       $      (0.03)      $      (0.40)             

======================================================================================================================              

                  The accompanying notes are an integral part of these financial statements.                                        

                                                                 F-5                                                                

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APPLE HOMES CORPORATION AND SUBSIDIARIES                                                                                            

Consolidated Statements of Changes in Stockholders'  Equity                                                                         

Years Ended March 31, 1999, 1998, and 1997                                                                                          
=================================================================================================================================== 

                                                                                            Additional     Retained                 
                                                                 Number of      Common       Paid-in       Earnings                 
                                                                  Shares         Stock       Capital       (Deficit)       Total    
----------------------------------------------------------------------------------------------------------------------------------- 

Balance, March 31, 1996                                          1,067,849   $     2,136   $   775,289   $   (54,129)   $   723,296 

       Issuance of common stock                                     99,118           198        49,459          --           49,657 

       Net loss                                                       --            --            --        (439,526)      (439,526)
                                                               -----------   -----------   -----------   -----------    ----------- 

Balance, March 31, 1997, as restated (a)                         1,166,967         2,334       824,748      (493,655)       333,427 

       Issuance of common stock:                                                                                                    
            Stock offering / services, as restated (a)             268,672           537       711,587          --          712,124 
            Debt disposition                                       266,475           533       484,467          --          485,000 
            Residential land and manufactured homes                 88,500           177       129,859          --          130,036 

       Net loss, as restated (a)                                      --            --            --         (51,531)       (51,531)
                                                               -----------   -----------   -----------   -----------    ----------- 

Balance, March 31, 1998, as restated (a)                         1,790,614         3,581     2,150,661      (545,186)     1,609,056 

       Issuance of common stock:                                                                                                    
            Professional services                                   66,925           134        88,616          --           88,750 
            Debt disposition                                       104,000           208       161,292          --          161,500 
            Purchase of subsidiary                                 130,000           260       227,240          --          227,500 

       Sale of warrants                                               --            --         100,000          --          100,000 

       Net income                                                     --            --            --         104,304        104,304 
                                                               -----------   -----------   -----------   -----------    ----------- 

Balance, March 31, 1999                                          2,091,539   $     4,183   $ 2,727,809   $  (440,882)   $ 2,291,110 
                                                               ===========   ===========   ===========   ===========    =========== 

(a)  Reference  Note M for  explanation  of restated  balances  and prior period adjustments.                                       

====================================================================================================================================

                      The accompanying notes are an integral part of these financial statements.                                    

                                                              F-6                                                                   

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APPLE HOMES CORPORATION AND SUBSIDIARIES                                                                                            

Consolidated Statements of Cash Flows                                                                                               

============================================================================================================================        

                                                                                          For the Year Ended March 31,              
                                                                             -----------------------------------------------        
                                                                                 1999             1998              1997            
----------------------------------------------------------------------------------------------------------------------------        

Cash flows from operating activities:                                                                                               
       Net income (loss)                                                     $   104,304       $   (51,531)      $  (439,526)       

       Adjustments to reconcile net income (loss) to net cash                                                                       
       provided by (used in) operating activities                                                                                   
            Bad debt expense                                                      51,101            21,324              --          
            Bad debt recovery                                                       --             (76,602)             --          
            Deferred income taxes                                                 45,113          (116,114)          (29,933)       
            Depreciation and amortization                                         97,562            70,059            37,980        
            Issuance of common stock for                                                                                            
              professional services                                               74,000              --              49,657        
            Issuance of common stock in lieu of                                                                                     
              payment of interest expense                                         38,750              --                --          
            Gain on sale of assets                                                  --            (190,137)           (2,500)       
            Minority interest in net income of                                                                                      
              consolidated subsidiary                                              9,989           240,392            71,051        
       Changes in assets and liabilities, net of effects                                                                            
         from purchase of subsidiary:                                                                                               
            Accounts receivable                                                 (505,536)         (195,431)           73,726        
            Other receivables                                                   (289,790)           98,686          (180,080)       
            Inventories                                                       (2,767,830)         (830,859)       (2,215,125)       
            Other current assets                                                  76,971           (86,250)           (1,988)       
            Notes receivable                                                    (337,627)         (393,507)         (127,748)       
            Other assets                                                         (15,356)           14,435            57,995        
            Floorplan payable                                                  3,351,645           747,384         2,168,133        
            Accounts payable                                                     310,524           (78,766)          359,826        
            Accrued expenses                                                    (317,992)          458,980           182,533        
            Customer deposits                                                     35,333            (9,968)           75,223        
            Other liabilities                                                     18,826            (2,009)           27,009        
                                                                             -----------       -----------       -----------        

                  Net cash provided by (used in) operating activities            (20,013)         (379,914)          106,233        
                                                                             -----------       -----------       -----------        

Cash flows from investing activities:                                                                                               
       Additions to property and equipment                                      (257,783)         (145,022)         (161,803)       
       Excess of cash acquired over cash paid for                                                                                   
         purchsed subsidiary                                                      44,805              --                --          
       Proceeds from the sale of developed                                                                                          
         residential land and manufactured homes                                    --             292,000             2,500        
       Advances to related entities                                                 --             132,999           (64,099)       
                                                                             -----------       -----------       -----------        

                  Net cash provided by (used in) investing activities           (212,978)          279,977          (223,402)       
                                                                             -----------       -----------       -----------        

============================================================================================================================        

                                                           F-7                                                                      

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===========================================================================================================================         

                                                                                        For the Year Ended March 31,                
                                                                            -----------------------------------------------         
                                                                               1999               1998            1997              
---------------------------------------------------------------------------------------------------------------------------         

Cash flows from financing activities:                                                                                               
     Principal payments on notes payable                                    $  (181,346)       $ (402,891)      $   (68,461)        
     Proceeds from issuance of notes payable                                    188,889              --             862,027         
     Payments made for loan cost                                                (20,275)             --                --           
     Additions to deferred underwriting cost                                       --                --            (200,926)        
     Proceeds from issuance of common stock and warrants                        100,000         1,058,312            45,528         
     Distributions paid to minority stockholders                                   --            (185,393)         (111,499)        
     Due to/from minority stockholders, net                                     (93,001)          128,440              --           
     Repayments on advances from officers                                          --             (19,000)          (34,082)        
                                                                            -----------       -----------       -----------         

                Net cash provided (used) by financing activities                 (5,733)          579,468           492,587         
                                                                            -----------       -----------       -----------         

                Net increase (decrease) in cash                                (238,724)          479,531           375,418         

Cash, beginning of year                                                         922,176           442,645            67,227         
                                                                            -----------       -----------       -----------         

Cash, end of year                                                           $   683,452       $   922,176       $   442,645         
                                                                            ===========       ===========       ===========         

Supplemental disclosure of cash flow information:                                                                                   

     Cash paid during the year for interest                                 $   533,881       $   602,000       $   503,982         
                                                                            ===========       ===========       ===========         

     Cash paid during the year for income taxes                             $     8,770       $      --         $      --           
                                                                            ===========       ===========       ===========         

     Non cash investing and financing activities:                                                                                   

                Financed property and equipment purchases                   $   644,449       $    35,036       $      --           
                Purchased subsidiary through                                                                                        
                  Issuance of common stock                                      227,500              --                --           
                  Seller financing                                               20,000              --                --           
                Repossessed mobile home units                                                                                       
                  converted to inventory                                        280,000              --                --           
                Converted developed residential land to:                                                                            
                     Inventory                                                     --             449,314              --           
                     Property and equipment                                        --             132,477              --           
                Note payable and interest converted to common stock              98,750              --                --           
                Debentures converted to common stock                             77,500           485,000              --           
                Issuance of stock for professional services                      74,000           150,000              --           
                Developed residential land received in exchange for:                                                                
                     Accounts receivable                                           --              51,134              --           
                     Notes receivable                                              --             210,591              --           
                     Common stock                                                  --             130,000            54,700         
                Transfer of deferred underwriting cost against                                                                      
                  related capital contributio                                      --             346,152              --           

===========================================================================================================================         

                          The accompanying notes are an integral part of these financial statements.                                

                                                              F-8                                                                   

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE A - NATURE OF BUSINESS                                                     

The principal  operations of Apple Homes  Corporation and its subsidiaries  (the
"Company") consist of the sale and installation of manufactured homes, primarily
in the southeastern  United States.  The subsidiaries of Apple Homes Corporation
consist of the following:                                                       

Name                                      Location             Percent Ownership
--------------------------------------------------------------------------------

Augusta Housing Center, Inc.          Augusta, Georgia                100%      
Big Daddy's Mobile Homes, Inc.        Augusta, Georgia                 80%      
Evans-Lanier, Inc.                    Thomson, Georgia                 80%      
Apple Homes, Inc.                     Waynesboro, Georgia             100%      
J. C. Homes, Inc.                     Augusta, Georgia                 80%      
Tim Phillips Homes, Inc.              Thomson, Georgia                 80%      
Mobile Air Systems, Inc.              Augusta, Georgia                100%      

All  subsidiaries  conduct  business  in the name of Apple  Homes.  The  Company
extends customary trade terms to some of its customers,  all of whom are located
in the southeastern United States.                                              

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             

Consolidation                                                                   
The consolidated  financial  statements  include the accounts of the Company and
its wholly  owned and majority  owned  subsidiaries.  All material  intercompany
accounts and transactions are eliminated in consolidation.                      

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

Receivables                                                                     
The Company uses the allowance method to provide for recognition of bad debt.   

F-9 

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 

Inventories                                                                     
Inventories  are stated at the lower of cost or market and are determined  using
the specific identification method.                                             

Property and Equipment                                                          
Property and equipment are stated at cost.  Maintenance  and repairs are charged
to expense as incurred, and renewals and betterments are capitalized. Provisions
for  depreciation  are charged to income over the estimated  useful lives of the
assets using methods  applicable  for income tax  purposes,  which do not differ
significantly from generally accepted accounting principles.                    

Deferred Loan Costs                                                             
Deferred loan costs related to the private placements of subordinated debentures
described in Note G are being  amortized  over the expected  life of the related
debt using a method that approximates the interest method.                      

Goodwill                                                                        
Goodwill  represents the excess of acquisition  costs over the fair market value
of the net assets of acquired  subsidiaries.  Goodwill is being  amortized  on a
straight-line  basis over a period of forty years.  In  accordance  with APB 17,
"Intangible  Assets," the Company continues to evaluate the amortization  period
to  determine  whether  events or  circumstances  warrant  revised  amortization
periods.                                                                        

Advertising Costs                                                               
The Company expenses advertising costs as they are incurred.                    

