SAXTON INC, 10-K, 2000-05-16

SAXTON INC
10-K, 2000-05-16
LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES)

Previous: DARUMA FUNDS INC, 497, 2000-05-16

Next: NEXTLINK COMMUNICATIONS INC /DE/, PRE 14C, 2000-05-16

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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________TO________

COMMISSION FILE NUMBER: 0-22299
-------
SAXTON INCORPORATED
(Exact name of registrant as specified in its charter)

NEVADA 88-0223654
(State, or other Jurisdiction of (IRS Employer
Incorporation, or Organization) Identification Number)

5440 WEST SAHARA AVENUE, THIRD FLOOR, LAS VEGAS, NEVADA 89146
(702) 221-1111
- -------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

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

SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:

COMMON STOCK, $.001 PAR VALUE
(Title of Class)

Indicate by check mark whether the registrant: (1) has filed reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

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

As of April 24, 2000, 8,336,455 shares of the registrant's common stock
were outstanding. The aggregate fair value of common stock held by
non-affiliates of the registrant as of April 24, 2000 was approximately
$3,089,007 based on a closing price of $1.125 for the common stock as reported
on the Nasdaq Stock Market on such date. For purposes of the foregoing
computation, all executive officers, directors and five percent beneficial
owners of the registrant are deemed to be affiliates. Such determination should
not be deemed to be an admission that such executive officers, directors or five
percent beneficial owners are, in fact, affiliates of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE
Exhibit index in Item 14.

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

<PAGE>
SAXTON INCORPORATED
1999 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I PAGE
----
<S> <C>
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 4. Submission of Matters to Vote of Security Holders . . . . . . . . . . . . . . . . . . 21
PART II
Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters . . . . 22
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . 37
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . 37
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 37
PART III
Item 10. Directors and Executive Officers of the Company. . . . . . . . . . . . . . . . . . . 39
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . 47
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 48
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . . . . . . . 50
</TABLE>

i
<PAGE>
PART I

ITEM 1. BUSINESS

GENERAL

Saxton Incorporated ("Saxton" or the "Company") is a diversified real
estate company, specializing principally in the affordable homebuilding
industry, operating in the fast-growing Las Vegas, Phoenix, Salt Lake City,
Tucson and Reno markets. The Company's business is comprised of four
components: (i) the design, development, construction and sale of single-family
homes; (ii) the performance of design-build services for third-party clients
("design-build services"), including tax credit partnerships; (iii) the design,
development and construction of income producing portfolio properties; and (iv)
property operations and management. The properties consist of office and
industrial buildings, retail centers, apartments, single-family homes and land
in various phases of development. The Company also has non-controlling
interests in joint ventures that are engaged in the acquisition, development,
ownership and operation of real property.

In 1995, management recognized the need for affordable housing in the Las
Vegas market and began to develop value-priced single-family detached homes.
The Company opened its first single-family home development in April 1996 and
its second home development in early 1997. During 1999, the Company sold 924
homes, at an average price of $111,161, an increase from 251 homes sold at an
average price of $110,100 in 1998. Reflecting the Company's commitment to expand
its homebuilding activities, in March 1998, the Company acquired Maxim Homes,
Inc. ("Maxim") and in November 1998, acquired Diamond Key Homes, Inc. ("Diamond
Key"). Maxim, a Salt Lake City, Utah homebuilder, specialized in building homes
generally ranging in price from $145,000 to $185,000. Diamond Key, an Arizona
homebuilder and construction company, specialized in entry-level and move-up
homes generally ranging in price from $90,000 to $120,000. The Company,
including Maxim and Diamond Key, had 26 residential community developments in
process, in three states, as of December 31, 1999. The Company also provides
its construction and design-build development services to clients which have
included large, nationally recognized public companies as well as smaller
regional businesses.

The Company's portfolio of 12 income producing properties at December 31,
1999 included approximately 307,316 square feet of office, retail and industrial
facilities. Management monitors the market for the Company's properties on an
ongoing basis to take advantage of opportunities for strategic sales of its
holdings when conditions are favorable. The Company also provides property
management services for apartment properties owned by the tax credit
partnerships.

WORKOUT PLAN

The Company has experienced a slow down of construction in the fourth
quarter of 1999 and a halt of construction in Nevada and Utah in the first
quarter of 2000, primarily due to cash flow problems and over expansion, and was
in default on substantially all notes payable at December 31, 1999. The
inadequate cash flow problem was due to several factors, including: the purchase
of Diamond Key Homes in November 1998 for approximately $12.9 million, including
$10.9 million in cash, a portion of which was borrowed funds; over expansion;
purchases of land in Utah in the first and third quarters of 1999 for $4.5
million, which the Company purchased using a combination of high interest rate,
short term debt and funds intended for working capital and other purposes, and
for which the Company was unable to obtain permanent replacement financing on
satisfactory terms; and the Company's failure to adequately monitor and manage
its cash flow. The aforementioned facts and circumstances have raised
substantial doubt that the Company will be able to continue as a going concern
and, therefore, may be unable to realize its assets and discharge its
liabilities in the normal course of business.

In the first quarter of 2000, the Company brought in outside consultants and
legal expertise to assist in formulating a workout business plan (the "Workout
Plan"). The key elements of the Workout Plan are: to establish adequate cash
management controls regarding cash flows and to accelerate the retirement of
debt, especially higher interest rate debt, by raising additional capital from
sources other than the sale of homes, such as the sale of land held for
development and for sale and operating properties, and to negotiate forbearance
agreements with the lenders. The Company believes that the proposed Workout
Plan will help the Company focus on operations, including improved cash
management and monitoring of cash flows and completion of construction and sales
of existing projects.

Although the Company hopes that the Workout Plan will allow the Company to
avoid filing, or being forced into, bankruptcy, there can be no assurances that
the Workout Plan will be approved by the Company's creditors and subcontractors
or, that if approved, the Company will be able to successfully take the steps
necessary under the Workout Plan to avoid filing, or being forced into,
bankruptcy.

Cash Flow Funds Controls. The Company is still in the process of finalizing
the details of various loan terms with its creditors and subcontractors. The
Company has been meeting with its lenders and subcontractors in order to discuss
with them the Company's operations, including the cash flow shortage, and the
proposed Workout Plan. However, there can be no assurance that the Company will
be able to obtain agreement from its creditors and subcontractors to the Workout
Plan.

<PAGE>
As part of the Workout Plan the Company has agreed to certain controls on
its use of cash, including setting up a voucher control system with Nevada
Construction Services to coordinate payments to lenders and subcontractors. The
Company has also proposed, as an additional component of the Workout Plan, that
its subcontractors accept a pro rata share of proceeds from the sales of future
units through escrow disbursements, after the primary lenders have been paid,
until the subcontractors' obligations are satisfied. These payments will be made
through escrow to insure payment is made timely and accurately to the lenders
and subcontractors. The Company has also agreed to weekly monitoring of the
Company's progress to insure adherence to the Workout Plan.

Retirement of Debt and Sale of Properties. An agreement (effective May 12,
2000) has been reached with a group of the Company's various individual debt
holders ("Debt Holder"), which agreement is the cornerstone of the Workout Plan
and would allow the Company to conduct an orderly disposition of certain of its
assets so as to improve its balance sheet and its cash flow. The agreement
provides for the Debt Holder to acquire assets from the Company with a carrying
value of approximately $11.3 million, comprised of the Company's rights to a 914
acre parcel of undeveloped land in Tucson, Arizona, an 80 acre parcel of
undeveloped land in North Las Vegas, Nevada, and two properties under
development in Phoenix, Arizona. In exchange for such assets, the Debt Holder
will forgive any and all indebtedness of the Company in favor of the Debt
Holder, currently aggregating approximately $34.1 million ($27.8 million at
December 31, 1999) and bearing interest rates ranging from 0.0% to 30.0%, and
the company will recieve Debt Holder's interest in a condominium project that
has a fair value of approximately $8.5 million and related debt of $5.5 million
(assumed by the Company) and the Debt Holder's assumed Company debt of
approximately $2.7 million on the two Phoenix, Arizona properties. This
agreement eliminates high interest rate debt the Company has recorded with
respect to these assets and it improves the balance sheet position in that the
primary asset being given in exchange for the extinguishment of debt is a
contract to acquire the 914 acre parcel, which is recorded as a $1.8 million
asset on the Company's Consolidated Balance Sheet. Through May 12, 2000 the
Company has sold three operating properties and two parcels of land, with
a carrying value of approximately $5.3 million and debt of approximately $4.2
million at December 31, 1999, for a total of approximately $6.1 million. These
sale transactions retired debt of approximately $4.2 million. The sale of
properties and extinguishment of debt will result in debt retirement of
approximately $39.9 million and a gain of approximately $26.1 million in 2000.
Although some of the Debt Holders' obligations are unsecured, much
of the debt is secured. Hence, this transaction will free up equity for the
purposes of generating cash either through loans or sales to meet the existing
cash flow shortages.

The Company has other properties in escrow and anticipates cash flows from
these closings in the coming months. There can be no assurance however that any
of the proposed asset sales will be completed or, that if completed, they would
be completed in a timely enough manner for the Company to avoid filing, or be
forced into, bankruptcy. Similarly, there can be no assurance the Company's
other creditors will forego taking any actions against the Company pending the
completion of these transactions and there can be no assurance that, even if the
transactions are completed, that the Company will be able to avoid filing, or be
forced into, bankruptcy.

The cash short fall in the initial months, until business operations
stabilize, is dependent on the sales of properties. However, with the Debt
Holder agreement in place, considerable cash would be freed up, and the
Company's cash flow demands from short term borrowings should diminish
significantly. Additionally, it will take time to fully implement the Workout
Plan and the Company may need to obtain interim financing and there can be no
assurance that the Company will be able to obtain such interim financing on
satisfactory terms or not at all.

The Company has also decreased its workforce in the first quarter of 2000 by 68
employees or 27.9% of the Company's workforce, which is expected to result in a
reduction of approximately $2.4 million per year in payroll related costs. See
"Employees."

INITIAL PUBLIC OFFERING

On June 24, 1997, the Company completed its initial public offering (the
"Offering") of 2,275,000 shares of the Company's common stock ("Common Stock")
at $8.25 per share. The net proceeds of approximately $17.3 million were used
as follows: (i) $8.1 million to repay indebtedness, of which $3.4 million
represented indebtedness to the Company's principal stockholders and $1.7
million represented indebtedness to other related parties; (ii) $5.6 million to
acquire land for future development; (iii) $2.8 million to acquire the interests
of various third-party partners in certain properties; and (iv) approximately
$800,000 for development activities and general corporate purposes.

Concurrently with the closing of the Offering, certain stockholders of the
Company (the "Contributing Stockholders") contributed their partnership
interests in certain properties to the Company. In addition, certain
obligations to the Contributing Stockholders represented by subordinated
dividend notes (the "Notes") were satisfied as follows: (i) approximately
$700,000 of outstanding amounts due to the Company by the principal stockholders
were offset against the Notes; (ii) $3.7 million was repaid through the issuance
by the Company of 384,256 shares of Common Stock; and (iii) $1.0 million was
repaid through the issuance by the Company of warrants for 400,000 shares of
Common Stock, which lapsed unexercised. See "-The Reorganization."

<PAGE>
DEVELOPMENT ACTIVITIES

GENERAL

Land Acquisition. The Company historically has selected land for its home
and other development projects based upon a variety of factors, including: (i)
internally and externally generated demographic and marketing studies; (ii) soil
and other physical conditions of the site; (iii) financial and legal reviews as
to the feasibility of the proposed project, including projected profitability;
(iv) the ability to secure necessary additional governmental approvals and
entitlements; (v) environmental due diligence; (vi) competition; (vii) proximity
to local traffic corridors and community facilities; (viii) infrastructure
requirements for grading, drainage, utilities and streets; and (ix) management's
judgment and experience as to the real estate market and economic trends in a
particular market.

The Company generally seeks opportunities to create value through the
purchase of undeveloped land, provided there is sufficient cash flow. However,
in the fiscal year ended December 31, 1999, the Company acquired certain land,
using high interest short term debt, which the Company was unable to replace
with permanent financing on satisfactory terms, which inability has contributed
to the Company's cash flow problems. The Company utilizes contingent purchase
agreements and options to control land while it performs its preliminary review.
Management then invests the time and resources to obtain all necessary
entitlements to develop the land. By acquiring unentitled land, the Company
attempts to: (i) minimize its capital investment because the land can generally
be purchased at a discount, compared to land with entitlements and because the
purchase is generally not consummated until all necessary entitlements are
obtained; (ii) realize greater returns on its investment in land due to the
significant value that is added once entitlements are obtained and subdivision
or parcel maps are filed; and (iii) provide a greater degree of involvement and
control over the design and development process. Once entitlements are obtained,
the Company undertakes final engineering, site grading and development of
infrastructure, including the construction of roads, utilities and other
improvements.