Income Taxes                                                                    
Income taxes are allocated among Apple Homes  Corporation  and its  subsidiaries
based upon their respective  separate taxable income or loss. Deferred taxes are
recognized  for  differences  between  the basis of assets and  liabilities  for
financial statement and income tax purposes. The differences relate primarily to
allowance for doubtful receivables  (deductible for financial statement purposes
but not for  income  tax  purposes),  inventory  capitalization  for  income tax
reporting,  and the  value of net  operating  losses  for tax  purposes  carried
forward from prior  years.  The  deferred  tax assets  represent  the future tax
return  consequences  of these  differences,  which will be deductible  when the
assets are recovered or settled.                                                

F-10

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 

Fair Value of Financial Instruments                                             
The carrying amounts of cash,  receivables,  and payables approximate fair value
because  of the short  maturity,  generally  less than  three  months,  of these
instruments.  The carrying value of the Company's notes receivable  approximates
fair value because the majority of the  outstanding  balance was adjusted to the
sales price of the notes sold subsequent to year end as described in Note E. The
carrying value of the Company's  long-term debt  approximates fair value because
current market prices and the Company's current  incremental  borrowing rate are
not significantly different from the terms in the Company's debt portfolio.     

Concentration of Credit Risk                                                    
The Company is subject to credit risk  through  trade and note  receivables  and
uninsured cash balances.  The majority of the Company's  business is from retail
trade of manufactured homes in the southeastern United States. Consideration was
given to this  concentration and the financial  position of these customers when
determining  the allowance  for doubtful  accounts.  Reference  Note O regarding
potential recourse liability. Cash is  placed in well capitalized,  high quality
financial  institutions.  The Federal Insurance  Corporation insures accounts at
each  institution  up to $100,000.  At March 31, 1999  balances in excess of the
$100,000 limit amounted to approximately $285,000.                              

Reclassifications                                                               
Certain 1998 and 1997 amounts  have been  reclassified  to conform with the 1999
presentation.  These  reclassifications  had no effect on net income or loss for
the years.                                                                      

F-11

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE C - INVENTORIES                                                            

At March 31, 1999 and 1998, inventories consisted of:                           

                                            1999                  1998
                                           ---------------      --------------
        New Manufactured Homes             $     7,377,858      $    4,537,876
        Repossessed Homes                          191,513                 -0-
        Used Manufactured Homes                    194,233             264,427
        Air Conditioning Units                      89,088                 -0-
        Land and Home Packages                     464,518             449,314
                                           ---------------      --------------
                                           $     8,317,210      $    5,251,617
                                           ===============      ==============

NOTE D - PROPERTY AND EQUIPMENT                                                 

At March 31, 1999 and 1998, property and equipment consisted of:                

                                            1999                1998
                                           -------------       -------------
       Land                                $     325,000       $         -0-
       Buildings                                 416,930             200,477
       Furniture and Fixtures                     86,194              56,604
       Vehicles                                  176,250              73,559
       Leasehold Improvements                    173,594                 -0-
       Machinery and Equipment                    34,337                 -0-
       Rental Units                              134,186             132,477
                                           -------------       -------------
                                               1,346,491             463,117
        Less Accumulated Depreciation            (110,615)            (60,957)
                                           -------------       -------------
                                           $   1,235,876       $     402,160
                                           =============       =============

NOTE E - NOTES RECEIVABLE                                                       

Notes receivable result from Company financial sales of manufactured  homes. The
notes have remaining  terms of one to thirty years and interest rates range from
8% to 15%.  Subsequent to March 31, 1999, the Company sold notes receivable with
a face value of $596,717 to a financing  company for  $481,605.  The discount of
$115,112  was recorded at March 31, 1999 as part of the  allowance  for doubtful
accounts of $148,277.                                                           

Of the  thirty-two  notes which were sold by the  Company,  nineteen  notes have
recourse for twelve months, and thirteen notes were sold  without recourse.  The

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

NOTE E - NOTES RECEIVABLE (continued)                                           

conditions of the recourse  allow the Company the option to make any payments on
the owners'  behalf to avoid defaults in the loan and give the Company the right
to collect  directly from the owners for any such payments  made. No reserve has
been recorded for this recourse, as management believes the Company will be able
to collect on any outstanding payments.                                         

Notes receivable at March 31, 1998 are net of an allowance for doubtful accounts
of $97,041.                                                                     

NOTE F - FLOORPLAN PAYABLE                                                      

The Company has  maintained  a floorplan  line of credit of  $10,275,000  during
1999 and  $7,150,000  during 1998 with several  finance  companies for new homes
inventory. These credit lines are collateralized by the homes and are guaranteed
by an officer of the  Company.  Interest  rates  range from prime to prime + 2%,
depending on several factors,  including the number of days a home is on a sales
lot.  Of the  available  line,  $7,993,154  was  utilized  on March 31, 1999 and
$4,641,509 was utilized on March 31, 1998.                                      

For the years  ended  March 31,  1999 and  1998 floorplan  interest  expense was
$385,394 and $404,814, respectively.                                            

NOTE G - SUBORDINATED DEBENTURES                                                

During the year ended March 31, 1994, the Company  completed a private placement
of seventeen debentures in the principal amount of $300,000.  The debentures are
due in 2003, pay interest  semi-annually  at 10.0%,  and are  convertible by the
holders  after  two  years  into  shares  of the  Company's  common  stock  at a
conversion  ratio of $1.25 per  share.  As of March  31,  1999,  $77,500  of the
original  debenture amount had been converted into 62,000 shares of stock.  None
of the debentures were converted during the year ended March 31, 1998.          

In December 1998, the Company offered convertible  subordinated  debentures as a
private  placement  pursuant to Rule 504 of Regulation D of the 1933  Securities
Act. The offering is not to exceed $900,000.  As of March 31, 1999, $137,500 had
been issued to investors.  In April, 1999, an additional $65,000 was issued. The
debentures  are due five years from  their  date of issue.  They bear  interest,
payable  semiannually,  at a rate of 10% per annum.  They are  convertible  into
common stock of the Company at the conversion price of $5.00 per share.         

The debentures are  subordinated  in right of payment to holders of senior debt,
including bank borrowings and floorplan financing.                              

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

NOTE H - NOTES PAYABLE                                                          

At March 31 1999, and 1998, notes payable consisted of the following:           

                                                   1999             1998
                                                   ----------      -----------

Subordinated debentures (see Note G)                $  360,000       $  300,000 

Note payable to Sun Trust with  interest                                        
at 7.25%, monthly payments of $2,115 due                                        
through  December  2001;  secured  by an                                        
office building and personal guarantees                                         
of the Company president and a director.               228,802              -0- 

Note payable to  Southeastern  at 9.50%,                                        
monthly  payments  of $2,663 due through                                        
November 2013;  secured by land.                       252,393              -0- 

Note payable to McDuffie  Bank &Trust at                                        
10.25%,  monthly  payments of $1,830 due                                        
through September 2000;  secured by land                                        
and personal  guarantees  of the Company                                        
president  and a  director.                            116,247          126,335 

Note  payable  to a  stockholder  at 10%                                        
interest, principal and accrued interest                                        
of  $38,749  due  in   September   1998;                                        
unsecured.                                                 -0-           85,000 

Other  notes  payable  to banks  bearing                                        
interest ranging from prime plus .85% to                                        
18%  fixed,  monthly  payments  totaling                                        
$4,566,  maturing between April 1999 and                                        
November  2002;   secured  primarily  by                                        
automobiles.                                           114,489           66,690 

Other  notes  payable  bearing  interest                                        
rates   ranging  from  4.9%  to  11.08%,                                        
monthly payments  totaling $708 maturing                                        
between November 2001 and February 2002;                                        
secured by various equipment.                           22,111              -0- 

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NOTE H - NOTES PAYABLE (continued)                                              

                                                   1999             1998
                                                   ----------       ----------
Unsecured note payable to an individual;                                        
principal  and  interest at 10%,  due in                                        
monthly  installments  of $1,062 through                                        
November 2000                                       $   20,389       $   29,732 

Other  unsecured  notes  payable  due in                                        
full over the next year.                                27,818              -0- 
                                                   ----------       ----------

                                                    1,142,249          607,757
Less current portion                                   (87,933)        (116,249)
                                                   ----------       ----------
                                                   $1,054,316       $  491,508
                                                   ==========       ==========

As of March 31, 1999 future maturities are as follows:                          

Year ending March 31, 1999                                                      

2000                                      $   87,933        
2001                                          80,022        
2002                                         264,745        
2003                                          35,427        
2004                                         254,986        
2005 and thereafter                          419,136        
                                  ----------

                                  $1,142,249
                                  ==========

NOTE I - EARNINGS PER SHARE                                                     

Basic  earnings  (loss) per share is  computed  by  dividing  net income or loss
attributable  to  common  shares  by  the  weighted  average  of  common  shares
outstanding during the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised or  converted  into common  stock.  The  accompanying  financial
statements do not include diluted  earnings per share because  conversion of the
subordinated  debentures  described in Note G and exercise of the stock warrants
described in Note N are antidilutive for the years presented.                   

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

NOTE J - INCOME TAXES                                                           

For the years ended March 31, 1999,  1998,  and 1997 the income tax  (provision)
benefit consisted of:                                                           

                         1999          1998             1997
                        -----------    ------------    -----------
Current:                                                          
   Federal            $       -0-    $      -0-      $     -0-
   State                  (27,596)          -0-            -0-
                        -----------    ------------    -----------
                          (27,596)          -0-            -0-
                        -----------    ------------    -----------
Deferred:                                                         
     Federal                (38,372)         98,697         28,333
     State                   (6,771)         17,417          5,000
                        -----------    ------------    -----------
                            (45,143)        116,114         33,333
                        -----------    ------------    -----------

                        $   (72,739)   $    116,114    $    33,333
                        ===========    ============    ===========

The  reconciliation  of reported  income tax (expense)  benefit to the amount of
income tax (expense)  benefit that would result from applying federal  statutory
tax rates to pretax income is as follows:                                       

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

NOTE J - INCOME TAXES (continued)                                               

                                                        · Enlarge/Download Table


                                                            Year ended March 31,                                 
                                       ------------------------------------------------------------------------  
                                                 1999                      1998                       1997       
                                       ----------------------     ---------------------      ------------------  
                                        Balance          %         Balance          %         Balance       %    
                                       ----------------------     ---------------------      ------------------  
                                                                                                                 
Statutory federal income tax           $ (63,891)      (34.0)     $ (24,734)      (34.0)     $ 136,615     34.0  
State income tax, net of                                                                                         
    federal tax benefit                  (27,596)       (14.8)          -0-         -0-           -0-       -0-  
Non deductible expenses                  (36,252)       (19.4)       (2,815)       (3.9)          -0-       -0-  
Valuation allowance change                55,000         29.3       143,663       197.5       (103,282)    (25.7)
                                       ---------       ------     ---------    --------       --------    ------ 
                                       $ (72,739)       (38.9)    $ 116,114       159.6       $ 33,333       8.3 
                                       =========       ======     =========    ========       ========    ====== 

The components of deferred tax assets were as follows:                                                           

                                                                  March 31,                                      
                                               ----------------------------------------------                    
                                                    1999            1998            1997                         
                                               -------------   --------------  --------------                    
       Net operating loss carryforward         $      35,495   $      150,063  $      198,663                    
       Allowance for doubtful accounts                59,311           38,816          36,519                    
       Inventory capitalization                       12,714           18,754             -0-                    
                                               -------------   --------------  --------------                    
                                                     107,520          207,633         235,182                    
       Less valuation allowance                          -0-         (55,000)        (198,663)                   
                                               -------------   -------------   --------------                    
                                               $     107,520   $      152,633  $       36,519                    
                                               =============   ==============  ==============                    

SFAS No. 109  requires a  valuation  allowance  to be  recorded  when it is more
likely  than  not  that  some or all of the  deferred  tax  assets  will  not be
realized.  At March 31,  1999,  due to improved  profitability  of the  Company,
management  determined  that it was more  likely  than not that  future  taxable
income would be  sufficient to enable the Company to realize all of its deferred
tax assets.  Accordingly,  no valuation allowance has been recorded at March 31,
1999. As of March 31, 1999,  the remaining net operating  loss  carryforward  of
approximately $88,000 will expire in varying amounts through 2012.              

NOTE K - RELATED PARTY TRANSACTIONS                                             

During the years ended March 31, 1999, 1998, and 1997 rent of $33,445,  $33,000,
and  $21,444,   respectively,  was  paid  to  an  officer  of  the  Company  for
month-to-month  leasing arrangements.  In addition,  the Company paid floor plan
guaranty  fees of $147,560  and  $159,019  during the years ended 1999 and 1998,
respectively, to an officer.                                                    

During the year ended March 31, 1999, the Company  employed the president's wife
in a consulting  capacity.  She decorated and furnished  manufactured homes that
the Company  sells to its retail  customers.  Related  compensation  amounted to
approximately  $153,000,  which included reimbursement of her direct expenses of
approximately $24,000.                                                          

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

NOTE K - RELATED PARTY TRANSACTIONS (continued)                                 

During the year ended March 31, 1998 the Company received developed  residential
land from related parties in exchange for accounts receivable of $51,134,  notes
receivable  of  $210,591,  and the  issuance  of common  stock of  $130,000.    

NOTE L - EQUITY INCENTIVE PLAN                                                  

In a prior year,  the  Company  approved an Equity  Incentive  Plan  designed to
attract  and  retain  key  employees.  The  Plan,  administered  by a  committee
appointed by the Board of Directors,  provides for stock options and other stock
based  awards to reward  employees,  as the  Committee  deems  appropriate.  The
Company  approved the allocation of up to 1,000,000 shares of common stock to be
used in the Plan. No stock has been awarded under this Plan.                    

NOTE M -- PRIOR PERIOD ADJUSTMENTS                                              

The balance of retained  earnings  (deficit) at March 31, 1997 has been restated
to  correct  an  error  in  accounting.  The  retained  earnings  (deficit),  as
previously   reported  at  March  31,  1997  of  $(605,154)   was  inclusive  of
distributions  of $111,499  paid to minority  stockholders  of  partially  owned
subsidiaries  during  1997  which  should  have been  applied  against  minority
interest liability and not retained earnings. The effect of the correction is to
reduce the  retained  earnings  (deficit) at March 31, 1997 from  $(605,154)  to
$(493,655). This correction does not impact the previously reported net loss for
the year ended March 31, 1997.                                                  

The balances of retained earnings  (deficit),  paid-in capital and net income as
of and for the year ended March 31,  1998,  as  previously  reported,  have been
restated  to  correct  errors  in  accounting.  These  corrections  are based on
information  discovered subsequent to the original release of the March 31, 1998
financial statements. The corrections are summarized as follows:                

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

                                                        · Enlarge/Download Table


NOTE M -- PRIOR PERIOD ADJUSTMENTS (continued)                                              

                                                  Additional      Retained         Net      
           Year Ended March 31, 1998               Paid-in        Earnings        Income    
           -------------------------               Capital        (Deficit)       (Loss)    
                                                 -----------    ------------   -------------
                                                                                            
Balance at beginning of year, as previously      $   824,748    $   (605,154)               
   reported                                                                                 

   As previously reported:                                                                  
        Prior period adjustment                            -          93,145                
        Issuance of common stock                                                            
            Stock offering/other cash                659,306               -                
                                                           -                                
            Debt disposition                         484,467               -                
            Residential land and manufactured                                               
                homes                                129,859               -                

   Distributions paid to minority interest                 -        (240,392)               

   Net income                                              -         202,982    $ 202,982   
                                                    ---------       --------    ---------   
Balance at March 31, 1998, as previously                                                    
   reported                                         2,098,380       (549,419)               

   Correction of classification of 1997                                                     
        distributions to minority stockholders              -        111,499                

     Correction of:                                                                         
        Prior period adjustment                             -        (93,145)      (93,145) 
        Valuation of stock issued for services,                                             
             offering cost and contributions to                                             
             capital                                   52,281              -       (52,281) 
        Revenue cut off, accrued expenses and                                               
             minority interest                              -              -      (205,036) 
        Income tax provision                                -              -        95,949  
        Classification of 1998 distributions to                                             
              minority stockholders                         -        240,392             -  
                                                                                 ---------- 
              Total 1998 net income adjustments                     (254,513)     (254,513) 
                                                   -----------    ----------     ---------- 
Balances at March 31, 1998, as restated            $ 2,150,661    $ (545,186)    $ (51,531) 
                                                   ===========    ==========     ========== 

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

NOTE M -- PRIOR PERIOD ADJUSTMENTS (continued)                                  

The net  effect  of the  adjustments  to net  income  noted  above was to change
earnings  per  share of  $0.14,  as  previously  reported,  to loss per share of
$(0.03).                                                                        

NOTE N - WARRANTS                                                               

At March 31,  1999,  the  Company had  outstanding  Class A Warrants to purchase
2,913,872  shares of the Company's common stock at $6.50 per share. The warrants
expire on December 31, 2001.                                                    

NOTE O - COMMITMENTS AND CONTINGENCIES                                          

At March 31, 1999, the Company was contingently liable for outstanding mortgages
placed with third party lenders on several homes that were  previously sold with
recourse for various limited periods of time. The original mortgages at the time
of sale were approximately $859,000.  Management estimates that the range of any
future possible loss if the owners default on these mortgages is between $86,000
and $129,000.  These  estimates are based on the Company's past  performance and
industry  averages for manufactured  homes that are repossessed and then resold.
These losses are expensed when incurred as normal operating cost.               

The Company has several operating leases that are month to month contracts. Rent
expense for the years ended March 31, 1999, 1998 and 1997 totaled  approximately
$366,000, $213,000 and $82,000 respectively.                                    

NOTE P -- ACQUISITIONS                                                          

On January 1, 1999, the Company acquired 100% of the issued outstanding stock of
Mobile Air Systems,  Inc. for $10,000 cash,  $20,000 note  payable,  and 130,000
shares of common  stock of Apple  Homes  Corporation  valued  at  $227,500.  The
transaction  was  accounted  for as a  purchase,  and  goodwill in the amount of
$181,051 was  recognized,  which is being  amortized over 40 years for financial
reporting.  The pro forma results on the  operations of the Company for the past
two years is insignificant.                                                     

NOTE Q - EMPLOYEE BENEFIT PLAN                                                  

The Company  sponsors a 401(k) Profit Sharing Plan. All individuals  employed on
March 15, 1999 were eligible to participate in the plan immediately. Individuals
employed  after  March 15,  1999 must  complete  six months of service  and have
attained  the  age of 21.  Eligible  employees  are  allowed  to  make  elective
deferrals of compensation to the plan in accordance with the 401(k)  provisions.
The Company may elect to make additional  contributions under the profit sharing
provisions of the plan. There were no Company contributions made to the plan for
the year ended March 31, 1999.                                                  

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

NOTE R - PENDING ACCOUNTING PRONOUNCEMENTS                                      

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is effective
for all fiscal  quarters of all fiscal years beginning after June 15, 1999. This
Statement   establishes   accounting  and  reporting  standards  for  derivative
instruments  and  hedging  activities.  Management  does  not  believe  that the
adoption  of this  statement  will be  material  to the  consolidated  financial
statements.                                                                     

In March 1998, the American  Institute of Certified  Public  Accountants  issued
Statement of Position ("SOP") 98-1, Accounting for the Cost of Computer Software
Developed  or Obtained  for  Internal  Use.  This SOP gives  guidelines  for the
capitalization or expensing of certain external and internal costs incurred when
developing  computer software for internal use. The SOP also gives guidelines as
to the amortization of the capitalized  cost. The SOP is effective for financial
statements for fiscal years beginning  after December 15, 1998.  Management does
not believe that the  adoption of this SOP will be material to the  consolidated
financial statements.                                                           

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of  Position  ("SOP")  98-5,  Reporting  on  the  Costs  of  Start-Up
Activities.  This SOP provides  guidance on the financial  reporting of start-up
costs and  organizational  costs.  It requires costs of start-up  activities and
organization  costs  to be  expensed  as  incurred.  This SOP is  effective  for
financial  statements  for  fiscal  years beginning  after  December  15,  1998.
Management  does not believe  that the  adoption of this SOP will be material to
the consolidated financial statements.                                          

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

NOTE S - SELECTED QUARTERLY FINANCIAL DATA  (UNAUDITED)                         

                                                        · Enlarge/Download Table


                                                        Quarter                           
                           -------------------------------------------------------------  
                                1st              2nd              3rd             4th     
                           ------------     ------------    -------------    ------------ 
                                         (In thousands except per share data)             
Year ended March 31, 1999                                                                 

                                                                                          
     Net sales             $      8,143     $     10,490    $       7,307    $       7,836
     Gross profit                 1,745            1,677            1,109            1,396
     Net income (loss)              149               20             (81)               16
     Earnings per share    $       0.07     $       0.01    $      (0.04)    $        0.01
                           ============     ============    ============     =============
     Weighted average                                                                     
       shares outstanding     1,811,942        1,897,756       1,913,517         2,077,506

Year ended March 31, 1998                                                                 

     Net sales             $      5,957     $      6,408    $       5,794    $       7,457
     Gross profit                 1,196            1,163            1,037            1,676
     Net income (loss)               61             (84)            (159)              130
     Earnings per share    $       0.05     $     (0.06)    $      (0.10)    $        0.07
                           ============     ===========     ============     =============
     Weighted average                                                                     
       shares outstanding     1,166,967       1,446,218        1,599,668         1,748,114


Earnings per share is computed independently for each of the quarters presented.
Therefore,  the sum of the quarterly earnings per share do not necessarily equal
the total for the year.                                                         

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                                                                             SME
                                                      --------------------------
                                   SEROTTA
                                                      --------------------------
Report of Independent Certified Public Accountants    MADDOCKS                  
                                                      --------------------------
                                              EVANS & CO., CPA'S
                                                      --------------------------
                                                      A Professional Corporation
                                                      --------------------------

The Board of Directors                                                          
Apple Homes Corporation                                                         
Augusta, Georgia                                                                

We have  audited  the  accompanying  consolidated  balance  sheet of Apple Homes
Corporation  and  Subsidiaries  (the  "Company")  as of March 31, 1998,  and the
related consolidated  statements of operations,  changes in stockholders' equity
and cash flows for the year then ended. These consolidated  financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.            