The Company typically obtains all necessary development approvals,
completes a satisfactory environmental assessment of the site, secures any
necessary financing and completes other due diligence deemed appropriate by the
Company prior to becoming obligated to complete the purchase or exercising its
option. The use of contingent purchase agreements and options reduces the risks
normally associated with the purchase of undeveloped land and reduces the
Company's land carrying costs. However, in the fiscal year ended December 31,
1999, the Company acquired certain land, using high interest short term debt,
which the Company was unable to replace with permanent financing on satisfactory
terms, which inability has contributed to the Company's cash flow problems. The
Company typically acquires land in contemplation of a specific development
project; it does not generally inventory undeveloped land. In certain cases,
however, the Company may acquire a site larger than required for the specified
project with the intent of using the balance of the site for future development.

<PAGE>
The following tables present certain information as of December 31, 1999
regarding parcels of land that the Company owned or controlled for development
or sale:

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF PROPOSED NUMBER PROPOSED NUMBER
ACRES (1) OF PROJECTS OF UNITS/SQ. FOOTAGE
------------ --------------- --------------------
<S> <C> <C> <C>
Homebuilding Acreage (1):
Arizona. . . . . . . . . . 1,017 4 3,282
Nevada . . . . . . . . . . 143 4 1,030
Utah . . . . . . . . . . . 66 3 377
------------ --------------- --------------------
Total 1,226 11 4,689
============ =============== ====================

Commercial Acreage (2):
Arizona. . . . . . . . . . 40 4 39,000
Nevada . . . . . . . . . . 49 8 683,755
Utah . . . . . . . . . . . 6 1 80,000
------------ --------------- --------------------
Total 95 13 802,755
============ =============== ====================

Tax Credit Project Acreage:
Arizona. . . . . . . . . . - - -
Nevada . . . . . . . . . . - - -
Utah . . . . . . . . . . . 18 2 396
------------ --------------- --------------------
Total 18 2 396
- --------------------------- ============ =============== ====================
<FN>
(1) Includes approximately 338 acres that are under option or in escrow and are
planned for development of 1,371 units.
(2) Includes approximately 145 acres that are under option or in escrow and are
planned for four projects.
</TABLE>

The continuation of the Company's development activities over the long term
will depend on its continued ability to locate, enter into contracts to acquire,
maintain adequate cash flow, obtain governmental approval for, consummate the
acquisition of and improve suitable parcels of land.

Construction. The Company currently employs a licensed architect who
directs and oversees the preparation of design plans for all of the Company's
projects by its design staff. Engineering plans are prepared by consultants
retained by the Company. The Company acts as the general contractor for all of
its development projects and each is assigned a project manager with
responsibility for all planning, scheduling and budgeting operations and an
on-site superintendent who oversees the subcontractors. The Company supervises
the construction of each project, coordinates the activities of subcontractors
and suppliers, subjects their work to quality and cost controls and assures
compliance with zoning and building codes. The Company did perform certain
construction services in-house, but during the first quarter of 2000, as part of
a cost reduction measure, the Company laid off eight employees and eliminated
that division. See "- Employees."

The Company subcontracts to specialty contractors for trades not
specifically performed by the Company. Subcontractors typically are retained on
a project-by-project basis to complete construction at a fixed price. Agreements
with the Company's subcontractors are generally entered into after competitive
bidding on an individual basis. The Company generally obtains information from
prospective subcontractors and suppliers with respect to their financial
condition and ability to perform under their agreements prior to commencement of
a formal bidding process. The services performed for the Company by
subcontractors are generally readily available from a number of qualified
subcontractors.

The Company uses, to the extent feasible, standardized designs and
materials in its commercial construction and homebuilding operations in order to
permit efficiencies in construction and materials purchasing that can result in
higher margins. In addition, by integrating its development and construction
operations, the Company is able to offer affordable homes with a wide range of
amenities.

The Company generally negotiates the purchase of major raw material
components such as concrete, lumber and structural steel. Where possible, the
Company negotiates price and volume discounts with suppliers on behalf of itself
and its subcontractors in order to take advantage of its volume of production.
Raw materials used in the Company's operations are generally readily available
from a number of sources but prices of such raw materials may fluctuate due to
various factors, including supply and demand.

<PAGE>
HOMEBUILDING

In 1995, the Company began the development of value-priced single-family
detached homes to meet the demand for affordable housing in the Las Vegas
market. In 1998, the Company expanded its homebuilding activities into Utah and
Arizona through the acquisitions of Maxim and Diamond Key. The Company
currently sells homes in Nevada, Utah and Arizona, including entry-level and
move-up homes. The Company emphasizes affordable housing, including townhomes,
cluster homes and single-family residences.

The Company's objective in its entry-level and move-up homebuilding
activities is to deliver superior value to low and moderate income families by
pricing its homes competitively and assisting buyers in locating financing,
while providing innovative designs, quality construction and features and
amenities not usually found in other affordable housing. The Company has
expanded its business opportunities by developing projects that are eligible for
various government-sponsored programs that provide down payment assistance or
lower cost financing. Typical down payment assistance programs include a 1%
down payment program and a sweat equity program that, where offered,
significantly increase the pool of potential homebuyers. The Company currently
plans to attempt to offer a range of value-priced homes at each residential
development, including at least one design that is the lowest priced comparable
product in the market. The Company has been able to minimize the cost of its
homes by integrating and performing many of the development functions as well
as utilizing high-density site plans configured with the lots having minimal
frontage area. This type of site design enables the Company to reduce certain
infrastructure construction costs, such as streets and sewer lines, in
order to increase potential profitability.

The following table provides certain information with respect to the
Company's homebuilding activities (dollars in thousands, except Average Sales
Price/Unit):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Number of Units Sold(1) . 134 251 924
Average Sales Price/Unit. $82,521 $110,096 $111,161
Total Revenue . . . . . . $11,058 $ 27,634 $102,713
Gross Profit. . . . . . . $ 919 $ 3,880 $ 9,699
<FN>
(1) Represents home sales which have closed.
</TABLE>

The Company focuses its marketing efforts primarily on first-time
homebuyers and apartment renters as potential customers. This is accomplished
through low down-payment requirements, down-payment assistance and sweat equity
programs. These programs offer potential customers the opportunity for home
ownership for less than the cost of renting many apartments. The Company is also
currently exploring other methods and programs for reducing the barriers to
homebuying for its targeted customers.

Nevada Product Description. The Company's Nevada homebuilding operations
----------------------------
focus on quality homes for working families who are generally first time
homebuyers. The Company markets its homes in Nevada under the "Perennial Homes"
brand name. A typical neighborhood built by the Company consists of a gated
community with a community recreation building and swimming pool. The Company
also provides a "complete home" package included in the purchase price. The
package includes name brand appliances, decorative window coverings, a security
system and garage door opener. The package concept gives homebuyers protection
against the hidden costs of moving and typically results in a lower overall
cost.

The Company's single-family detached home communities generally offer at
least three different floor plans, with two, three or four bedrooms and two-car
garages and range from 991 square feet to 1,736 square feet. The townhouses
have two or three bedrooms, with two and one-half baths and either a one- or
two-car attached garage. The Company's cluster home developments generally
consist of seven to eight single-family detached homes sharing a common
cul-de-sac.

<PAGE>
The base sales price ranges for homes in the Company's Nevada communities
as of December 31, 1999 were as follows:

<TABLE>
<CAPTION>
<S> <C>
Sutter Creek (single-family detached) . . . $ 105,990 - $126,990
Crescendo at Silver Springs (cluster homes) 99,990 - 132,990
Sterling at Silver Springs (cluster homes). 99,990 - 115,990
Kendall Creek (townhomes) . . . . . . . . . 109,990 - 122,990
Pelican Creek (single-family detached). . . 121,990 - 135,990
</TABLE>

While the Company's primary geographic focus in Nevada has been in the Las
Vegas area, during 1998 the Company opened office facilities in Reno, Nevada and
is currently constructing and selling a 102-unit townhome project in Sparks,
near Reno, known as Kendall Creek.

The following table presents certain information, as of December 31, 1999,
relating to the Company's home developments in Nevada that were: (i) completed
and sold out during 1999; (ii) active (under development or with unsold
inventory); or (iii) planned:

<TABLE>
<CAPTION>
Nevada Homebuiling

Under Development or With Unsold
Inventory (3):
Pelican Creek. . . . . . . . . Detached Las Vegas 79 1 1 34 123,589 123,589
Sutter Creek . . . . . . . . . Detached Las Vegas 150 113 112 13 109,544 12,270,025
Cresesendo at Silver Springs. Cluster homes Las Vegas 285 121 121 31 109,480 13,247,130
Sterling at Silver Springs . . Cluster homes Las Vegas 240 50 50 25 104,018 5,200,897
Kendall Creek . . . . . . . . Townhomes Sparks 102 10 10 29 111,708 1,117,076
Total Under Development or ---------- ------ --------- ----------- -------------
With Unsold Inventory . . . 856 295 294 132 31,958,717

Planned (4):
Silver Springs Phase A . . . . Cluster homes Las Vegas 236 - - - - -
Taylor Ranch (5) . . . . . . . Cluster homes Las Vegas 581 - - - - -
Madre Mesa North . . . . . . . Detached Las Vegas 131 - - - - -
Madre Mesa South . . . . . . . Detached Las Vegas 82 - - - - -
---------- ------ --------- ----------- -------------
Total Planned . . . . . . . 1,030 - - - - -
----------
Grand Total . . . . . . . . 2,040 449 304 132 32,869,181
- ---------------------------------------------------------- ========== ====== ========= =========== =============

Estimated
Ave. Price Est. Sales
per Unsold Value of
Project Name Home (2) Unsold Homes
- ------------ ---------- ------------
<S> <C> <C>
Completed and Sold out During
1999:
Sunrise Ridge. . . . . . . . . $ - $ -
Total Completed and Sold Out -------------
During 1999. . . . . . . . . . . . -

Under Development or With Unsold
Inventory (3):
Pelican Creek . . . . . . . . 128,657 10,035,246
Sutter Creek . . . . . . . . . 119,864 4,434,968
Cresesendo at Silver Springs . 119,135 19,538,140
Sterling at Silver Springs . . 107,807 20,483,330
Kendall Creek . . . . . . . . 111,708 10,277,136
Total Under Development or -------------
With Unsold Inventory 64,768,820

Planned (4):
Silver Springs Phase A . . . . - -
Taylor Ranch (5) . . . . . . . - -
Madre Mesa North . . . . . . . - -
Madre Mesa South . . . . . . . - -
-------------
Total Planned . . . . . . . -

Grand Total . . . . . . . . $ 64,768,820
=============
<FN>
(1) Represents The Number Of Homes That Are Under Sales Contracts But Have
Not Yet Closed.
(2) Represents The Proposed Average Offering Sales Price Per Home To Be
Sold.
(3) Open For Sale As Of March 30, 2000.
(4) The Company Owns Or Otherwise Controls The Land For Each Planned Home
Development. In Most Cases, The Planned Home Development Requires
Additional Entitlements, Permits Or Other Actions Prior To Construction,
And There Can Be No Assurance That All Regulatory Approvals Can Be
Obtained.
(5) This Property Was Given In Exchange For Relief Of Debt To The Company's
Largest Debt Holder. See "Workout Plan."
</TABLE>

Arizona Product Description. Diamond Key, the Company's Arizona
-----------------------------
homebuilding subsidiary, was acquired in November 1998. Diamond Key's
homebuilding operations have historically included a wide range of homes.
However, during 1997, its focus began to shift to entry-level homes in the
Phoenix and Tucson areas. The Company markets its homes in Arizona under the
"Diamond Key Homes" brand name. The targeted market is low to moderate income
households.

The Company has under purchase agreement approximately 900 acres of land,
which is not included in the "Arizona Homebuilding" table. This land is located
in close proximity to Interstate 10, ninety miles south of Phoenix, and is
currently zoned for large lot development. This right, under the purchase
agreement, was exchanged for relief of debt with the Company's largest debt
holder. See "Workout Plan."

<PAGE>
The following table presents certain information, as of December 31, 1999,
relating to the Company's home developments in Arizona that were: (i) completed
and sold out during 1999; (ii) active (under development or with unsold
inventory); or (iii) planned:

<TABLE>
<CAPTION>
Arizona Home Building

Total No. of Average
No. of No. of Homes Number of Price/Home Total Home
Homes at Homes Closed in Homes in Closed in Sales Revenue
Project Name Home Type Location Completion Closed 1999 Backlog (1) 1999 in 1999
- ------------ ------------- --------- ---------- ------ --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Completed and Sold out During
1999:
Neely Ranch . . . . . . . . . Detached Gilbert 22 22 3 - $ 156,833 $ 470,500
Rancho Vistoso . . . . . . . . Detached Oro Valley 17 17 1 - 209,000 209,000
Rancho Cimarron 1 . . . . . . Detached Gilbert 63 63 1 - 169,000 169,000
Bolero Court . . . . . . . . . Detached Phoenix 130 130 97 - 98,838 9,587,286
Stonehenge . . . . . . . . . . Detached Gilbert 57 57 5 - 143,209 716,045
Sonoran Vista 1 . . . . . . . Detached Gilbert 150 150 8 - 120,025 960,200
---------- ------ --------- ----------- -------------
Total Completed and Sold Out
During 1999. . . . . . . . . . . 439 439 115 - 12,112,031

Under Development or With Unsold
Inventory:
Sunrise Canyon 1 . . . . . . . Detached Apache Jctn 268 260 141 18 99,250 13,994,278
Sunrise Canyon 2 . . . . . . . Detached Apache Jctn 132 116 88 7 106,992 9,415,322
Copper Creek . . . . . . . . . Detached Oro Valley 61 29 15 5 114,111 1,711,671
Castle Rock . . . . . . . . . Detached Phoenix 166 54 20 20 155,253 3,105,057
Desert Vista 1 . . . . . . . . Detached Oro Valley 40 39 8 - 204,858 1,638,863
Desert Vista 2 . . . . . . . . Detached Oro Valley 33 1 1 4 197,331 197,331
Rita Ranch 1 . . . . . . . . . Detached Tucson 72 70 57 - 104,711 5,968,554
Rita Ranch 2 . . . . . . . . . Detached Tucson 63 - - 21 - -
Suncliff 1 . . . . . . . . . . Detached Peoria 246 245 48 1 100,942 4,845,215
Sonoran Vista 2 . . . . . . . Detached Gilbert 24 8 6 6 239,222 1,435,332
Sunrise Canyon 3 . . . . . . . Detached Apache Jct 81 7 7 73 103,936 727,554
Suncliff 3 . . . . . . . . . . Detached Peoria 28 - - - - -
Suncliff 4 . . . . . . . . . . Detached Peoria 135 51 51 42 108,526 5,534,888
Pueblo Seco Townhouses . . . . Townhomes Mesa 166 20 20 25 99,330 1,986,600
---------- ------ --------- ----------- -------------
Under Development or With Unsold
Inventory: 1,515 900 462 222 50,561,665

Planned (3):
Suncliff 5 (4) . . . . . . . . Detached Peoria 170 - - - - -
El Mirage (4) . . . . . . . . Detached El Mirage 653 - - - - -
Tangerine Hills . . . . . . . Detached Tucson 450 - - - - -
---------- ------ --------- ----------- -------------
Total Planned . . . . . . . 1,273 - - - -
---------- ------ --------- ----------- -------------
Grand Total . . . . . . . . 3,227 1,339 577 222 $ 62,673,696
- -------------------------------- ========== ====== ========= =========== =============

Estimated
Ave. Price Est. Sales
per Unsold Value of
Project Name Home (2) Unsold Homes
- ------------ ---------- ------------
<S> <C> <C>
Completed and Sold out During
1999:
Neely Ranch . . . . . . . . . $ - $ -
Rancho Vistoso . . . . . . . . - -
Rancho Cimarron 1 . . . . . . - -
Bolero Court . . . . . . . . . - -
Stonehenge . . . . . . . . . . - -
Sonoran Vista 1 . . . . . . . - -
------------
Total Completed and Sold Out
During 1999. . . . . . . . . . . -

Under Development or With Unsold
Inventory:
Sunrise Canyon 1 . . . . . . . 101,000 808,000
Sunrise Canyon 2 . . . . . . . 104,000 1,664,000
Copper Creek . . . . . . . . . 107,500 3,440,000
Castle Rock . . . . . . . . . 151,000 16,912,000
Desert Vista 1 . . . . . . . . 165,000 165,000
Desert Vista 2 . . . . . . . . 192,000 6,144,000
Rita Ranch 1 . . . . . . . . . 101,500 203,000
Rita Ranch 2 . . . . . . . . . 101,500 6,394,500
Suncliff 1 . . . . . . . . . . 101,000 101,000
Sonoran Vista 2 . . . . . . . 212,500 3,400,000
Sunrise Canyon 3 . . . . . . . 99,000 7,326,000
Suncliff 3 . . . . . . . . . . 112,500 3,150,000
Suncliff 4 . . . . . . . . . . 103,500 8,694,000
Pueblo Seco Townhouses . . . . 95,000 13,870,000
------------
Under Development or With Unsold
Inventory: 72,271,500

Planned (3):
Suncliff 5 (4) . . . . . . . . - -
El Mirage (4) . . . . . . . . - -
Tangerine Hills . . . . . . . - -
------------

Total Planned . . . . . . . - -
------------

Grand Total . . . . . . . . $ 72,271,500
- -------------------------------- ============
<FN>
(1) Represents the number of homes that are under sales contracts but have
not yet closed.
(2) Represents the proposed average offering sales price per home to be
sold.
(3) The Company owns or otherwise controls the land for each planned home
development. In most cases, the planned home development requires
additional entitlements, permits or other actions prior to construction,
and there can be no assurance that all regulatory approvals can be
obtained.
(4) These properties were given in exchange for relief of debt to the
Company's largest debt holder. See "Workout Plan."

</TABLE>

Utah Product Description. Maxim, the Company's Utah homebuilding
--------------------------
subsidiary, was acquired in March 1998. Maxim has specialized in building homes
generally ranging in price from $145,000 to $185,000. Under Saxton leadership,
Maxim's homebuilding operations will focus on move-up homes with prices ranging
from $100,000 to $170,000. The Company markets its homes in Utah under the
"Maxim Homes" brand name. The targeted market is for moderate-income households,
focusing on the move-up buyer. The Company's current developments are located in
the Salt Lake City area. The homes include fully landscaped front yards, garage
door openers and are pre-wired for security systems.

<PAGE>
UTAH HOMEBUILDNG

The following table presents certain information, as of December 31, 1999,
relating to the Company's home developments in Utah which are active (under
development or with unsold inventory) or planned:

UTAH HOMEBUILDING

<TABLE>
<CAPTION>
Average/
No. of Price Total
No. of Total Homes No. of Home Home
Homes No. of Closed Homes Closed Sales
at Homes In in in Revenue
Project Name Home Type Location at Completion Closed 1999 Backlog(1) 1999 in 1999
- ------------ --------- --------- ------------- ------ ---- ---------- ---- ---------
Completed and Sold Out During 1999:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wood Ranch . . . . . . . . . . . . . . . . . . . . Detached South Jordan 70 70 13 - $185,551 2,411,637
Riverwalk. . . . . . . . . . . . . . . . . . . . . Detached American Fork 13 13 13 - 173,661 2,257,598
------ ------ ----- --------- ---------
Total Completed and Sold Out During 1999 . . . . . . . . . . . . . . . . . . 83 83 26 - 4,669,235

Under Development or With Unsold Inventory (3):
Murfield . . . . . . . . . . . . . . . . . . . . . Detached Syracuse 142 - - - - -
The Falls at Overlake Detached Tooele 49 - - - - -
Sunrise Pointe 1 . . . . . . . . . . . . . . . . . Detached W.Valley City 77 17 17 2 147,159 2,501,699
------ ------ ----- --------- ---------
Total Under Development or With Unsold Inventory . . . . . . . . . . . . . . 268 17 17 2 2,501,699

Planned (4):
West Haven Townhomes . . . . . . . . . . . . . . Townhomes Roy 186 - - - - -
------ ------ ----- --------- ---------
Total Planned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 - - - -
------
Grand Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 100 43 2 $7,170,934
====== ====== ===== ========= =========

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

Estimated
Ave. Price Est. Sales
per Unsold Value of
Project Name Home (2) Unsold Homes
- ------------ ------------------ ------------------
Completed and Sold Out During 1999:
<S> <C>
Wood Ranch . . . . . . . . . . . . . . . . . . . . - -
Riverwalk. . . . . . . . . . . . . . . . . . . . . - -
------------------
Total Completed and Sold Out During 1999 . . . . . . -
Under Development or With Unsold Inventory (3):
Murfield . . . . . . . . . . . . . . . . . . . . . 141,143 20,042,306
The Falls at Overlake. . . . . . . . . . . . . . . 125,990 6,173,510
Sunrise Pointe 1 . . . . . . . . . . . . . . . . . 148,132 8,887,920
-----------------
Total Under Development or With Unsold Inventory . 35,103,736

Planned (4):
West Haven Townhomes . . . . . . . . . . . . . . - -
-----------------
Total Planned. . . . . . . . . . . . . . . . . . -

Grand Total . . . . . . . . . . . . . . . . . . $ 35,103,736
=================

<FN>
(1) Represents the number of homes that are under sales contracts but have
not yet closed.
(2) Represents the proposed average offering sales price per home to be
sold.
(3) Open for sale as of December 31, 2000.
(4) The Company owns or otherwise controls the land for each planned home
development. In most cases, the planned home development requires
additional entitlements, permits or other actions prior to construction,
and there can be no assurance that all regulatory approvals can be
obtained.
</TABLE>

Production Strategy. The Company attempts to limit the number of unsold
units under construction by limiting the size of each construction phase and
closely monitoring sales activity. However, the Company commences construction
prior to obtaining sales contracts for all homes within a given phase. The
Company strives to match construction starts to its sales rates. Building homes
of the same product type in phases also allows the Company to utilize production
techniques that reduce its construction costs. The size of these phases depends
on such factors as current sales and cancellation rates, the type of buyer
targeted for a particular residential project, the time of the year and the
Company's assessment of prevailing and anticipated economic conditions.
Depending on the design, time of year, local labor situation, governmental
approvals, availability of materials and supplies, and other factors, the
Company generally completes a home in three to four months, most of which are
sold by completion of construction. The Company has historically implemented
this production strategy in Nevada and intends to phase it into its homebuilding
operations in Arizona and Utah, where Diamond Key and Maxim have historically
built most homes to order.

Marketing and Sales. The Company sells its homes through licensed sales
representatives who typically work from sales offices located in the model homes
at the development site. Sales representatives assist potential buyers by
providing them with basic floor plans, price information, development and
construction timetables, tours of model homes and the selection of options. The
Company's sales representatives are provided training by the Company and
generally have had prior experience selling new homes in the local market. The
Company also markets its homes for sale through direct mailing to identified
populations of prospective buyers and, to a lesser extent, through other media,
including newspaper, television and radio advertising, billboard and other
signage.

The Company has built and decorated model homes at each of its residential
communities to display the homes' design features. Model homes play a key role
in helping buyers understand the efficiencies and value provided by each plan
type of the Company's homes. The Company intends to utilize model homes at each
of its planned residential communities.

Homes are typically sold prior to or during construction using sales
contracts which are accompanied by small cash deposits. Purchasers are
permitted to cancel sales contracts if they are unable to qualify for financing
and under certain other circumstances, including rescission rights which may be
given under local law. The Company believes that its cancellation rate is
consistent with that generally experienced at other affordable home
developments. Although cancellations can delay the sale of the Company's homes,
they have not had a material impact on sales, operations or liquidity because
the Company closely monitors the progress of prospective buyers in obtaining
financing and monitors and adjusts its construction plans to better match the
level of demand for its homes.

<PAGE>
To assist in the marketing of its homes and to limit the Company's
liability for certain construction defects, the Company sells the homes subject
to a limited warranty which includes, among other things, coverage from an
insurance company for the cost to repair major structural defects for ten years.
The Company is liable for such repair costs during only the first two years and,
subject to the following limitations, such liability is covered by the Company's
builders' policy. The foregoing repair costs are limited by the Company's
builders' policy to the repair, replacement or payment of the reasonable cost of
repair or replacement of such warranted items not to exceed an aggregate amount
equal to the final sales price of the home covered by the warranty. The choice
to repair, replace or make payments is the Company's during the first two years
and the insurance company's thereafter. Typically, the Company also has the
right to buy back the home at the original purchase price plus specified costs
incurred by the buyer under certain conditions. In addition, all other
warranties, express or implied, including but not limited to, all implied
warranties of fitness, merchantability or habitability are disclaimed and
excluded to the extent allowed by law.