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.          

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Apple  Homes
Corporation  and  Subsidiaries  as of March 31,  1998,  and the  results  of its
operations  and cash flows for the year then ended in conformity  with generally
accepted accounting principles.                                                 

As discussed in Note 16 to the financial statements,  certain errors in reported
amounts  were  discovered  by  management  of  the  Company  subsequent  to  our
previously  issued  1998  report  dated  June 15,  1998.  Accordingly,  the 1998
financial statements have been restated to correct these errors.                

/s/  Serotta Maddocks Evans & Co.                                               
-----------------------------------                                             
SEROTTA MADDOCKS EVANS & CO., CPA'S                                             

Augusta, Georgia                                                                
June 15, 1998, except for Notes 13                                              
and 16, as to which the date is June 23, 1999                                   

--------------------------------------------------------------------------------
701 Greene Street, Suite 200 / Augusta, GA 30901-2322 
Telephone (706) 722-5337 Telefax (706) 724-FAXX (3299)

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APPLE HOMES CORPORATION AND SUBSIDIAREIS
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998

ASSETS                                                                          
CURRENT ASSETS                                                                  
    Cash                                                           $   922,176
    Accounts receivable                                                240,445
    Other receivables                                                  165,766
    Inventories                                                      5,251,617
    Other current assets                                                95,087
    Deferred taxes                                                      74,531
    Notes receivable, current portion                                   42,883
                                                                   -----------
        Total Current Assets                                         6,792,505
                                                                   -----------
PROPERTY AND EQUIPMENT, NET                                             402,160 
                                                                   -----------
OTHER ASSETS                                                                    
Notes receivable, net of allowance                                    
     for bad debt of $97,041                                           679,761
    Deferred taxes                                                      78,102
Deferred loan acquisition costs,                                      
     net of accumulated amortization of $74,954                         87,050
Goodwill, net of accumulated                                          
     amortization of $29,979                                           292,175
                                                                   -----------
        Total Other Assets                                           1,137,088
                                                                   -----------
                                                                   $ 8,331,753
                                                                   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY                                            
CURRENT LIABILITIES                                                             
    Floorplan payable                                              $ 4,641,509
    Accounts payable                                                   421,493
    Sales tax payable                                                  207,009
    Accrued salaries and commissions                                   230,799
    Other accrued liabilities                                          309,490
    Customer deposits                                                   96,704
    Due to minority stockholders                                       128,440
    Notes payable, current portion                                     116,249
                                                                   -----------
        Total Current Liabilities                                    6,151,693
                                                                   -----------
LONG-TERM LIABILITIES                                                           
    Notes payable                                                      491,508
                                                                   -----------
MINORITY INTEREST IN NET ASSETS                                                 
OF CONSOLIDATED SUBSIDIARY                                              79,496
                                                                   -----------
STOCKHOLDERS' EQUITY                                                            
Common stock, $.002 par value;                                        
authorized 10,000,000 shares;                                       
     1,790,614 issued and outstanding                                    3,581
    Additional paid-in capital                                       2,150,661
     Retained deficit                                                  (545,186)
                                                                   -----------
        Total Stockholders' Equity                                   1,609,056
                                                                   -----------
                                                                   $ 8,331,753
                                                                   ===========

See notes to consolidated financial statements                                  

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APPLE HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
 YEAR ENDED MARCH 31, 1998
SALES                                                              $ 25,615,535 
COST OF SALES                                                        20,543,498 
                                                                  ------------
       Gross Profit                                                  5,072,037
                                                                  ------------

OPERATING EXPENSES                                                              
    Compensation                                                     2,354,711
    Occupancy and vehicle                                              357,735
    Advertising                                                        352,610
    Insurance                                                          196,223
    Taxes and licenses                                                 296,081
    Professional fees                                                  219,417
    Depreciation and amortization                                       70,059
    Utilities                                                          215,740
    Office and lot                                                     220,523
    Travel and entertainment                                            92,337
    Guaranty fees                                                      159,019
    Rent and maintenance                                               112,811
    Other                                                              389,809
                                                                  ------------
    Total Operating Expenses                                         5,037,075
                                                                  ------------
       Operating Income                                                 34,962
                                                                  ------------

OTHER INCOME (EXPENSE)                                                          
    Finance participation and other                                    516,542
    Interest income                                                     27,137
    Commissions                                                        107,666
     Interest expense                                                  (613,560)
                                                                  ------------
    Total Other Income (Expense)                                        37,785
                                                                  ------------
Income Before Income Tax Provision                              
         and Minority Interest                                          72,747

INCOME TAX BENEFIT                                                      116,114 

MINORITY INTEREST IN NET INCOME                                                 
OF CONSOLIDATED SUBSIDIARY                                             (240,392)
                                                                  ------------
        Net Loss                                                    $   (51,531)
                                                                  ============

Per share data:                                                                 
   Weighted average number of shares outstanding                     1,491,423
    Net loss per share                                              $     (0.03)

See notes to consolidated financial statements                                  

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                                           APPLE HOMES CORPORATION AND SUBSIDIARIES                       
                                              CONSOLIDATED STATEMENT OF CHANGES                           
                                                     IN STOCKHOLDERS' EQUITY                              
                                                    YEAR ENDED MARCH 31, 1998                             

                                                                                  Retained                
                                               Common            Paid-in           Earnings               
                                                Stock            Capital          (Deficit)       Total   
                                                -----            -------          ---------       -----   

                                                                                                          
Balance, March 31, 1997                       $    2,334        $  824,748        $ (493,655)  $  333,427 

Issuance of common stock:                                                                                 
  Stock offering/other cash                          537           711,587              --        712,124 
  Debt disposition                                   533           484,467              --        485,000 
  Residential land and manufactured homes            177           129,859              --        130,036 

Net loss                                            --                --             (51,531)     (51,531)
                                              ----------        ----------        ----------   ---------- 

Balance, March 31, 1998                       $    3,581        $2,150,661        $ (545,186)  $1,609.056 
                                              ==========        ==========        ==========   ========== 

See notes to consolidated financial statements                                  

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APPLE HOMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1998 

CASH FLOWS FROM OPERATING ACTIVITIES:                                           
     Net loss                                                       $   (51,531)
Adjustments to reconcile net loss to net cash                         
provided by (used in) operating activities                        
       Bad debt expense                                                 21,324
        Bad debt recovery                                               (76,602)
        Deferred income taxes                                          (116,114)
       Depreciation and amortization                                    70,059
Gain on sale of developed residential                           
         land and manufactured homes                                   (190,137)
Minority interest in net income of                              
        consolidated subsidiary                                        240,392
Cash provided by (used in):                                     
            Accounts receivables                                       (195,431)
           Rebates receivables                                          98,686
            Inventories                                                (830,859)
            Notes receivable                                           (393,507)
            Other assets                                                (71,815)
           Floorplan payable                                           747,384
            Accounts payable                                            (78,766)
           Accrued expenses                                            458,980
            Customer deposits                                            (9,968)
            Other liabilities                                            (2,009)
                                                                   -----------
                Net cash used in operating activities                  (379,914)
                                                                   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:                                           
     Additions to property and equipment                               (145,022)
Proceeds from the sale of developed                                   
     residential land and manufactured homes                           292,000
    Advances to related entities                                       132,999
                                                                   -----------
               Net cash provided by investing activities               279,977
                                                                   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:                                           
     Principal payments on notes payable                               (402,891)
    Proceeds from issuance of common stock                           1,058,312
     Distributions paid to minority stockholders                       (185,393)
    Due to minority stockholders                                       128,440
     Repayments on advances from officers                               (19,000)
                                                                   -----------
               Net cash provided by financing activities               579,468
                                                                   -----------

               Net increase in cash and cash equivalents               479,531

Cash and cash equivalents, beginning of year                            442,645 
                                                                   ===========
Cash and cash equivalents, end of year                              $   922,176 
                                                                   ===========

See notes to consolidated financial statements                                  

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS                                                     
---------------------------                                                     

The principal operations of Apple Homes Corporation and its subsidiaries (the   
"Company") consist of the sale and installation of manufactured homes primarily 
in the southeastern United States. The subsidiaries of Apple Homes Corporation  
consist of the following:                                                       

Name                                    Location               Percent Ownership
--------------------------------------------------------------------------------
Augusta Housing Center. Inc.            Augusta, Georgia             100%       
Big Daddy's Mobile Homes, Inc.          Augusta, Georgia              80        
Evans-Lanier, Inc.                      Thomson, Georgia              80        
Apple Homes, Inc.                       Waynesboro, Georgia           80        
J. C. Homes, Inc.                       Augusta, Georgia              80        
Tim Phillips Housing, Inc.              Thompson, Georgia             80        
New Century Homes, Inc.                 Augusta, Georgia              80        

All  subsidiaries  conduct  business  in the name of Apple  Homes.  The  Company
extends customary trade terms to some of its customers,  all of whom are located
in the southeastern United States.                                              

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             
---------------------------------------------------                             

Consolidation                                                                   
The consolidated  financial  statements  include the accounts of the Company and
its wholly  owned and majority  owned  subsidiaries.  All material  intercompany
accounts and transactions are eliminated in consolidation.                      

Management Estimates                                                            
The  preparation of the  consolidated  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.             

Cash and Cash Equivalents                                                       
For purposes of the  statement of cash flows,  the Company  considers all highly
liquid  investments with original  maturities of three months or less to be cash
equivalents.                                                                    

Receivables                                                                     
The Company uses the allowance method to provide for recognition of bad debt.   

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)                 
---------------------------------------------------                             

Inventory                                                                       
Inventory is stated at the lower of cost or market and is  determined  using the
specific identification method.                                                 

Property and Equipment                                                          
Property and equipment are stated at cost.  Maintenance  and repairs are charged
to expense as incurred, and renewals and betterments are capitalized. Provisions
for  depreciation  are charged to income over the estimated  useful lives of the
assets using methods  applicable  for income tax  purposes,  which do not differ
significantly from generally accepted accounting principles.                    

Advertising Costs                                                               
The Company expenses advertising costs as they are incurred.                    