Customer Financing. The Company does not provide financing to prospective
homebuyers but works closely with mortgage brokers or lenders who assist the
Company's homebuyers in obtaining financing. Since its acquisition in December
1998, HomeBanc Mortgage Corporation "HomeBanc" has provided mortgage brokerage
services to purchasers of the Company's homes in Arizona. The Company is
planning to explore opportunities to expand its mortgage brokerage activities
into its other markets and to enter the mortgage banking business. At the
on-site office, sales representatives provide prospective homebuyers with
information regarding the qualifying criteria for mortgage financing. In
addition, the Company prices its homes to meet the applicable requirements for a
home buyer's mortgage loan to be insured by the Federal Housing Administration
(the "FHA") or guaranteed by the Veterans Administration (the "VA"). FHA and VA
financing generally enables homebuyers who satisfy certain income and other
requirements to purchase homes with lower down payments than the down payments
required by conventional mortgage lenders. The Nevada Housing Division's
mortgage purchase programs generally enable such buyers to obtain mortgage
financing at less than prevailing rates. During 1998, the Company offered a
program to buyers which allows them to make a minimum 1% down payment, which
generally permits these buyers to move into a new home for less than or
equivalent to the cost of renting an apartment. The Company also intends to
work with other federal, state and non-profit sponsors which provide down
payment assistance to qualifying homebuyers. Management believes that the
availability of the foregoing financing programs broadens the pool of potential
purchasers for the Company's homes.

Customer Service and Quality. Management believes that strong customer
relations and an adherence to high quality control standards are fundamental to
the Company's future success. The Company employs a quality assurance process
which is intended to provide a positive atmosphere for each customer throughout
the pre-sale, sale, building, closing and post-closing periods. The Company
employs full-time customer service employees, who, working as a team with the
Company's sales representatives and on-site construction supervisor, oversee
compliance with the Company's quality control standards. These employees as a
group have responsibility for: (i) overseeing the entire project from land
development through construction; (ii) overseeing performance by the Company's
subcontractors and suppliers; (iii) reviewing the progress of each home and
conducting formal inspections as specific stages of construction are completed;
(iv) regularly updating each buyer on the progress of such buyer's home; (v)
preparing homeowner orientation materials; and (vi) scheduling and performing
all service calls to handle "punch-list," warranty and other items immediately
before and after the home sale.

PORTFOLIO PROPERTIES

The Company designs, develops and owns commercial income-producing
properties for its own portfolio. At December 31, 1999, the Company owned and
operated a portfolio of 12 properties comprised of approximately 307,316 square
feet of space at an annualized base rent of approximately $3.6 million
(including approximately $584,045 paid by the Company). See "Property
Operations and Management - Operations." At December 31, 1999, the cost basis
of these properties was $28.2 million and these properties secured indebtedness
of $24.2 million. At December 31, 1999, the Company had two portfolio
properties in various stages of development. The estimated aggregate cost at
completion for such projects is approximately $3.1 million, substantially all of
which is expected to be financed with construction loans. At December 31, 1999,
all portfolio properties were designated as held for sale.

<PAGE>
The following table sets forth certain information with respect to the
Company's portfolio properties under development and held for sale as of
December 31, 1999:

<TABLE>
<CAPTION>
APPROXIMATE COSTS INCURRED ESTIMATED ESTIMATED
BUILDING THROUGH REMAINING TOTAL COST AT
PROJECT (1) TYPE ACRES SQUARE FEET DECEMBER 31, 1999 COSTS COMPLETION
- -------------- ------ ----- ----------- ------------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C>

Rancho Vegas . .Retail 0.7 9,800 $ 925,243 $ 53,734 $ 978,977
Regency Plaza. .Retail 2.8 28,200 1,751,699 339,964 2,091,663
----- ----------- ------------------ ---------- --------------
Total . . . . . . . . 3.5 38,000 $ 2,676,942 393,698 $ 3,070,640
===== =========== ================== ========== ==============
<FN>
(1) These projects are located in Las Vegas, Nevada.
</TABLE>

The Company builds retail and office properties which typically are located
within commercial corridors near traffic generators such as regional malls,
business developments and major thoroughfares. Management believes the benefits
of such locations include high visibility to passing traffic, ease of access and
tenant control over the site's operating hours and maintenance standards. The
Company typically builds industrial properties in areas where other industrial
properties are located. The Company's commercial and industrial properties have
the potential to be easily adapted to a variety of tenants and have relatively
low re-leasing costs, which provide the Company with flexibility in use and
tenant selection if the properties are vacated.

The following table sets forth certain information with respect to the
Company's sales of commercial properties (dollars in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------ ----------
<S> <C> <C> <C>
Number of Portfolio Properties Sold. 3 4 2
Number of Land Parcels Sold. . . . . 3 - 1 (1)
Total Revenue. . . . . . . . . . . . $11,540 $7,823 $ 4,901
Gross Profit (loss). . . . . . . . . $ 4,413 $ 113 $( 2,016)
<FN>
(1) Partial land sale in 1999, adjacent to the Turtle Stop Property.
</TABLE>

DESIGN-BUILD SERVICES

The Company provides its design-build construction services to third-party
clients, including Tax Credit Partnerships. See "Tax Credit Projects." During
the five years ended December 31, 1999, the Company completed 39 design-build
projects, comprised of 13 industrial facilities, 14 other commercial properties,
4 schools and 8 apartment or townhome complexes. At December 31, 1999, the
Company had 2 uncompleted design-build development and construction projects,
representing an aggregate contract amount of approximately $35.3 million. The
Company manages its design and construction process through a coordinated,
cooperative team approach. The Company's primary goal is to achieve the owner's
cost and schedule objectives while producing a facility of the highest standards
of quality.

<PAGE>
The following table sets forth certain information with respect to the
Company's TCP projects, which are under development, but were classified as held
for sale, as of December 31, 1999:

<TABLE>
<CAPTION>
APPROXIMATE REVENUE TOTAL
BUILDING THROUGH CONTRACT
PROJECT TYPE LOCATION SQUARE FEET DECEMBER 31, 1999 PRICE
- ------------- ---------- -------------- ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C>
South Valley Apartments Las Vegas, NV 265,339 $ 20,412,990 $22,192,000
Spanish Hills Apartments Sparks, NV 146,951 12,445,100 13,100,632
------------ ----------------- -----------
Total. . . . . . . . . . . . . . . 412,290 $ 32,858,090 $35,292,632
============ ================= ===========
</TABLE>

The Company's design-build development and construction services encompass
all phases of the project, including architectural design, the selection and
review of engineering professionals and the performance of all general
contractor responsibilities. Design-build projects permit the Company to offer
accelerated construction schedules to its clients because the Company can
perform work on certain aspects of a project while other aspects are still being
designed. Design-build contracting enables the Company to provide clients with
comprehensive project management, providing a coordinated team approach from the
pre-construction development stage through construction and completion of a
project.

Design-build projects are generally undertaken on a fixed-price basis and
may be built on land owned by the Company and then sold to the client, owned by
the client, or identified by the client and then either purchased by the client
or by the Company for resale to the client. The typical design-build contract
requires the Company to obtain all necessary government permits and approvals,
perform or oversee all architectural and engineering services, construct the
project and, in many cases, arrange, on the client's behalf, any needed land,
construction and permanent financing. The Company's design-build projects are
generally the result of referrals by former clients, brokers or others in the
real estate business.

Fixed-price contracts require the Company to accurately estimate the cost
and quantities of materials, labor and equipment necessary and the amount of
time required to complete a project. The Company generally bears the risks of
construction cost overruns. In order to arrive at the contract price, the
Company uses a computer-based estimating program to develop a comprehensive
estimate for the project for which separate labor, equipment, material,
subcontractor, overhead and profit estimates are compiled. Once a project
begins, the estimate is used to measure and monitor ongoing project costs. The
Company's ability to estimate project costs accurately has historically been a
key component of its success and profitability. Fixed-price contracts provide
the opportunity for greater profits to the extent the contractor is able to hold
down costs below those originally anticipated.

The Company bills its client, or the project construction lender, for work
performed and pays the subcontractors from funds received. The Company is
responsible for the performance of the entire contract, including work assigned
to subcontractors. Accordingly, the Company is subject to liability resulting
from the failure of subcontractors to perform as required under the contract.
Typically, pursuant to construction industry practice, a portion of billings,
generally not exceeding 10%, is retained by the client until the project is
completed. The Company recognizes revenue and profit on its construction
contracts under the percentage-of-completion method.

The Company generally does furnish bonds guaranteeing its performance, upon
request, and the Company generally will be requiring completion bonds from its
subcontractors to protect the Company's interest in the project. To date, the
Company has not been denied a construction job because of its unwillingness to
furnish a completion bond.

The following table sets forth certain information with respect to the
Company's design-build projects (dollars in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- ----------
<S> <C> <C> <C>
Number of New Contracts Awarded. 2 3 1
Total Revenue. . . . . . . . . . $31,707 $51,524 $ 16,621
Gross Profit (Loss). . . . . . . $ 4,726 $10,661 $( 2,365)
</TABLE>

<PAGE>
Stages of a Project. The Company's design and construction process is
intended to be accomplished through a coordinated, cooperative team approach.
The Company's primary goal is to achieve the owner's cost and schedule
objectives while producing a facility of the highest standards of quality.
Following is a summary of the Company's approach at the pre-construction,
construction and post-construction stages of a project:

Pre-Construction Stage. The Company's approach for providing
pre-construction services involves establishing a project team that advises and
assists the client on all aspects of design and development for the project.
The Company assists its clients in the financial planning for the project
through preparation of cash flow projections, accounting procedures, detailed
cost budgets and comparative cost analysis studies. The Company: (i) works with
the client to establish completion dates for all stages of the project; (ii)
analyzes market conditions with a view toward material availability, cost
strategies, construction techniques, manpower levels and similar matters; (iii)
develops a bid-packaging program to encourage maximum bidder interest and fully
defines the work to minimize contingencies for unknown circumstances; (iv)
thoroughly reviews and defines the project schedule, critical materials
required, delivery dates and performance criteria with the selected
subcontractors; and (v) advises and incorporates considerations regarding
construction safety and public agency requirements. The Company also assists in
or manages the development of the architectural, civil, mechanical, electrical
and structural plans and specifications, and advises in the areas of land
selection, construction feasibility, possible economies, availability and
utilization of materials, and labor and time requirements for procurement,
construction and project costs.

Construction Stage. As general contractor, the Company assumes
responsibility for managing the construction of a project and directs the field
execution of the concepts and objectives established during the pre-construction
stage. The Company maintains a full-time supervisory staff at the job site to
coordinate and provide general direction of the work and progress of the
subcontractors, including framing, paving and permitting, establishing an
on-site organization to carry out the overall plans of the project team and
directing the work being performed until final completion and delivery to the
owner.

Post-Construction Stage. As a project nears completion, the Company works
with the project team to assist in an orderly project close-out and transition
from construction to actual use in the areas of quality control, documentation
and building turnover.

TAX CREDIT PROJECTS. Substantially all of the Company's design-build
contracts for apartment complexes have been Tax Credit Projects developed for
Tax Credit Partnerships formed to take advantage of the low income housing tax
credit provided by Section 42 of the Internal Revenue Code (the "Housing Tax
Credit"). The Company has completed the construction of six Tax Credit Projects
and has two currently in process. Tax Credit Partnerships have been attractive
development opportunities for the Company because of their potential to generate
long-term cash flow streams with little or no initial cash investment. The
Company has been a leading developer of Tax Credit Projects in Nevada during the
past five years according to statistics provided by the Nevada Housing Division.
In a typical Tax Credit Project, the Company is retained by the Tax Credit
Partnership to develop the project pursuant to a fixed-price construction
contract. Included in the fixed price are the Company's customary contractor and
developer fees and, where market conditions permit, a markup on the sale of the
underlying land. The cost of developing the Company's Tax Credit Projects is
generally financed approximately as follows: loan proceeds, 60% to 70%; partner
equity, 15% to 30%; and deferred developer fees, 5% to 15%. In addition, the
Company may be entitled to earn, upon completion or over a period of time
following completion, certain additional fees, including property management
fees based on property rental income.

During the construction period, the Company, as general partner of the Tax
Credit Partnerships, bears the developer's risk on the fully recourse
construction loans. Upon completion of construction and lease-up, the
construction loans convert to non-recourse permanent loans. See Note 6 of Notes
to Consolidated Financial Statements and "Property Operations and Management -
Management and Leasing" and "Regulatory and Environmental Matters - Resident
Income and Other Limitations."

The Company structures the Tax Credit Partnership and generally retains or
purchases up to a 1% general partner interest. As the developer and general
partner for these projects, the Company is generally entitled to between 66% and
85% of any annual distributions of net cash from operation of the Tax Credit
Project, after payment of deferred fees, and from its sale over its expected 15
year life. Since none of the Company's Tax Credit Partnerships have sold a Tax
Credit Project, the Company has received no distribution of sales proceeds.
There can be no assurance that the Company will receive any distribution of
sales proceeds upon the eventual sale of the Tax Credit Projects. The Company's
capital contribution for its general partner interest is funded in cash or as a
contribution of all or a portion of its equity in the land on which the Tax
Credit Project is to be constructed. In addition to its capital contribution,
the Company is typically obligated to make operating expense loans, up to a
stated maximum, to meet operating deficits of the Tax Credit Partnership. Under
the terms of the partnership agreements of two Tax Credit Partnerships, the
Company is required to withdraw as a general partner upon receipt of all amounts
due the Company for developer fees and interest. An unaffiliated third-party
investor group is the limited partner of the Tax Credit Partnership and
contributes all or substantially all of the equity capital to the Tax Credit
Partnership in exchange for substantially all of the benefit of the Housing Tax
Credit. The investor limited partner's equity is generally contributed in
installments over a period of approximately 24 months. Approximately 40% of such
contribution is funded upon admission of the investor limited partner to the Tax
Credit Partnership and the balance is contributed from time to time when
specified conditions are satisfied.

<PAGE>
The Tax Credit Projects to date have been structured to be eligible for
financing through one or more of the tax-exempt private activity revenue bond
programs sponsored by the Nevada Housing Division. The programs of the Nevada
Housing Division are intended to provide incentives for the construction,
ownership and financing of housing for persons and families of low and moderate
income. These incentives may include lower interest rates on construction and
permanent financing with respect to the eligible project. Nevada Housing
Division bond financing typically involves substantially greater origination
fees and expenses than those associated with conventional financing. The Company
believes the return on its investment provided by the lower interest rates over
the term of the loan more than compensates for the additional fees and expenses.

As a condition to obtaining tax-exempt land financing, the Company is
required to enter into certain regulatory and other agreements with the Nevada
Housing Division, the terms of which require that the owner of such properties
set aside a specified percentage of the units (generally 100%) for residents
whose incomes do not exceed a specified percentage of the area median income
("Lower Income Tenants") and hold all vacant units in the project (for a
reasonable period consistent with maintaining the project's financial viability)
for rent or occupancy by Lower Income Tenants. These restrictions terminate
approximately 15 years following the date of initial occupancy of the project.
During the period that the restrictions apply, any sale or transfer of the
project, or the sale or transfer of the Company's interest in the partnership
which owns the project, will be subject to regulatory approval.

The Company has operated the Tax Credit Projects through its in-house
property management division. In the fourth quarter of 1999, the Company
terminated the in-house property management staff and retained two third party
property management companies to manage the residential properties. These
outside companies are responsible for the lease-up of the properties,
management, accounting and daily maintenance of these properties. The Company
had previously received property management fee revenue of 5.0% of gross
revenues. The agreement with the third-party property management companies
allows them to receive 3.5% and the Company to receive 1.5% of gross revenues.

WRITE DOWN OF TAX CREDIT PROJECTS TO FAIR VALUE.

During the fourth quarter of 1999, the Company began to explore the
possibility of selling the Tax Credit Project general partnership interests and
receivables to strengthen the Company's cash flow position and has determined
that the Due from TCP's and the Investments in the TCP Joint Ventures are held
for sale at December 31, 1999 and are actively being marketed for sale.
Therefore, at December 31, 1999, the amounts are recorded at the lower of cost
or fair value, less selling expenses even though the estimated future cash flows
exceed the gross recievable balance at December 31, 1999. The Company has
obtained a fair market valuation from an independent third party for the general
partnership interests and the receivables from the eight TCP properties. This
valuation indicated a fair value of $14.8 million, resulting in a write down of
the Tax Credit partnership receivables by $23.9 million and a write down of
the investments in these projects by $1.7 million (See Notes 6 and 9 to the
Consolidated Financial Statements).

Until the fourth quarter of 1999, the Company had not attempted to market
these general partnership interests and receivables and based on all available
information, the Company believed that it would be able to collect the
receivable balances plus interest as provided for in the agreements.

The Company has completed the construction of six Tax Credit Projects and
has two projects under construction at December 31, 1999. The following table
sets forth information regarding the Tax Credit Projects. The Company holds a
general partner interest in each Tax Credit Partnership, which holds fee simple
title to the project. The Company does not plan to pursue any new Tax Credit
Projects in the foreseeable future. The following table represents certain
information relating to the Company's completed or under development Tax Credit
Projects as of December 31, 1999 (dollars in thousands):

<PAGE>
<TABLE>
<CAPTION>
DATE OF OCCUPANCY MGMT.
COMPLETION TOTAL TOTAL CARRYING CARRYING AT FEE
OR ESTIMATED PROJECT CONTRACT VALUE OF VALUE OF NO. OF DECEMBER 31, EARNED
TAX CREDIT PROJECT (1) TYPE COMPLETION COST (2) AMOUNT RECEIVABLE INVESTMENT UNITS 1999 IN 1999
- ------------------------ ------------ ---------- --------- -------- ---------- ---------- ------------ ----------- -------
Completed:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Saratoga Palms East I. . Sr. Citizens 02/96 $13,556 $16,923 $1,388 $1,502 360 87% $97
Lake Tonopah . . . . . . Sr. Citizens 08/96 13,348 15,745 1,523 656 356 84 96
Paseo del Prado. . . . . Family 10/96 5,026 6,761 - - 120 90 35
Saratoga Palms East II . Family 06/97 12,002 16,767 396 662 256 87 80
Saratoga Palms North II. Family 07/97 13,873 16,590 - 430 252 53 56
Rancho Mesa. . . . . . . Family 12/98 16,135 22,458 2,503 - 272 86 78
Under Development:
South Valley Apts. . . . Family 06/00 15,429 22,192 2,670 - 272 - -
Spanish Hills Apts (3) . Family 06/00 11,187 13,101 2,025 - 152 4 -
West Meadows I (4) . . . Family 12/01 11,120 14,256 2,083 - 180 - -
</TABLE>
(1) All are located in the greater Las Vegas area except for Spanish Hills,
in Sparks, Nevada and West Meadows I in West Haven, Utah.
(2) Represents all actual and anticipated costs of the project including
land, construction, development, lease-up and financing costs, estimated
at December 31, 1999.
(3) Partial occupancy, with the remainder still under development.
(4) This development was planned, pending sufficient cash flows, but will
more likely be sold. The carrying value primarily represents the land
value.

PROPERTY OPERATIONS AND MANAGEMENT

Operations. The Company's property operations provide it with flexibility
with respect to the disposition of its portfolio properties and enable it to
diversify its sources of revenues. The following table sets forth certain
information regarding each of the Company's operating portfolio properties as of
December 31, 1999. The Company holds fee simple title to each property, all of
which are located in Nevada. At December 31, 1999, all of these properties were
designated as held for sale.

CURRENT
APPROXIMATE OCCUPANCY AT CURRENT ANNUALIZED
SQUARE DECEMBER 31, ANNUALIZED BASE RENT/LEASED
PORTFOLIO PROPERTY (1) FOOTAGE 1999 BASE RENT(2) SQUARE FOOT(3)
- ------------------------------------ ------- ------------- ------------- ----------------
Retail:
- ------------------------------------
<S> <C> <C> <C> <C>
Levitz (4). . . . . . . . . . . . . 102,400 100.0 % $ 952,990 $ 9.30
Levitz II (Furniture Expo). . . . . 37,260 100.0 % 446,197 11.98
Levitz Unit 77 (Woody's Furniture). 4,675 100.0 % 84,150 18.00
Turtle Stop (5) . . . . . . . . . . 4,430 0.0 % - N/A
Sahara/Decatur Retail (7) . . . . . 3,627 100.0 % 89,773 24.75
Nellis/Stewart (7). . . . . . . . . 4,571 100.0 % 72,377 15.83

Office:
Las Vegas Sun . . . . . . . . . . . 15,452 100.0 % 259,610 16.80
Americana (6) . . . . . . . . . . . 17,154 50.0 % 145,812 17.00
General Services Administration (7) 16,414 100.0 % 193,626 11.80
Sahara Vista A (6). . . . . . . . . 38,525 81.7 % 672,549 21.36
Sahara Vista B. . . . . . . . . . . 38,608 58.3 % 434,519 19.30

Industrial:
Arcata Industrial Park (6). . . . . 24,200 50.0 % 234,317 19.36
------- ---------- ------
Total/Weighted Average . . . . . . . 307,316 $3,585,920 $11.67
======= ========== ======
<FN>
(1) Excludes a property operated by the Company under a sale/leaseback
arrangement, of which the operations were sold in July 1999.
(2) Represents an annualized amount of the monthly base rent of occupied
space at December 31, 1999, which should approximate the estimated rental
revenue for 2000. Includes $584,045 of base rent related to space occupied by
the Company at December 31, 1999.
(3) Based on actual square footage.
(4) During 1997, Levitz Furniture declared bankruptcy and has not yet
affirmed or rejected the lease. Levitz is current on its rental payments.
(5) The property is vacant and listed for sale. In 1999, there was a
partial land sale adjacent to this property.
(6) The occupancy rate has been calculated including space occupied by the
Company. See Item 2. "Properties."
(7) Properties sold during the first quarter of 2000.
</TABLE>

<PAGE>
The following table sets forth the annual lease expirations at the
Company's portfolio properties with respect to leases in place as of December
31, 1999 for each of the next five years and thereafter (assuming that no
properties are subsequently sold or no tenants exercise renewal or cancellation
options and that there are no tenant bankruptcies or other tenant defaults):

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER SQUARE ANNUALIZED ANNUALIZED RENT
OF FOOTAGE OF ANNUALIZED RENT REPRESENTED PER LEASED
EXPIRING EXPIRING RENT OF EXPIRING BY EXPIRING SQUARE FOOT OF
YEAR OF LEASE EXPIRATION LEASES LEASES LEASES LEASES EXPIRING LEASES
- ------------------------ -------- ---------- ----------------- ----------------- ----------------

<S> <C> <C> <C> <C> <C>
2000 . . . . . . . . . . 4 27,452 $ 532,967 17% $ 19.41
2001 . . . . . . . . . . 3 13,607 190,024 6 13.97
2002 . . . . . . . . . . 6 48,561 782,586 25 16.12
2003 . . . . . . . . . . 2 6,568 141,066 4 21.48
2004 . . . . . . . . . . 6 29,772 413,318 13 13.88
2005 and thereafter. . . 3 104,957 1,117,694 35 10.65
-------- ---------- ----------------- ----------------- ----------------

Total/Weighted Average . 24 230,917 $ 3,177,655 100 % $ 13.76
======== ========== ================= ================= ================
</TABLE>

All of the Company's leases for its retail and industrial properties are on
a triple-net basis and the leases of its office properties are on either a
triple-net or full-service gross basis. Under a triple-net lease, tenants pay
their utilities and a pro rata share of all building insurance, property taxes
and common area services. Under a full-service gross lease, the landlord
provides and pays for all utilities to the tenants' premises, as well as all
building insurance, property taxes and common area services, except that in most
cases the Company's office tenants are required to reimburse the Company for
their pro rata share of increases in building operating costs each year over
those incurred in the base year, which is generally the year in which a
particular tenant's lease commences.

The following table sets forth certain information with respect to the
Company's portfolio property operations and management activities (dollars in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Number of Properties Owned 14 14 12
Total Revenue. . . . . . . $3,583 $3,515 $3,532
Gross Profit . . . . . . . $2,859 $2,700 $2,492
</TABLE>

Leases for the Company's commercial properties typically have terms ranging
from one to ten years, with renewal options of various periods, and provide for
periodic rent increases in either stated amounts or based upon increases in the
consumer price index. Management believes that as the leases expire, either the
tenants will renew their leases or the Company will be able to re-lease the
vacated space at market rents.

The Company regularly repairs and maintains its operating properties,
utilizing third-party property management companies, including making the
capital improvements, on an as needed basis utilizing available working capital.
There are no current plans for any renovation or improvement of any operating
property and, accordingly, no funds have been reserved for such purpose.

<PAGE>
Management and Leasing. The Company provides property management and
leasing services with respect to all non-residential operating properties held
in its portfolio. The Company also provides such services through external
property management companies for the six Tax Credit Projects and will do the
same, upon completion, for the two under construction. Property management
agreements with third parties generally provide for the Company to be paid a
management fee of 5% of a property's gross rental income and generally have a
minimum term of five years, although some agreements provide for earlier
termination without cause. To date, the Company's revenue from third-party
property management has not been significant. While management anticipates that
the Company's revenues from its property management operations will increase as
a result of its increased development of Tax Credit Projects, such operations
are not anticipated to be material to the Company overall. Revenue from
management and leasing activities are included in Other Revenue on the Company's
Consolidated Statements of Operations.