Income Taxes                                                                    
Income  taxes are  accounted  for using the  asset and  liability  approach  for
financial  accounting and reporting  purposes.  Under that method,  deferred tax
assets and  liabilities  are  recognized for temporary  differences  between the
financial  statement  carrying  amounts  of  assets  and  liabilities  and their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary  differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.                          

Net Income Per Share                                                            
Net income per share is computed by dividing net income by the weighted  average
number of shares  outstanding  during the year.  The weighted  average number of
shares used in the calculation of net income per share was computed based on the
actual  time  such  shares  were  outstanding  during  the year.  The  Company's
convertible  debentures  (see Note 8) meet the  criteria for  classification  as
common stock  equivalents.  Therefore,  they were included in the calculation of
weighted  average number of shares.  The Company's  Class A warrants do not meet
the criteria for  classification as common stock  equivalents.  Therefore,  they
were excluded from the calculation of weighted average number of shares.        

NOTE 3 - INVENTORY                                                              
------------------                                                              

At March 31, 1998, inventory consists of:                                       

New manufactured homes                       $ 4,537,876              
Used manufactured homes                          264,427              
Land and mobile home packages                    449,314              
                               -----------
                               $ 5,251,617
                               ===========

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - PROPERTY AND EQUIPMENT                                                 
-------------------------------                                                 

At March 31, 1998, property and equipment consists of:                          

Buildings  and  improvements                    $ 200,477             
Rental  mobile home units                         132,477             
Furniture  and  fixtures                           56,604             
Vehicles                                           73,559             
                                   ---------
                                     463,117
Less accumulated depreciation                     (60,957)            
                                   ---------
                                   $ 402,160
                                   =========

NOTE 5 - DEFERRED LOAN ACQUISITION COSTS                                        
----------------------------------------                                        

The Company  incurred  costs related to the private  placement of its debentures
and the acquisition of bridge loans,  principally  during 1994. These costs have
been deferred and are being amortized over the expected life of the related debt
using a method that approximates the interest method.                           

NOTE 6 - GOODWILL                                                               
-----------------                                                               

Goodwill is being amortized over a period of forty years using the straight-line
method.                                                                         

NOTE 7 - FLOORPLAN PAYABLE                                                      
--------------------------                                                      

The Company  maintains a $7.15  million  floorplan  line of credit with  several
finance companies for new homes inventory. These credit lines are collateralized
by the homes and personal  guarantee  from an officer of the  Company.  Interest
rates range from prime to prime + 4%,  depending on several  factors,  including
the  number  of  days a home  is on a lot.  The  finance  companies  also  offer
incentive packages back to the Company based on the volume of homes financed and
the turnover of inventory  financed.  Of the available line,  approximately $4.6
million was utilized on March 31, 1998.                                         

For the year ended March 31, 1998,  floor plan interest  expense and  incentives
received were $404,814 and $136,460, respectively.                              

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - SUBORDINATED DEBENTURES                                                
--------------------------------                                                

During 1994, the Company  completed a private  placement of 17 debentures in the
principal  amount  of  $300,000.  The  debentures  are due  2003,  pay  interest
semi-annually  at 10.0%, and are convertible by the holders after two years into
shares of the Company's common stock at a conversion ratio of $l.25 per share.  

NOTE 9 - NOTES PAYABLE                                                          
----------------------                                                          

At March 31, 1998, notes payable consists of the following:                     

Note payable to First Union with interest at prime                              
plus  1.50%,  payments  of $640.86 are due monthly                          
through April 2000; secured by an automobile.                    $ 20,634   

Note payable to First Union with interest at prime                              
plus  1.50%,  payments  of $471.63 are due monthly                          
through April 1999; secured by an automobile.                       6,133   

Note  payable  to  an  individual;  principal  and                              
interest at 10%,  due in monthly  installments  of                          
$1,062 through November 2000; unsecured.                           29,732   

Note  payable  to  McDuffie  Bank &  Trust  at 10%                              
interest,  payments  of  $515.14  are due  monthly                          
through  February 2002;  secured by a manufactured                          
home.                                                              19,803   

Note  payable  to  Regions  Bank at 10%  interest,                              
payments  of  $552.56  are  due  monthly   through                          
December 2001; secured by a vehicle.                               20,120   

Note  payable to  McDuffie  Bank & Trust at 10.25%                              
interest,  payments  of  $1,830  are  due  monthly                          
through  September  2000;   secured  by  land  and                          
personal guarantees of the Company president and a                          
minority shareholder.                                             126,335   

Debentures (See Note 8)                                             300,000     

Note  payable to a  stockholder  at 10%  interest,                              
principal  and accrued  interest of $38,749 due in                          
September  1998;  unsecured.                                       85,000   
                                                             ---------
                                                               607,757
Less current portion                                               (116,249)    
                                                             ---------
                                                             $ 491,508
                                                             =========

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - NOTES PAYABLE (continued)                                              
----------------------                                                          

Maturities are as follows:                                                      

Year ending March 31,                                   
---------------------                                   
     1999                                $ 116,249
     2000                                   28,877
     2001                                  153,392
     2002                                    9,239
  2003                                    --
2004 and thereafter                          300,000  
                                         ---------
                                         $ 607,757
                                         =========

NOTE 10 - INCOME TAXES                                                          
----------------------                                                          

At March 31, 1998, the income tax benefit consists of:                          

Current:                                                                        
Federal                                             $     --              
State                                                     --              

Deferred:                                                                       
Federal                                                (98,697)           
State                                                  (17,417)           
                                        ----------
Total                                               $ (116,114)           
                                        ==========

     The  reconciliation  of  reported  net income tax  benefit to the amount of
income tax expense that would result from applying  federal  statutory tax rates
to pretax income is as follows:                                                 

                                             Amount              Percent
                                             ------              -------

Statutory federal income tax expense      $  24,734               34.0
 Valuation allowance change                 (143,663)            (197.5)
Other                                         2,815                3.9
                                          ---------             ------
                                           $(116,114)            (159.6)
                                          =========             ======

   At March 31, 1998, the components of deferred tax assets were as follows:

Net operating loss carryforward                     $150,063          
Allowance for uncollectible accounts                  38,816          
Inventory capitalization                              18,754          
                                          --------
                                           207,633
Less valuation allowance                             (55,000)         
                                          --------
                                          $152,633
                                          ========

     SFAS No. 109 requires a valuation  allowance to be recorded when it is more
likely  than  not  that  some or all of the  deferred  tax  assets  will  not be
realized.  At March 31,  1998,  management  has  determined  that a  reserve  is
necessary  until future  taxable  income is  sufficient to enable the Company to
realize all of its deferred tax assets.  At March 31, 1998,  the  remaining  net
operating loss  carryforward  of  approximately  $370,000 will expire in varying
amounts through 2012.                                                           

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - RELATED PARTY TRANSACTIONS                                            
------------------------------------                                            

During the year ended March 31, 1998, rent of approximately  $33,000 was paid to
an officer of the Company for month-to-month leasing arrangements.  In addition,
floorplan guaranty fees of $159,019 were paid to an officer of the Company.     

NOTE 12 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                      
----------------------------------------------------------                      

During the year ended March 31, 1998,  cash paid for interest was  approximately
$602,000.                                                                       

During the year  ending  March 31,  1998,  the  following  noncash  transactions
occurred:                                                                       
                                                             Related
                                                  Amount       Party Transaction
--------------------------------------------------------------------------------

Received  developed  residential land in         $  51,134           Yes        
exchange for write-off of accounts                                          
receivable                                                                  
Received developed residential land in             210,591           Yes        
exchange for write-off of notes                                             
receivable                                                                  
Received  developed  residential land in           130,000           Yes        
exchange for issuance of common stock                                       
Write-off  of a note payable in exchange           485,000           No         
for issuance of common stock                                                
Write-off  prepaid  expense  to  related           346,152           No         
cash addition to paid-in capital                                            
Assets purchased through financing                  35,036           No         
arrangements                                                                
Received services in exchange for                                               
issuance of common stock                         150,000           No       
Converted developed residential land                                            
to inventory                                     449,314           No       
Converted developed residental land                                             
to property and equipment                        132,477           No       

NOTE 13 - EQUITY INCENTIVE PLAN                                                 
-------------------------------                                                 

In a prior year,  the  Company  approved an Equity  Incentive  Plan  designed to
attract  and  retain  key  employees.  The  Plan,  administered  by a  committee
appointed by the Board of Directors,  provides for stock options and other stock
based awards to reward employees as the Committee deems appropriate. The Company
approved the allocation of up to 1,000,000  shares of common stock to be used in
the Plan. No stock has been awarded under this Plan.                            

NOTE 14 - CONCENTRATION OF CREDIT RISK                                          
---------------------------------------                                         

The  Company  maintains  its cash  balances at several  financial  institutions.
Accounts at each institution are insured up to $100,000 by the Federal Insurance
Corporation.  At March 31, 1998, the Company's  uninsured cash balances  totaled
approximately $525,000.                                                         

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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - WARRANTS                                                              
------------------                                                              

At March 31,  1998,  the  Company had  outstanding  Class A warrants to purchase
1,913,872  shares of the Company's common stock at $6.50 per share. The warrants
expire on December 31, 2001.                                                    

NOTE 16 - RESTATEMENTS                                                          
----------------------                                                          

Certain  reclassifications  and errors of reported  amounts were  discovered  by
management of the Company  subsequent to our previously issued 1998 report dated
June 15,  1998.  Therefore,  the  financial  statements  have been  restated  as
follows:                                                                        

                                                        · Enlarge/Download Table


                                     March 31, 1998,                             March 31, 1998,
                                 as previously reported       Restatement         as restated   
                                 ---------------------------------------------------------------
                                                                                                
Assets                               $   8,148,089            $   183,664         $   8,331,753 
Liabilities                              6,228,863                414,338             6,643,201 
Minority interest in net assets                                                                 
 of consolidated corporations              366,684               (287,188)               79,496 
Stockholders' Equity                     1,552,542                 56,514             1,609,056 
Sales                                   25,522,390                 93,145            25,615,535 
Other operating expenses                 4,685,190                351,885             5,037,075 
Interest expense                           521,838                 91,722               613,560 
Income tax benefit                          20,165                 95,949               116,114 


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Report of Independent Certified Public Accountants

The Board of Directors                                                          
Mayfair Homes Corporation                                                       
Augusta, Georgia                                                                

We have audited the  accompanying  consolidated  balance sheets of Mayfair Homes
Corporation and Subsidiaries  (the "Company") as of March 31, 1997 and 1996, and
the related  consolidated  statements of  operations,  changes in  stockholders'
equity, and cash flows for the years then ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.                                                                     

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Mayfair  Homes
Corporation  and  Subsidiaries as of March 31, 1997 and 1996, and the results of
their  operations  and their cash  flows for the years then ended in  conformity
with generally accepted accounting principles.                                  