Other than design-build properties which are to be occupied by the
Company's client, the Company strives to pre-lease its commercial properties
before and during construction through the use of on-site billboards, print
advertising and direct mail flyers. Although the Company has not previously
charged a separate leasing brokerage commission, the Company will, where
possible, negotiate a separate leasing commission for its services in leasing
properties owned by third parties. Tenants for the apartment complexes are
generally obtained through a combination of print advertising, on-site
billboards and walk-in traffic. In the fourth quarter of 1999, the Company
terminated the in-house property management staff and retained two third-party
property management companies to manage the residential properties. These
outside companies are responsible for the lease-up of the property, management,
accounting and daily maintenance of these properties. The Company had
previously received property management fee revenue of 5% of gross revenues.
The agreement with the third-party property management companies allows them to
receive 3.5% and the Company to receive 1.5% of gross revenues.

THE REORGANIZATION

Concurrently with the closing of the Offering, in June 1997, the
transactions described below (collectively, the "Reorganization") were
consummated by the Company and others for the principal purpose of transferring
to the Company the ownership of all investment properties and all interests in
partnerships which owned properties which were owned by the Contributing
Stockholders, alone or with one or more third parties. In addition, as part of
the Reorganization, certain outstanding indebtedness between the Company and the
Contributing Stockholders was satisfied.

The Reorganization was comprised of the transactions summarized below:

Acquisition of Partnership Interests of Third Parties. The Company acquired
the non controlling partnership or other ownership interests of five third-party
investors, including Paul Eisenberg, a Director of the Company, in four limited
and general partnerships which owned an aggregate of six operating properties
and approximately 3.3 acres of undeveloped land, for an aggregate of
approximately $2.8 million in cash from the net proceeds of the Offering. No
third-party determination of the value was sought or obtained in connection with
the acquisition by the Company of the partnership interests. The consideration
paid was based on the value of the partnerships' real property and other assets
as determined by negotiation between the Company and the third-party partners.

Contribution of Partnership Interests of the Contributing Stockholders. The
Contributing Stockholders contributed to the Company (a) their interests in the
partnerships described in the preceding paragraph and (b) their interests in
three additional limited and general partnerships which owned an aggregate of
six operating properties, two properties under construction and approximately
5.6 acres of undeveloped land. All interests in partnerships acquired from the
Contributing Stockholders were acquired by the Company as additional capital
contributions of such stockholders. The portion of the book value of the
properties contributed by the Contributing Stockholders attributable to their
partnership interests was approximately $10.6 million at March 31, 1997.

Upon completion of the acquisitions and contributions of partnership
interests described above, the Company held 100% of the economic interest in the
partnerships; therefore the partnerships were dissolved by operation of law and
all assets, subject to all liabilities, of such partnerships were transferred to
the Company.

Additional Contributions by James C. Saxton. Mr. Saxton also contributed
to the Company, as an additional capital contribution, (a) his direct or
indirect general partner interest in four Tax Credit Partnerships and (b) an
assignment of his 50% economic interest in an unconsolidated general partnership
with Paul Eisenberg, a Director of the Company, which owns two small retail
properties (the "Retail Partnership"). The portion of the book value of the
properties attributable to the partnership interests contributed by Mr. Saxton
was approximately $520,000 on March 31, 1997.

Satisfaction of Outstanding Indebtedness. As of March 31, 1997, the Company
was indebted to the Contributing Stockholders in the aggregate amount of $8.1
million, which amount was represented by non-interest bearing notes of the
Company, with original terms of 10 years and subordinated to all existing
Company debt (the "Subordinated Dividend Notes"). Of such Subordinated Dividend
Notes, $6.5 million in aggregate principal amount was distributed to the
Contributing Stockholders in December 1994 and represented the Company's
estimated undistributed S corporation earnings as of December 31, 1994. The $1.6
million balance of the Subordinated Dividend Notes was issued to the
Contributing Stockholders in September 1996 in connection with loans of equal
amount to the Company by the Contributing Stockholders. The Company was also
indebted to Mr. Saxton in the amount of $695,440 on account of a non-interest
bearing demand loan made by Mr. Saxton to the Company in July 1996. At March 31,
1997, the Contributing Stockholders were indebted to the Company in the
aggregate amount of approximately $727,000.

<PAGE>
The Company and the Contributing Stockholders satisfied their respective
obligations to the other as follows: (a) the approximately $727,000 outstanding
balance of loans by the Company to the Contributing Stockholders was offset
against an equal amount of Subordinated Dividend Notes; (b) the Company issued
384,256 shares of Common Stock to the Contributing Stockholders in satisfaction
of approximately $3.7 million of Subordinated Dividend Notes, based on a per
share price of $9.50; (c) the Company issued warrants for 400,000 shares of
Common Stock, exercisable at $9.90 per share if the Company achieved specified
levels of after tax net income in 1997 and 1998, in satisfaction of $1.0 million
of Subordinated Dividend Notes; and (d) the Company utilized a portion of the
net proceeds of the Offering to repay the $2.7 million balance of Subordinated
Dividend Notes and $695,440 of other indebtedness. The warrants for 400,000
shares of Common Stock lapsed unexercised. See Item 13. "Certain Relationships
and Related Transactions."

Upon consummation of the Reorganization, ownership of all the real property
interests held by the Contributing Stockholders, other than their personal
residences, were transferred to the Company. The Contributing Stockholders
intend to engage in the real estate business exclusively through the Company.

BUSINESS AND GROWTH STRATEGIES

The Company's business and growth strategies include the following key
elements:

Stabilizing and improving cash flow. The Company believes that the proposed
Workout Plan will help the Company focus more on its operations, including
tighter control and monitoring of cash flows and completion of construction and
sales of existing projects. The Company has several properties in escrow and
anticipates cash flows from these properties in the coming months. There can be
no assurance however that any of the proposed asset sales will be completed or,
that if completed, they would be completed in a timely enough manner for the
Company to avoid filing, or be forced into, bankruptcy. Similarly, there can be
no assurance the Company's other creditors will forego taking any actions
against the Company pending the completion of these transactions and there can
be no assurance that, even if the transactions are completed, that the Company
will be able to avoid filing, or be forced into, bankruptcy.

Pursuing growth through strategic acquisitions. The Company believes there
are significant opportunities to acquire existing homebuilding companies on
attractive terms in selected markets in the southwestern United States. The
Company is targeting well managed, profitable homebuilders with compatible
product lines at acquisition prices that it expects will immediately increase
fully-diluted earnings per share on a pro forma basis. The Company's strategy is
to retain current management, capitalize on brand name recognition in the
applicable market and expand the product lines of acquired companies. The
Company intends to pursue strategic acquisitions, provided it has adequate cash
flows, to provide it with additional profitability, market share, desirable land
and local market experience, although the Company cannot be certain that it will
be able to consummate any such acquisition.

Pursuing geographic expansion in fast-growing southwestern markets. While
the Company continues to believe that the outlook for the Las Vegas market is
favorable, geographic expansion is a key element in achieving long-term
stability and growth. In this regard, the Company recently expanded its
operations into the Phoenix, Salt Lake City, Reno and Tucson markets and intends
to further capitalize on its experience and demonstrated capabilities in real
estate by targeting these and other viable markets in the southwestern United
States, provided the Company can maintain sufficient working capital.

Expanding business opportunities by taking advantage of
government-sponsored programs. The Company has expanded its business
opportunities by building projects that are eligible for various
government-sponsored programs that provide down payment assistance or lower cost
financing. The Company's typical down payment assistance programs include a 1%
down payment program and a sweat equity program that, where offered,
significantly increase the pool of potential homebuyers. Other
government-sponsored programs include private activity revenue bonds, federal
low-income tax credits, and small business loans. The Company has developed a
significant level of expertise in taking advantage of these government-sponsored
programs that it believes provide it with a significant competitive advantage.

Reducing the risk of economic and real estate cycles through operating
diversification. The Company seeks to enhance its financial stability and
reduce the potential impact of economic and real estate cycles by operating in
four components of the real estate business: (i) the design, development,
construction and sale of single-family homes; (ii) design-build services for
third-party clients; (iii) the design, development and construction of portfolio
properties; and (iv) property operations and management. The Company believes
that the depth of the Company's experience in multiple real estate disciplines
allows it to anticipate changing real estate markets and adapt to changing
market and economic conditions and provides for more consistent and stable
results than those of competitors depending solely on homebuilding operations.
All land purchases are subject to sufficient cash flow and working capital.

<PAGE>
THE COMPANY'S PRIMARY MARKETS

The Company believes that the homebuilding industry in its primary markets
is one of the fastest growing nationwide. Population and job growth, key drivers
to homebuilding and real estate demand, are well in excess of national averages
in the Company's primary markets. The Company's primary markets are the: Las
Vegas, Nevada Metropolitan Statistical Area ("MSA"), Phoenix, Arizona MSA and
Salt Lake City, Utah MSA.

The Las Vegas MSA ( equivalent to Clark County ) has benefited from
continuing economic growth and positive demographic trends. Population in the
Las Vegas MSA grew 78.0% from 1990 to 1999. According to the U.S. Census Bureau
and the Nevada State Demographer, the Las Vegas MSA is expected to experience
population growth of 48.2% from 1998 to 2005 compared to the projected United
States growth rate of 9.4% over the same period. In addition, since 1990 the Las
Vegas MSA has experienced a job growth rate of 73.0% according to the
Nevada Bureau of Employment, Training and Rehabilitation.

The Phoenix MSA (equivalent to Maricopa County) has benefited from
continuing economic growth and positive demographic trends. Strong in-migration
and inexpensive land values have fueled Phoenix's homebuilding industry. From
1990 to 1999, the 28.4% population growth in the Phoenix MSA outpaced the
national average of 9.4%. From 1990 to 1999, the Phoenix MSA also experienced
employment growth of 54.1% according to the Department of Economic Security
Employment, Training and Rehabilitation.

The Salt Lake City MSA (Salt Lake, Weber, Davis and Utah Counties) has
benefited from continuing economic growth and positive demographic trends. From
1990 to 1999, the 20.7% population growth of the Salt Lake City MSA outpaced
that of the national average of 9.4%. From 1990 to 1999, the Salt Lake City MSA
also experienced employment growth of 44.6%, according to the Governor's Office
of Planning and Budget of the State of Utah.

All three targeted MSA's out-paced the national growth rate of 17.6%
according to the Nevada Bureau of Employment, Training and Rehabilitation.

COMPETITION

The real estate industry in all of the Company's markets is highly
competitive. The Company competes for desirable properties, financing, raw
materials and skilled labor. In each of its business components, the Company
competes against numerous developers and others in the real estate business,
many of which are larger and have significantly greater financial resources and
better access to capital than the Company. The Company competes on the basis of
a complete package of real estate services it offers its clients, as well as its
reputation for fair pricing and quality construction. The Company also competes
with other owners and operators of real properties for tenants and buyers.

INSURANCE

The Company maintains numerous commercial insurance policies with limits
and coverage, it believes consistent with its risk of loss. The Company carries
general liability insurance with an aggregate limit of $2.0 million. With
respect to all of the properties it owns, the following coverages are included
in an all-risk, replacement cost package policy with blanket limits, customary
policy specifications, provisions and deductibles: property; boiler and
machinery; crime; real estate extension; employee benefits; stop-gap liability;
multicover; employee dishonesty; forgery; electronic data processing; and
commercial auto. With respect to its unimproved land, the Company maintains
separate and distinct coverage in the form of an all-risk course of construction
and inland marine policy and in the form of a general liability policy,
specifically underwriting the Company's construction operations.

Workers' compensation insurance is maintained under a self-funded program,
with excess workers' compensation and employers' liability insurance with a
limit of $1.0 million for all Nevada operations. Operations in other states are
covered under a separate, blanket workers' compensation policy subject to
statutory limits.

All of the above provide underlying limits to a commercial umbrella
insurance policy with a limit of $50.0 million. All are believed by management
to be adequate for its current and anticipated future activities.

<PAGE>
Some of the Company's ancillary coverages include: key man life insurance
with a $5.0 million death benefit on James C. Saxton, President and Chief
Executive Officer of the Company; architects and engineers' professional
liability; real estate errors and omissions liability; directors' and officers'
professional liability; and employment practices liability.

REGULATORY AND ENVIRONMENTAL MATTERS

In addition to the obtaining of all building permits and authorizations
normally associated with the development of real property and customary and
routine business permits and licenses, the Company's business and operations are
subject to additional regulation as described below.