/s/  Cherry, Bekaert & Holland, LLP                                             
-----------------------------------                                             
Cherry, Bekaert & Holland, LLP                                                  

Augusta, Georgia                                                                
January 26, 1998                                                                

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS

 March 31, 1997 and 1996

ASSETS

                                                       1997           1996
                                                       ----------     ----------
Current assets                                                                  
     Cash                                              $  442,645     $   67,227
     Trade receivables, net                                19,546         93,272
     Other receivables                                    245,497         65,417
     Inventory                                          3,971,444      1,790,894
     Advances to related entities                         132,999         68,900
     Current portion of notes receivable                  191,852         38,467
     Prepaid and other current assets                       8,837          6,849
     Deferred income taxes                                 29,109          3,186
                                                       ----------     ----------

              Total current assets                      5,041,929      2,134,212
                                                       ----------     ----------

Property and equipment                                                          
     Building and improvements                            172,859         74,792
     Vehicles                                              51,803          4,923
     Furniture and equipment                               48,517         31,661
                                                       ----------     ----------
                                                          273,179        111,376
     Less accumulated depreciation                         33,202         23,360
                                                       ----------     ----------

              Net property and equipment                  239,977         88,016
                                                       ----------     ----------

Developed residential land                                207,118        172,543
                                                       ----------     ----------

Other assets                                                                    
     Notes receivable, net                                369,200        394,837
     Finance participation receivable, net                 18,955         23,055
     Deferred loan acquisition costs                      105,049        126,050
     Deferred underwriting costs                          355,152        154,226
     Goodwill                                             269,694        277,332
     Deferred income taxes                                  7,410          3,400
     Other                                                 14,435         68,330
                                                       ----------     ----------

              Total other assets                        1,139,895      1,047,230
                                                       ----------     ----------

              Total assets                             $6,628,919     $3,442,001
                                                       ==========     ==========

See notes to consolidated financial statements.                                 

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LIABILITIES AND STOCKHOLDERS' EQUITY

                                                  1997            1996
                                                  -----------      -----------

Current liabilities                                                             
    Floor plan payable                            $ 3,894,125      $ 1,725,992
    Accounts payable                                  500,259          140,433
    Accrued expenses                                  263,318           80,785
    Customer deposits                                 106,672           31,449
    Advances from officers                             19,000           53,082
    Current portion of notes payable                   52,085          113,561
    Short-term notes payable                          323,204           25,000
  Other liabilities                                  27,009             --
                                                  -----------      -----------

             Total current liabilities              5,185,672        2,170,302
                                                  -----------      -----------

Long-term liabilities                                                           
    Subordinated debentures                           300,000          300,000
    Notes payable                                     785,323          228,485
                                                  -----------      -----------

             Total long-term liabilities            1,085,323          528,485
                                                  -----------      -----------

Minority interest in net assets of                                              
 consolidated subsidiary                               24,497           19,918
                                                  -----------      -----------

Stockholders' equity                                                            
Common stock, $.002 par value;                                        
authorized 5,000,000 shares;                                        
issued and outstanding:                                             
1997 - 1,166,967; 1996                                              
     1,067,849 shares                                   2,334            2,136
    Additional paid-in capital                        824,748          775,289
     Retained deficit                                 (493,655)         (54,129)
                                                  -----------      -----------

             Total stockholders' equity               333,427          723,296
                                                  -----------      -----------

Total liabilities and                               
               stockholders' equity               $ 6,628,919      $ 3,442,001
                                                  ===========      ===========

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

 CONSOLIDATED STATEMENTS OF OPERATIONS

 Years Ended March 31, 1997 and 1996

                                                 1997             1996
                                                 ------------     ------------

Sales                                             $ 15,549,376     $  8,442,228 
    Less cost of sales                             12,327,352        7,028,488
                                                 ------------     ------------
             Gross profit                           3,222,024        1,413,740
                                                 ------------     ------------

Operating expenses                                                              
    Compensation                                    1,416,052          600,807
    Occupancy and vehicle                             239,413          133,931
    Advertising                                       194,151          101,667
    Insurance                                         101,373           60,779
    Taxes and licenses                                140,489           47,458
    Professional fees                                 147,383           42,510
    Depreciation and amortization                      37,980           35,982
    Other                                             828,645          211,310
                                                 ------------     ------------

             Total operating expenses               3,105,486        1,234,444
                                                 ------------     ------------

             Operating income                         116,538          179,296

Other income (expense)                                                          
    Commissions                                        36,851           30,004
    Rental and other                                   (5,332)           6,316
    Interest income                                    49,457           12,343
     Interest expense                                 (599,322)        (323,062)
                                                 ------------     ------------

              Other expense, net                      (518,346)        (274,399)
                                                 ------------     ------------

Loss before income taxes and                        
                minority interest                     (401,808)         (95,103)

Income tax benefit                                      33,333            6,586 

Minority interest in net income of                                              
  consolidated subsidiary                              (71,051)          (4,917)
                                                 ------------     ------------

              Net loss                            $   (439,526)    $    (93,434)
                                                 ============     ============

Per share data:                                                                 
Weighted average number of                                            
      shares outstanding                            1,109,669          946,264
     Net loss per share                           $       (.40)    $       (.10)
                                                 ============     ============

See notes to consolidated financial statements.                                 

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                               MAYFAIR HOMES CORPORATION AND SUBSIDIARIES                        

                                  CONSOLIDATED STATEMENTS OF CHANGES IN                          
                                          STOCKHOLDERS' EQUITY                                   

                                   Years ended March 31, 1997 and 1996                           

                                                                           Retained              
                                    Common              Paid-in            Earnings              
                                     Stock              Capital            (Deficit      Total   
                                     -----              -------            --------      -----   

                                                                                                 
Balance, March 31, 1994            $   1,193           $ 315,425           $ (67,194)  $ 249,424 
     Issuance of common stock            510             212,490                --       213,000 
     Net income                         --                  --               106,499     106,499 
                                   ---------           ---------           ---------   --------- 

Balance, March 31, 1995                1,703             527,915              39,305     568,923 
     Issuance of common stock            433             247,374                --       247,807 
     Net loss                           --                  --               (93,434)    (93,434)
                                   ---------           ---------           ---------   --------- 

Balance, March 31, 1996                2,136             775,289             (54,129)    723,296 
     Issuance of common stock            198              49,459              49,657             
     Net loss                           --                  --              (439,526)   (439,526)
                                   ---------           ---------           ---------   --------- 

Balance, March 31, 1997            $   2,334           $ 824,748           $(493,655)  $ 333,427 
                                   =========           =========           =========   ========= 


See notes to consolidated financial statements.                                 

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                                    MAYFAIR HOMES CORPORATION AND SUBSIDIARIES                         

                                      CONSOLIDATED STATEMENTS OF CASH FLOWS                            

                                   For the Years Ended March 31, 1997 and 1996                         

                                                                                 1997          1996    
                                                                             -----------   ----------- 
                                                                                                       
Cash flows from operating activities                                                                   
     Net loss                                                                $  (439,526)  $   (93,434)
     Adjustments to reconcile net loss to net cash                                                     
      provided by (used in) operating activities                                                       
         Minority interest in net income of consolidated subsidiary               71,051         4,918 
         Depreciation and amortization                                            37,980        35,982 
         Deferred income taxes                                                   (29,933)       (6,586)
         (Gain) loss on disposition of assets                                     (2,500)        6,055 
         Professional services contributed                                        49,657          --   
         Cash provided by (used in):                                                                   
              Trade receivables, net                                              73,726       (56,201)
              Other receivables                                                 (180,080)       (4,755)
              Inventory                                                       (2,180,550)      541,679 
              Notes receivable, net                                             (127,748)      (25,699)
              Prepaid and other current assets                                    (1,988)       15,557 
              Developed residential land                                         (34,575)         --   
              Other assets, net                                                   57,995        15,321 
              Floor plan payable                                               2,168,133      (634,273)
              Accounts payable                                                   359,826        31,407 
              Accrued expenses                                                   182,533        12,139 
              Customer deposits                                                   75,223         8,085 
              Other liabilities                                                   27,009          --   
                                                                             -----------   ----------- 
              Net cash provided by (used in) operating activities                106,233      (149,805)
                                                                             -----------   ----------- 

Cash flows from investing activities                                                                   
     Additions to property and equipment                                        (161,803)      (24,673)
     Advances to related entities                                                (64,099)      (64,176)
     Proceeds from disposition of property and equipment                           2,500        30,346 
     Investment in sales locations opened subsequent to March 31, 1997              --         (25,000)
                                                                             -----------   ----------- 
              Net cash used in investing activities                             (223,402)      (83,503)
                                                                             -----------   ----------- 

Cash flows from financing activities                                                                   
     Proceeds from issuance of common stock                                         --         108,000 
     Proceeds from issuance of common stock of subsidiaries                       45,528        15,000 
     Proceeds from issuance of notes payable                                     862,027       101,723 
     Principal payments on notes payable                                         (68,461)      (73,102)
     Distributions paid to minority stockholders                                (111,499)         --   
     Additions to deferred underwriting costs                                   (200,926)      (46,477)
     Proceeds from advances from officers                                           --          49,515 
     Repayments on advances from officers                                        (34,082)       (4,983)
                                                                             -----------   ----------- 
              Net cash provided by financing activities                          492,587       149,676 
                                                                             -----------   ----------- 

              Net increase (decrease) in cash                                    375,418       (83,632)

Cash at beginning of year                                                         67,227       150,859 
                                                                             -----------   ----------- 

Cash at end of year                                                          $   442,645   $    67,227 
                                                                             ===========   =========== 
See notes to consolidated financial statements.                                                        

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 March 31, 1997 and 1996

Note 1 - The Company and Basis of Presentation                                  

The principal  operations of Mayfair Homes Corporation and its subsidiaries (the
"Company")  consist of the sale and  installation of manufactured  homes and the
development of  residential  property for resale  primarily in the  southeastern
United  States.  The Company began  operations in October 1990. The wholly owned
subsidiaries  of Mayfair Homes  Corporation  consist of Augusta  Housing Center,
Inc. and Big Daddy's Mobile Homes,  Inc. During 1996,  Mayfair Homes Corporation
completed  the  purchase  of an 80%  interest  in  Evans-Lanier,  Inc.,  a sales
location in Thomson,  Georgia. During 1997, the Company began operations with an
80% interest in four new subsidiaries,  Apple Homes, Inc. (Augusta, Georgia), J.
C. Homes, Inc. (Augusta, Georgia), Deneaux Housing, Inc. (Waynesboro,  Georgia),
and Apple Homes of Tennessee,  Inc. (Johnson City, Tennessee).  All subsidiaries
conduct business in the name of Apple Homes. The Company extends customary trade
terms to some of its  customers,  all of whom are  located  in the  southeastern
United States.                                                                  

Note 2 - Summary of Significant Accounting Policies                             

Consolidation                                                                   
The consolidated  financial  statements  include the accounts of the Company and
its wholly  owned and majority  owned  subsidiaries.  All material  intercompany
accounts  and  transactions  are  eliminated  in  consolidation.  For 1996,  the
accounts of  Evans-Lanier,  Inc.  are  included  for the period from its date of
incorporation,  February 1, 1995,  through its year end,  December 31, 1995. The
effect on the  consolidated  financial  statements  of using a calendar year for
Evans-Lanier is not considered material.                                        

During 1997, Evans-Lanier,  Inc. changed its fiscal year end from December 31 to
March 31 to coincide with the Company's  fiscal year end. For 1997, the accounts
of  Evans-Lanier,  Inc.  are  included for its fiscal year ended March 31, 1997.
Operations  of  Evans-Lanier,  Inc.  for the three month  period ended March 31,
1996, presented in summary form below, are immaterial and unaudited.            

Evans-Lanier, Inc.
 Selected Financial Data
 For the Three Month Period Ended March 31, 1996
 -----------------------------------------------

  Sales                                                   $691,892
  Cost of sales                                            568,364
                                                          --------
       Gross profit                                        123,528
  Operating expenses                                        71,105
                                                          --------

  Operating income                                          52,423
  Other expense, net                                        13,179
                                                          --------

  Net income                                              $ 39,244
                                                          ========

Management Estimates                                                            
The  preparation of the  consolidated  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.             

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 2 - Summary of Significant Accounting Policies (Continued)                 

Fair Value of Financial Instruments                                             
Financial  instruments  held by the  Company  at March 31,  1997  include  cash,
accounts and notes receivable,  related party advances, floor plan, accounts and
notes payable and customer deposits.  Management believes that, based on current
interest rates and terms for  comparable  financial  instruments,  the estimated
fair value of the Company's  financial  instruments  approximated their carrying
values at March 31, 1997.                                                       

Receivables                                                                     
The Company uses the allowance  method to provide for  recognition  of bad debt.
The Company's  allowance  for doubtful  accounts was $76,602 and $9,371 at March
31, 1997 and 1996, respectively.                                                

Inventory                                                                       
Inventory is stated at the lower of cost or market and is  determined  using the
specific identification method.                                                 

Property and Equipment                                                          
Property and equipment are stated at cost.  Maintenance  and repairs are charged
to expense as incurred, and renewals and betterments are capitalized.  Gains and
losses on disposals are credited or charged to operations.                      

Depreciation and Amortization                                                   
Provisions  for  depreciation  are charged to income over the  estimated  useful
lives of the assets  using  methods  applicable  for income  tax  purposes.  The
estimated useful lives of depreciable and amortizable assets are as follows:    

                                                   Years
                                                   -----
Building and improvements                                   15        
Vehicles                                                  3 - 5       
Furniture and equipment                                   3 - 7       
Goodwill                                                    40        
Deferred loan acquisition costs                              9        
Other intangible assets                                      5        

Depreciation expense for the years ended March 31, 1997 and 1996 was $21,330 and
$9,007, respectively.                                                           

Income Taxes                                                                    
Income  taxes are  accounted  for using the  asset and  liability  approach  for
financial  accounting and reporting  purposes.  Under that method,  deferred tax
assets and  liabilities  are  recognized for temporary  differences  between the
financial  statement  carrying  amounts  of  assets  and  liabilities  and their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary  differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.                          

Net Loss Per Share                                                              
Net loss per share is  computed  by dividing  net loss by the  weighted  average
number of shares  outstanding  during the year.  The weighted  average number of
shares used in the  calculation  of net loss per share was computed based on the
actual  time  such  shares  were  outstanding  during  the year.  The  Company's
convertible debentures (see Note 10) do not meet the criteria for classification
as common stock equivalents.  Therefore, they were excluded from the calculation
of weighted average number of shares.                                           

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 2 - Summary of Significant Accounting Policies (Continued)                 

Future Impact of Recently Issued Accounting Standards                           
The  Financial  Accounting  Standards  Board  (FASB) has  issued two  accounting
standards  which the Company  will adopt during its fiscal year ending March 31,
1998.                                                                           

Statement of Financial  Accounting Standards (SFAS) 128, "Earnings per Share" is
effective  for fiscal  years  ending after  December  15,  1997.  The  Statement
requires the presentation of basic earnings per share, which is calculated using
the weighted average number of outstanding  common shares,  and diluted earnings
per share,  which  incorporates  the  potential  dilution  from all  potentially
dilutive securities outstanding.                                                

SFAS 129,  "Disclosure of Information about Capital Structure" is also effective
for fiscal years ending after December 15, 1997. This  Statement,  which applies
to all entities,  requires the disclosure of information  related to an entity's
securities, liquidation preference of preferred stock, and redeemable stock.    

Management  has  determined  that  the  impact  on  the  Company's  consolidated
financial  statements  of adopting the  standards  discussed  above would not be
material.                                                                       

Reclassifications                                                               
Certain  1996  amounts  have  been   reclassified   to  conform  with  the  1997
presentation. These reclassifications had no effect on net loss.                

Note 3 - Notes Receivable                                                       

Notes receivable consists of the following:                                     
                                                       1997           1996
                                                       --------      ---------

Receivable  from  individuals;   secured  by  real                              
estate;  due in monthly  installments of principal                              
and  interest at rates  ranging from 8.25% to 8.5%                              
with terms of 360 months                               $104,674      $    --    

Receivable  from  minority  shareholders;  due  in                              
quarterly  payments  based on minority  interests'                              
share of net profits                                     56,830           --    

Receivable  from an  individual;  secured  by real                              
estate;  due in monthly  installments of principal                              
and interest at 11.0% through December 19, 2006           --            50,000  

Receivable  from  individuals;  secured  by mobile                              
homes;  due in monthly  installments  of principal                              
and interest at rates  ranging from 6.36% to 26.61                              
with terms from 12 to 240 months                        264,808        174,665  

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 3 - Notes Receivable (Continued)                                           
                                                    1997          1996
                                                    --------      --------

Receivable from a company owned by a Director;                                  
secured by developed residential lots.                                      
Payments are in the form of lot releases                                    
upon sales of lots                                   $210,592      $218,010 
                                                    --------      --------
           Total                                     636,904       442,675

  Less current portion                               191,852        38,467
                                                    --------      --------

  Long-term notes receivable                         445,052       404,208

   Less allowance for doubtful accounts              ( 75,852)     (  9,371)
                                                    --------      --------

           Net long-term notes receivable           $369,200      $394,837
                                                    ========      ========

Note 4 - Developed Residential Land                                             

Developed  residential land primarily  consists of approximately 7 acres located
within Mayfair Acres subdivision in Richmond County, Georgia.                   

Note 5 - Finance Participation Receivable                                       

The Company sold, in prior years, a portion of its mobile homes under a recourse
financing  plan. In doing so, it  participated in finance charges which are held
in reserve by the financing agent.  Payment of this reserve is contingent on the
customers  paying their  obligations.  The March 31, 1997 and 1996 receivable of
$18,955 and $23,055, respectively, is presented net of an allowance for doubtful
accounts of $19,500 and $15,990 at March 31, 1997 and 1996, respectively.       

Note 6 - Deferred Loan Acquisition Costs                                        

The Company  incurred  costs related to the private  placement of its debentures
and the acquisition of bridge loans  principally  during 1994.  These costs have
been deferred and are being amortized over the expected life of the related debt
using a method that approximates the interest method.                           

Note 7 - Deferred Underwriting Costs                                            

The Company  incurred  certain  administrative  costs  related to its efforts to
raise capital, which culminated in a Rule 504 offering of common stock completed
subsequent  to year-end - See Note 19.  These  costs will be  deducted  from the
proceeds of the related offering.                                               

Note 8 - Goodwill                                                               

Goodwill relates to the purchase of Augusta Housing Center, Inc. and Big Daddy's
Mobile Homes, Inc., the Company's wholly owned  subsidiaries,  and Evans-Lanier,
Inc., a majority owned subsidiary, and is being amortized over a period of forty
years using the straight-line method.                                           

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 8 - Goodwill (Continued)                                                   

At March 31, 1997 and 1996, goodwill and related amortization is as follows:    

                                                       1997         1996
                                                       --------     --------
Goodwill:                                                             
       Augusta Housing Center, Inc.                    $104,632     $104,632
       Big Daddy's Mobile Homes, Inc.                   138,405      138,405
       Evans-Lanier, Inc.                                50,000       50,000
                                                       --------     --------
                                                        293,037      293,037
                                                       --------     --------
Accumulated amortization:                                             
       Augusta Housing Center, Inc.                      10,463        7,847
       Big Daddy's Mobile Homes, Inc.                    10,380        6,920
       Evans-Lanier, Inc.                                 2,500          938
                                                       --------     --------
                                                         23,343       15,705
                                                       --------     --------

                                                       $269,694     $277,332
                                                       ========     ========
Note 9 - Other Assets                                                           

Other assets consists of the following:  1997                         
1996 Option to purchase 10 houses and lots in                         
The  Timbers  subdivision,  acquired  through                         
issuance of 136,000  shares of the  Company's                         
stock.  Purchase  price  for the 10  homes is                         
$200,000,  with  closing  to  occur  upon the                         
   successful completion of the public offering.       $   --       $ 39,984

Investment   in   sales   locations    opened                         
   subsequent to March 31, 1996                                       25,000

   Other miscellaneous                                   14,435        3,346
                                                       --------     --------

                                                       $ 14,435     $ 68,330
                                                       ========     ========
Note 10 - Subordinated Debentures                                               

During 1994 the Company  completed a private  placement of 17  debentures in the
principal  amount  of  $300,000.  The  debentures  are due  2003,  pay  interest
semi-annually  at 10.0%, and are convertible by the holders after two years into
shares of the Company's common stock at a conversion ratio of $1.25 per share.  