Americans With Disabilities Act. The Company's properties must comply with
Title III of the Americans with Disabilities Act of 1990 ("ADA") to the extent
that such properties are "public accommodations" and/or "commercial facilities"
as defined by the ADA. In the case of existing properties, compliance with the
ADA requirements could require removal of structural barriers to handicapped
access in certain public areas of the projects where such removal is "readily
achievable." The Company believes that all of its properties are in substantial
compliance with present requirements under the ADA and any applicable state
laws. Noncompliance could result in imposition of fines or an award of damages
to private litigants. The Company intends to construct all future properties in
compliance with any then-existing requirements of the ADA and any applicable
state law.

Fair Housing Amendments Act of 1988. The Fair Housing Amendments Act of
1988 ("FHAA") requires multifamily communities first occupied after March 13,
1990 to be accessible by the disabled. Noncompliance with the FHAA could result
in the imposition of fines or an award of damages to private litigants. The
Company believes that its properties that are subject to the FHAA are in
compliance with such law.

Resident Income and Other Limitations. The Company's development of Tax
Credit Projects to date has been financed with the proceeds of tax-exempt
multifamily housing revenue bonds issued by the Nevada Housing Division, a
division of the Department of Business and Industry of the State of Nevada. As a
condition to obtaining such financing, the Company is required to enter into
certain regulatory and other agreements with the Nevada Housing Division, the
terms of which require that the owner of such properties set aside a specified
percentage of the units (generally 100%) for residents whose incomes do not
exceed a specified percentage of the area median income ("Lower Income Tenants")
and hold all vacant units in the project (for a reasonable period consistent
with maintaining the project's financial viability) for rent or occupancy by
Lower Income Tenants. These restrictions terminate approximately 15 years
following the date of initial occupancy of the project. During the period that
the restrictions apply, any sale or transfer of the project, or the sale or
transfer of the Company's interest in the partnership which owns the project,
will be subject to regulatory approval.

The Tax Credit Partnerships intend to operate their respective projects to
qualify for the Housing Tax Credit. Generally, the Housing Tax Credit is
available only with respect to residential rental projects in which a specified
minimum percentage of the residential rental units are occupied by individuals
with incomes not in excess of a specified percentage of the area median income,
as adjusted for family size (the "minimum set-aside"). The Tax Credit
Partnerships have generally elected to set aside 100% of the units for
individuals with incomes not in excess of 60% of the area median income. (Units
occupied by individuals meeting the income test are referred to herein as the
"Low-Income Units.") All units comprising the minimum set-aside must be suitable
for residential occupancy and used on a non-transient basis. Additionally, in
order to qualify for the Housing Tax Credit, the gross rent (including the cost
of any utilities other than telephone service) charged to tenants of Low-Income
Units comprising the minimum set-aside generally cannot exceed 30% of the
applicable income limits for an apartment of its size (the "rent restriction
test"). A project must, in general, continuously meet the requirements with
respect to the minimum set-aside and the rent restriction test during the period
commencing not later than the date 12 months after the date such project is
placed in service and ending 15 years thereafter.

The Company, as manager of the Tax Credit Projects and a general partner of
Tax Credit Partnerships, will be responsible for ensuring compliance with any
tenant and rent restrictions under the regulatory agreement or necessary for the
continued eligibility for the Housing Tax Credit. The Company may be liable to
the investors in the Tax Credit Partnerships for any lost tax credits resulting
from any failure to so comply and any such liability could be substantial.

Environmental Matters. The Company and its competitors are subject to a
variety of local, state and federal statutes, ordinances, rules and regulations
concerning the protection of health and the environment. The regulations include
those related to the availability of water, land use, protection of endangered
species, population density and the preservation of the natural terrain. The
particular environmental laws which apply to any given property vary greatly
according to the property, its environmental condition and its present and
former use. Environmental laws may result in delays and cause the Company to
incur substantial compliance or other costs or prohibit or severely restrict
development in certain environmentally sensitive regions or areas. In addition,
environmental regulations can have an adverse impact on the availability and
price of certain raw materials such as lumber.

<PAGE>
Certain environmental laws can impose liability on owners of property,
among other parties, to the extent that hazardous or toxic substances are or
were present during their ownership period. A transfer of the property does not
relieve an owner of such liability. Thus, the Company may have liability with
respect to properties it has sold. There is also a risk that the Company may be
liable for such costs as an "owner" of real estate with respect to the
properties it owns or as an "operator" of real estate with respect to properties
that the Company does not own, but manages for a fee.

Prior to purchasing a parcel of land, the Company evaluates such land for
the presence of hazardous or toxic materials, wastes or substances. In addition,
the Company typically engages independent environmental engineers to perform
"Phase I" environmental assessments (which involve physical inspections without
soil or groundwater analyses) on the land. Since assessments are generally
performed at the time of the Company's acquisition or financing of a property,
many of the assessments of properties currently owned by the Company were
obtained more than one year ago and in one case was obtained over eight years
ago. None of the assessments revealed any hazardous or toxic materials, wastes
or substances that the Company believes would have a material adverse effect on
the Company's financial position or results of operations. The Company has not
been notified by any governmental authority of any material noncompliance,
liability or other claim in connection with any property currently or formerly
owned by the Company nor is the Company otherwise aware of any environmental
liability relating to the properties that it believes would have a material
adverse effect on its business, assets or results of operations. Nevertheless,
it is possible that the environmental assessments did not reveal all
environmental liabilities with respect to the properties, that environmental
liabilities have developed with respect to the properties since the
environmental assessments were prepared or that there are material environmental
liabilities of which the Company is unaware with respect to the properties.
Moreover, no assurance can be given that (i) future laws, ordinances or
regulations will not impose material environmental liabilities or (ii) the
current environmental condition of the properties will not be affected by the
Company or other tenants or occupants of the properties, by the uses or
condition of properties in the vicinity of the properties or by third parties
unrelated to the Company.

EMPLOYEES

As of December 31, 1999, the Company had 528 employees (of whom 272 were
full-time, 11 were part-time and 245 were occasional construction workers).
During January 2000, the Company reduced its overhead staff in its Las Vegas
office by 32 employees as part of a cost reduction plan. In February 2000, the
Company experienced subsequent layoffs of 8 employees in their in-house
construction division and 28 additional overhead employees in Las Vegas. These
overhead reductions resulted in a total decrease in head count of 68 employees
or approximately 27.9% of the total Company workforce and 42.8% of the Las Vegas
workforce, resulting in approximately $2.4 million per year in reduced estimated
payroll related costs. A number of employees have also resigned and there can
be no assurance that the Company will be able to retain the existing employees
or recruit new employees. The Company employs construction workers on an
as-needed basis, depending upon the level and type of its construction
activities. The total number of employees can fluctuate in proportion to the
timing and nature of construction activity. None of the Company's employees is
represented by a labor union and the Company considers its employee relations to
be acceptable. See "-Workout Plan."

ITEM 2. PROPERTIES

The Company's corporate executive offices are located in approximately
20,000 square feet at its Sahara Vista A office building in Las Vegas. The
Company also occupied approximately 8,700 square feet at its adjacent Americana
office building until February 2000, when certain corporate employees were
consolidated into Sahara Vista A after a 27.9% reduction in labor in Las Vegas.
See Item 1. "Employees." The Company also occupies approximately 6,100 feet at
its Arcata Industrial Park. The Company's Reno offices of approximately 672
square feet are leased for office space.

Diamond Key leases approximately 12,200 square feet of combined office space in
Phoenix, Arizona. Diamond Key originally leased office space of 2,098 square
feet in Tucson, Arizona, for which the Company paid approximately $2,800 per
month. This lease expired March 31, 2000. The new Tucson lease commences on
April 1, 2000 for approximately 6,000 square feet, for which the Company will
pay approximately $8,000 per month, and expires on March 31, 2005. The Phoenix
office leases, for which the Company pays approximately $23,000 per month,
expire on September 30, 2001.

Maxim leases approximately 960 square feet of office space in Draper, Utah,
approximately 30 miles southeast of Salt Lake City. The lease expires in June
2000.

The Company anticipates that its existing spaces will satisfy its space
requirements for the foreseeable future.

<PAGE>
ITEM 3. LEGAL PROCEEDINGS

The Company is involved in litigation arising from the ordinary course of
its business, none of which, in the opinion of the Company, will have a material
effect on the Company's financial position, results of operations or cash flows.

On March 13, 2000, pursuant to a purchase/settlement agreement with Volunteers
of America (VOA) National Housing Corp. which was approved by the Company's
Board of Directors in the fourth quarter of 1999, the Company issued 457,142
shares of Saxton Common Stock to acquire certain of VOA's interest in Tax Credit
Partnerships. The purchase/settlement agreement required the Company to deliver
to VOA, $1,000,000 worth of stock (457,142 shares at $2.25 per share, the market
price on March 12, 2000). These shares represent approximately 5.8% of the
Company's Common Stock issued and outstanding on March 12, 2000. The Company
also agreed to pay $325,000 in cash to VOA, of which $125,000 was paid in the
first quarter of 2000, with the remainder to be paid in annual installments,
over the next two years. The $1,325,000 has been recorded as Investment in
Joint Ventures held for sale at December 31, 1999 and was included in the market
valuation of all TCP properties.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1999, through the
solicitation of proxies or otherwise.

<PAGE>
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS

MARKET INFORMATION

The Company's Common Stock is traded in the over-the-counter market and
since the effective date of the Offering on June 24, 1997, prices have been
quoted on the Nasdaq Stock Market ("Nasdaq") under the trading symbol "SXTN"
(the Company has been notified by Nasdaq that the Company's Common Stock is
subject to delisting for the failure by the Company to comply with certain
Nasdaq continued listing requirements, which decision the Company is appealing.
Pending the outcome of the appeal, and the Company's compliance with such
requirements, the Company's Common Stock trades under the symbol "SXTNE".) The
following table sets forth the high and low sales prices of the Common Stock as
reported on the Nasdaq Stock Market:

First Quarter . . . . . . . . . . . . . $8.750 $6.813
Second Quarter. . . . . . . . . . . . . 7.375 6.188
Third Quarter . . . . . . . . . . . . . 8.000 5.000
Fourth Quarter. . . . . . . . . . . . . 7.875 4.750

1999
- ----
First Quarter . . . . . . . . . . . . . 7.000 5.500
Second Quarter. . . . . . . . . . . . . 6.500 5.000
Third Quarter . . . . . . . . . . . . . 5.563 3.250
Fourth Quarter. . . . . . . . . . . . . 4.500 2.500

2000
- ----
First Quarter . . . . . . . . . . . . . 2.875 1.000
Second Quarter (through April 24, 2000) 1.313 0.938
</TABLE>

As of April 24, 2000, there were approximately 71 holders of record and 845
beneficial holders of the 8,336,455 shares of Common Stock. The closing sale
price per share for the Common Stock on April 24, 2000 was $1.125.

VOA AGREEMENT

On March 13, 2000, pursuant to a purchase/settlement agreement with
Volunteers of America (VOA) National Housing Corp. which was approved by the
Company's Board of Directors in the fourth quarter of 1999, the Company issued
457,142 shares of Saxton Common Stock to acquire certain of VOA's interest in
Tax Credit Partnerships. The purchase/settlement agreement required the Company
to deliver to VOA, $1,000,000 worth of stock (457,142 shares at $2.25 per share,
the market price on March 12, 2000). These shares represent approximately 5.8%
of the Company's Common Stock issued and outstanding on March 12, 2000. The
Company also agreed to pay $325,000 in cash to VOA, of which $125,000 was paid
in the first quarter of 2000, with the remainder to be paid in annual
installments, over the next two years. The $1,325,000 has been recorded as
Investment in Joint Ventures held for sale at December 31, 1999 and was included
in the market valuation of all TCP properties.

NASDAQ POTENTIAL DELISTING

On April 19, 2000, the Nasdaq Stock Market, Inc. ("Nasdaq") informed the
Company that Nasdaq had determined that the Company was not in compliance with
the requirement that the Company's report on Form 10-K for the year ended
December 31, 1999 be filed with the Securities and Exchange Commission and with
Nasdaq and that, unless such Form was filed on or before April 26, 2000, the
Company's Common Stock would be delisted from trading on the Nasdaq National
Market. The Company has appealed this decision, which will stay the delisting
pending an oral hearing, which hearing has been set for May 18, 2000. Although
the Company will have filed the Form 10-K by such date and believes that it will
be in compliance with the Nasdaq National Market continued listing requirements,
there can be no assurance that the Company's appeal will be successful or that
the Company's Common Stock will remain listed on the NASDAQ National Market.