Note 11 - Notes Payable                                                         

Short-term notes payable consists of the following:                             
                                                      1997        1996
                                                       --------   ----------

Promissory   notes  payable  to  individuals;                         
principal  and  interest  at 10% due June 30,                         
 1997.                                               $115,000   $     --

Bridge loan from a  shareholder;  interest at                         
 10%; due on demand; unsecured.                        85,000         --

Payable on demand to a shareholder;  interest                         
   at 10%; unsecured.                                    25,000       25,000

Note payable to a shareholder;  principal and                         
 interest at 10% due May 14, 1997; unsecured.          25,000         --

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 11 - Notes Payable (Continued)                                             
                                                     1997         1996
                                                     ----------   ----------

Note  payable to a bank;  due  September  24,                         
1997;   interest  at  11%;  secured  by  real                         
estate.                                           $   25,085    $   --

Note  payable at a bank;  due  September  25,                         
1997; interest at 9.25%; unsecured.                   48,119        --
                                                     ----------    ---------

       Short-term notes payable                      $  323,204    $  25,000
                                                     ==========    =========

Long-term liabilities consists of the following:                                
                                                      1997          1996
                                                     ----------    ---------
Promissory notes payable to individuals; principal                              
and  interest  at 10% due  originally  June 30,                           
1997.  Amount  was  subsequently  converted  to                           
common stock. See Note 19.                         $   485,000    $   --  
Payable  to  a  financial   institution  at  rates                              
ranging  from 10.25% to 10.75%;  due in monthly                           
installments through March 1998; unsecured               3,478      10,776
Bridge loan from a  shareholder;  interest at 10%;                              
$50,000 due March 31, 1997; $35,000 convertible                           
into common stock at $2 per share, due December                           
27, 1997; unsecured                                      --         85,000
Bridge loan from a bank; principal and interest at                              
10.25% payable  monthly  beginning  April 1994;                           
balloon   payment   extended  to  August  1997;                           
secured by land                                        146,550     173,328
Subordinated  debentures  payable to  individuals;                              
interest at 10% payable semi-annually; due 2003        300,000     300,000
Mortgages to a financial institution;  interest at                              
11%; due in monthly installments through August                           
1997; secured by a mobile home                         117,597       8,508

Note  payable  to  an  individual;  principal  and                              
interest at 10%; due in monthly installments of                           
$1,062 through November 2000; unsecured                 39,729      47,711
Payable to a financial institution;  principal and                              
interest  at prime  plus 1.5%  payable  monthly                           
beginning May 1997 through April 2001;  secured                           
by a vehicle                                            25,018        --  

Payable to a financial institution;  principal and                              
interest  at prime  plus 1.5%  payable  monthly                           
beginning May 1997 through April 1999;  secured                           
by vehicles                                             20,036        --  

Payable  to a  bank;  principal  and  interest  at                              
9.25%;  due  in  monthly  installments  through                           
February 2001; secured by model home in Mayfair                           
Acres subdivision                                        --         16,723
                                                     ---------    --------
      Total                                          1,137,408     642,046
  Less current portion                                  52,085     113,561
                                                     ---------    --------

Long-term notes payable and                                           
   subordinated debentures                          $1,085,323    $528,485
                                                    ==========    ========

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 11 - Notes Payable (Continued)                                             

The Company's long-term liabilities mature as follows:                          

Year ending March 31,                                                 
---------------------                                                 
1998                                     $   52,085 
1999                                         52,236 
2000                                         46,338 
2001                                        187,016 
2002                                         14,733 
2003 and thereafter                              785,000      
                                        ----------

                                        $1,137,408
                                        ==========
Note 12 - Income Taxes                                                          

Income tax expense (benefit) in 1997 and 1996 is summarized as follows:         

                                               1997             1996
                                               --------         --------
Current taxes:                                                
     Federal                                $     --         $    --
     State                                        --              --
                                               ----------       ----------
                                                  --              --
                                               ----------       ----------
       Deferred taxes                            (  33,333)        (  6,586)
                                                ----------       -----------

          Total income tax benefit              $(  33,333)      $ (  6,586)
                                                =========        =========

The following is a  reconciliation  of Federal income taxes for 1997 and 1996 at
the Federal statutory rate with Federal income taxes recorded by the Company:   

                                                1997            1996
                                               ---------        --------

Computed income taxes at the                                          
   Federal statutory rate                       $(136,615)       $(20,585)
 Losses not available for carryback              136,615          20,585
                                               ---------        --------

Income tax expense (benefit)                  $   --           $  --  
                                               =========        ========

Deferred tax assets at March 31, 1997 and 1996 consist of the following:        

                                                1997              1996
                                                ---------        ---------

 Operating loss carryforwards                   $ 198,663        $  46,681
 Allowance for uncollectible accounts              36,519            6,586
                                                ---------        ---------
                                                  235,182           53,267
  Less valuation allowance                        (198,663)       (  46,681)
                                                ---------        ---------

 Net deferred tax asset                         $  36,519        $   6,586
                                                =========        =========

At  March  31,  1997,  the  Company  had net  operating  loss  carryforwards  of
approximately $522,800, which will expire in various periods through 2012.      

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 13 - Operating Leases                                                      

The  Company  leases  office  space,  lot  space  and  certain  equipment  under
short-term  operating  leases.  Rent  expense  under  these  leases  amounted to
$239,413 and $110,366 in 1997 and 1996, respectively.                           

Note 14 - Related Party Transactions                                            

Related party advances consist of the following:                                

                                                        · Enlarge/Download Table

                                                               1997                      1996         
                                                      ----------------------   -----------------------
                                                      Receivables    Payables  Receivables    Payables
                                                      -----------    --------  -----------    --------

                                                                                                      
Receivable from a company owned by a Director of                                                      
 the Company                                            $  51,134    $   --     $ 37,448      $   --  
Receivable from a partnership in which the Chairman                                                   
 of the Company owns a 50% interest                        77,311        --       26,728          --  
Receivable from the President of the Company                4,554        --        4,724          --  
Payable to a partnership in which the Company owns a                                                  
 minority interest                                           --          --          --         8,165 
Payable to the wife of the Chairman of the Company           --         9,000        --        24,917 
Payable to the President of the Company                      --        10,000        --        20,000 
                                                        ---------    --------   ---------     ------- 

    Total related party advances                         $132,999    $ 19,000   $  68,900     $53,082 
                                                        =========    ========   =========     ======= 

During  1995 the  Chairman's  wife  purchased  the  sales  office  at one of the
locations  and leases the sales office back to the Company for $625 per month on
a month-to-month basis.                                                         

Two of the  Company's  sales  offices  are owned by the  President.  The Company
leases the offices on a month-to-month basis for $1,787 per month.              

Note 15 - Reverse Stock Split                                                   

On March 6, 1996 the Company's Board of Directors approved a one-for-two reverse
split of the Company's outstanding common stock. The effect of the reverse split
was to  decrease  the number of  outstanding  common  shares from  2,135,694  to
1,067,849 and to increase the par value from $.001 to $.002.                    

Note 16 - Supplemental Disclosure of Cash Flow Information                      

Cash paid for  interest  was $503,982 and $300,029 for the years ended March 31,
1997 and 1996, respectively.                                                    

During the year ended March 31, 1996,  the Company  recorded a receivable in the
amount of $4,724 related to the sale of a vehicle to the Company's President.   

Asset additions through financing  arrangements  totaled $22,242 during the year
ended March 31, 1996. There were no such arrangements during 1997.              

The Company recognized  goodwill in the amount of $50,000 in 1996 related to its
purchase of an 80% interest in Evans-Lanier, Inc. (see Note 1).                 

  F-48

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MAYFAIR HOMES CORPORATION AND SUBSIDIARIES  

Notes to Consolidated Financial Statements - Continued

 March 31, 1997 and 1996

Note 16 - Supplemental Disclosure of Cash Flow Information (Continued)          

During the year ended March 31, 1996, the Company  purchased a model home in its
Mayfair  Acres  subdivision  from a Director  in exchange  for 46,147  shares of
stock. The home is carried in the Company's consolidated financial statements at
March 31, 1996 at the purchase price of $54,700.  During 1997, the home was sold
to a third party.                                                               

Note 17 - Amendment of Certificate of Incorporation                             

On April 26,  1996 the Company  amended  its  Certificate  of  Incorporation  to
increase the authorized  capitalization to 10,000,000 shares of common stock and
to increase the par value to $.002.                                             

Note 18 - Equity Incentive Plan                                                 

On April 26, 1996 the Company  rescinded its 1993 Stock Option Plan and approved
a new Equity  Incentive Plan designed to attract and retain key  employees.  The
Plan, administered by a committee appointed by the Board of Directors,  provides
for stock  options  and other  stock  based  awards to reward  employees  as the
Committee  deems  appropriate.  The Company  approved  the  allocation  of up to
1,000,000 shares of common stock to be used in the Plan. No shares of stock were
used in the 1993 Stock Option Plan.                                             

Note 19 - Subsequent Events                                                     

Subsequent  to March 31, 1997 the  Company  converted  $485,000 of its  $600,000
short-term  promissory  notes to  common  stock at a rate of $2 per  share.  The
remaining $115,000 plus accrued interest was repaid by the Company.             

Subsequent to March 31, 1996 the Company  completed the sale of 200,000 Units of
$5 per Unit.  Each Unit  consisted  of one share of common  stock and one Common
Stock Purchase Warrant, each to purchase one share of the Company's common stock
at $6.50 per share. The warrants are exercisable until December 31, 2001.       

Note 20 - Retained earnings and minority interest                               

In  previously  issued  financial  statements,  dividends  of  $111,499  paid to
minority  interest  shareholders  during  the year  ended  March  31,  1997 were
incorrectly  shown as a reduction  of  retained  earnings.  In the  accompanying
financial  statements,  retained  earnings  has been  restated  to  exclude  the
minority  interest  dividends,  and  the  dividends  have  been  charged  to the
liability account "Minority interest in net assets of consolidated subsidiary." 

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SIGNATURES

   Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.                    

                                 APPLE HOMES CORPORATION

                                  By: /s/  E. Samuel Evans
                                                 -------------------------------
                                            E. Samuel Evans, President

                             Date: July 15, 1999
                                                   -----------------------------

(25)

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-12G Filing	Date	First	Last	Other Filings

	3/31/94	37	63
	2/1/95	65
	2/15/95	24
	12/31/95	65
	3/6/96	72
	3/31/96	59	73
	4/1/96	20
	4/26/96	18	73
	1/1/97	24
	3/31/97	11	73
	5/14/97	69
	6/30/97	69	70
	9/24/97	70
	9/25/97	70
	12/15/97	67
	12/27/97	70
	1/26/98	25	59
	3/31/98	11	67
	4/1/98	19
	5/11/98	20
	6/15/98	25	58
	10/1/98	19
	12/15/98	45
	1/1/99	44
	3/15/99	44
	3/18/99	23
	3/31/99	5	46
	4/28/99	19
	5/24/99	19
	6/1/99	14
	6/15/99	45
	6/23/99	25	47
	6/30/99	21
	7/15/99	74
Filed On / Filed As Of	7/16/99
	3/31/0	18		10-K, 4
Corrected On	4/13/0
	12/5/1	13
	12/31/1	44	73
	12/19/6	67

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Genfinity Corp · 10-12G · On 7/16/99

Filed On 7/16/99 · SEC Files 0-22045, 0-30696 · Accession Number 1000096-99-387

This Filing was Corrected by the SEC on 4/13/0.

Registration of Securities (General Form) · Form 10Filing Table of Contents

10-12G · Form 10Document Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Registration of Securities (General Form) · Form 10
Filing Table of Contents

10-12G · Form 10
Document Table of Contents