<PAGE>
On May 5, 2000, Nasdaq notified that Company that it had failed to maintain
a minimum $5,000,000 fair value of public float ("MVPF") as required for
continued listing on the Nasdaq National Market. NASD Rules provides that the
failure to meet the continued inclusion requirement for minimum MVPF shall exist
if the deficiency continues for 30 consecutive trading days and, as of May 4,
2000, the Company's MVPF was approximately $732,324 and had been below
the minimum $5,000,000 requirement for 30 consecutive trading days. Nasdaq
granted the Company a 90-day grace period, which expires on August 3, 2000, in
which to comply with the MVPF requirement, which can be met by meeting the
$5,000,000 MVPF for a minimum of ten consecutive trading days. Nasdaq also
recommended that the Company address this issue at the previously scheduled May
18, 2000 hearing on the Company's failure to timely file its Form 10-K for the
year ended December 31, 1999.

On May 5, 2000, Nasdaq also notified the Company that the bid price for its
Common Stock was $0.3125 and has been below the minimum $1.00 requirement for 10
consecutive trading days. Nasdaq reminded the Company that the failure to
maintain a minimum $1.00 bid price for 30 consecutive trading days is a
violation of the continued listing requirements for the Nasdaq National Market,
the occurrence of which would subject to the Company's Common Stock to
delisting. The Company will be deemed in compliance if at anytime within ninety
calendar days from May 4, 2000, its shares of Common Stock have a closing bid
price of at least $1.00 or more for a minimum of ten consecutive trading days.
Nasdaq recommended that the Company also address this issue at its May 18, 2000
hearing.

The Company believes that it will be able to file the Form 10-K for the
year ended December 31, 1999 prior to the May 18, 2000 hearing and that the
filing of the Form 10-K, in conjunction with its Workout Plan and its attempts
to reduce its debt load and raise capital through asset sales will increase the
perceived value of the Company's Common Stock and, accordingly, its bid price
and the MVPF. However, there can be no assurance that the Company will be able
to successfully file the Form 10-K prior to the May 18, 2000 hearing, execute
the Workout Plan, reduce its debt load or raise additional capital or avoid
being delisted from the Nasdaq National Market.

If the company's common stock should cease to be listed on the Nasdaq
National Market, they may continue to be traded on the Nasdaq SmallCap Market or
OTC --Bulletin Board. If the Company's Common Stock is delisted from the
Nasdaq National Market, it would likely be more difficult to buy or sell shares
of the Common Stock or to obtain timely and accurate quotations to buy or sell.
In addition, the delisting process could result in a decline in the trading
market for the Common Stock which could depress its stock price, among other
consequences. There is no assurance that at any time the Company will be able
to satisfy all of the conditions for continued listing on the Nasdaq National
Market.

DIVIDENDS

The Company has not paid or declared any dividends on its Common Stock and
currently intends to retain all future earnings for use in the Company's
business and therefore does not anticipate declaring or paying dividends on its
Common Stock in the foreseeable future. The Company's loan agreements generally
have provisions restricting the payment of dividends, unless certain conditions
are met. Any future determination as to the payment of dividends will be
subject to restrictions in the loan agreements and at the discretion of the
Board of Directors of the Company and will depend on the Company's financial
condition, results of operations, capital requirements and such other factors as
the Board of Directors deems relevant.

<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth selected financial and operating information
for the Company on a historical consolidated basis. The historical consolidated
financial and operating information is comprised of the operations, assets and
liabilities of the Company and certain properties, which were owned and operated
by entities affiliated with and controlled by the Company during the periods
presented. The following information should be read in conjunction with all of
the financial statements and notes thereto included elsewhere in this Annual
Report on Form 10-K.

This table should be read in conjunction with Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, the notes thereto and other
financial information appearing elsewhere herein.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1995 (2) 1996 1997 1998 1999
---------- ---------- ---------- ---------- -----------
INCOME STATEMENT DATA (1): (in thousands, except share and per share amounts)
Revenue:
<S> <C> <C> <C> <C> <C>
Construction revenue. . . . . . . . $ 22,090 $ 41,875 $ 31,707 $ 51,524 $ 16,621
Sales of homes. . . . . . . . . . . - 12,963 11,058 27,634 102,713
Sales of commercial properties . . 9,850 4,772 11,540 7,823 4,901
Rental revenue. . . . . . . . . . . 3,531 3,922 3,583 3,515 3,532
Other . . . . . . . . . . . . . . . 99 536 1,508 1,676 2,365
---------- ---------- ---------- ---------- -----------
Total revenue . . . . . . . . . . 35,570 64,068 59,396 92,172 130,132
---------- ---------- ---------- ---------- -----------
Cost of revenue:
Cost of construction. . . . . . . . 18,194 33,078 26,981 40,863 18,633
Write down of TCP's to fair value . - - - - 25,305
Cost of homes sold. . . . . . . . . - 10,967 10,139 23,754 93,014
Cost of commercial properties sold. 9,373 3,444 7,127 7,710 6,917
Rental operating cost . . . . . . . 631 784 724 815 1,040
---------- ---------- ---------- ---------- -----------
Total cost of revenue . . . . . . 28,198 48,273 44,971 73,142 145,262
---------- ---------- ---------- ---------- -----------
Gross profit (loss) 7,372 15,795 14,425 19,030 ( 15,130)
---------- ---------- ---------- ---------- -----------
General and administrative expenses. 1,957 3,425 2,746 5,042 10,721
Depreciation and amortization. . . . 722 1,079 1,393 1,687 2,362
---------- ---------- ---------- ---------- -----------
Operating income (loss) 4,693 11,291 10,286 12,301 ( 28,213)
---------- ---------- ---------- ---------- -----------
Other income (expense):
Joint venture earnings (loss) 1,131 ( 43) 16 ( 25) ( 37)
Interest expense ( 2,393) ( 2,820) ( 3,086) ( 2,337) ( 5,330)
Interest income . . . . . . . . . . 266 72 985 1,105 843
---------- ---------- ---------- ---------- -----------
Total other expense (996) (2,791) (2,085) (1,257) (4,524)
---------- ---------- ---------- ---------- -----------
Income (loss) before provision
(benefit) for income taxes 3,697 8,500 8,201 11,044 ( 32,737)
Income taxes (benefit) (2) 67 2,517 2,350 3,313 (2,518)
---------- ---------- ---------- ---------- -----------
Net income (loss) $ 3,630 $ 5,983 $ 5,851 $ 7,731 $ (30,219)
========== ========== ========== ========== ===========

Earnings (loss) per share (3):
- ------------------------------
Basic:
- ------
Net Income (loss) . . . . . . . . . . . . . . . . $ 0.92 $ 1.01 $ (3.90)
========== ========== ===========
Weighted-average number of common. . . . . . . . .

shares outstanding. . . . . . . . . . . . . . . . 6,341,879 7,656,189 7,751,772
========== ========== ===========

Diluted:
- --------
Net Income (loss) . . . . . . . . . . . . . . . . $ 0.92 $ 1.01 $ (3.90)
========== ========== ===========
Weighted-average number of common

shares outstanding assuming dilution . . . . . . . 6,363,219 7,674,119 7,751,772
========== ========== ===========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
------- ------- ------- -------- --------
(dollars in thousands, except average sales price per home closed)
BALANCE SHEET DATA (3):
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents . $ 492 $ 1,590 $ 1,110 $ 1,331 $ 6,268
Real estate properties, net 31,966 38,808 51,298 103,884 131,625
Total assets. . . . . . . . 49,580 67,957 90,120 170,995 173,028
Total debt. . . . . . . . . 39,969 49,710 44,449 101,440 128,907
Stockholders' equity. . . . 3,693 6,291 29,644 38,187 8,968
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1995 (2) 1996 1997 1998 1999
---------- ---------- ---------- ---------- -----------
(dollars in thousands, except average sales price per home closed)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Adjusted EBIT(4). . . . . . . . . . . . . . . $ 6,090 $ 12,805 $ 12,552 $ 14,971 $( 23,350)
Adjusted EBITDA (5) . . . . . . . . . . . . . $ 6,812 $ 13,884 $ 13,945 $ 16,658 $( 20,988)
Interest capitalized. . . . . . . . . . . . $ 355 $ 1,271 $ 1,159 $ 4,859 $ 7,656
Interest included as a component of cost of
sales and construction . . . . . . . . . . N/A $ 1,485 $ 1,265 $ 1,590 $ 4,057
Interest expense incurred. . . . . . . . . . $ 2,748 $ 4,091 $ 4,245 $ 7,196 $ 12,986
Adjusted EBITDA to interest expense
incurred . . . . . . . . . . . . . . . . . 2.48 3.39 3.29 2.31 ( 1.62)
Adjusted EBIT to interest expense
incurred . . . . . . . . . . . . . . . . . $ 2.22 $ 3.13 $ 2.96 $ 2.08 $ ( 1.80)
Total debt to adjusted EBITDA . . . . . . . . 5.87 3.58 3.19 6.09 ( 6.14)
Total debt divided by tangible stockholders'
equity . . . . . . . . . . . . . . . . . . . 10.82 7.90 1.50 3.35 75.08
Return on assets (6). . . . . . . . . . . . . 14.3% 21.8% 15.9% 11.5% ( 13.6)%
Return on equity (7). . . . . . . . . . . . . 157.8% 119.9% 32.6% 22.8% ( 128.2)%
Cash flows:
Used in operating activities . . . . . . . . $( 1,465) $( 3,708) $( 12,470) $( 35,874) $( 31,003)
Provided by (used in) investing
activities $( 3,317) $ 818 $( 964) $( 19,020) $ 2,276
Provided by financing activities . . . . . . $ 5,221 $ 3,988 $ 12,954 $ 55,115 $ 33,664
Single-family homes:
Closings . . . . . . . . . . . . . . . . . . - 173 134 251 924
Backlog (at year end) (8). . . . . . . . . . - 37 - 184 356
Homes remaining for sale
(at year end). . . . . . . . . . . . . . . - 9 2 1,365 1,427
Aggregate sales value of backlog . . . . . . $ - $ 2,970 $ - $ 19,730 40,118
Average sales price per home
closed . . . . . . . . . . . . . . . . . . $ - $ 74,930 $ 82,521 $ 110,096 $ 111,161
Design-build projects:
Number of contracts awarded. . . . . . . . . 4 6 2 3 1
Backlog (at year end) (9). . . . . . . . . . $ 52,075 $ 21,130 $ 36,420 $ 20,338 $ 10,877
Portfolio properties:
Number of properties developed . . . . . . . 3 5 1 4 -
Number of properties sold (10) . . . . . . . 3 3 3 4 2
Number of properties owned (at
year end). . . . . . . . . . . . . . . . . 14 16 14 14 12
<FN>

(1) In accordance with Generally Accepted Accounting Principles in the United
States of America ("GAAP"), the income statement does not include
construction revenue and costs incurred in connection with portfolio
construction, but does include construction revenue and costs incurred in
connection with the construction for entities which the Company does not
control. Costs of portfolio construction are capitalized as improvements on
the Company's Consolidated Balance Sheets and profit, if any, in connection
with such activities is recognized only upon sale of the property.

(2) Prior to October 1, 1995, the Company's predecessor operated as an "S"
corporation for income tax purposes and therefore, was not subject to
income taxes until October 1, 1995, at which time the Company became
taxable as a "C" corporation. In addition, certain of the consolidated
entities were partnerships for federal income tax purposes until
consummation of the Offering and were, therefore, not subject to income
taxes. The income taxes for 1995 computed at a marginal effective rate of
34% would have been $1,257,000.

<PAGE>
(3) On June 24, 1997, the Company completed its initial public offering and
became a public entity; therefore no earnings per share prior to 1997 are
presented.

(4) Adjusted EBIT is a supplemental financial measurement used by the Company
in the evaluation of its business. Adjusted EBIT is calculated by adding
interest expense, interest included as a component of cost of sales and
construction and income taxes to net income. Adjusted EBIT excludes any
items deemed non-recurring. Adjusted EBIT should not be construed as an
alternative to income from operations or cash flows from operating
activities (as determined in accordance with GAAP). Adjusted EBIT may not
be calculated in the same manner by other similarly captioned measures used
by other companies.

(5) Adjusted EBITDA is a supplemental financial measurement used by the Company
in the evaluation of its business. Adjusted EBITDA is calculated by adding
interest expense, interest included as a component of cost of sales and
construction, income taxes, depreciation and amortization expense to net
income. Adjusted EBITDA excludes any items deemed non-recurring. Adjusted
EBITDA should not be construed as an alternative to income from operations
or cash flows from operating activities (as determined in accordance with
GAAP). Adjusted EBITDA may not be calculated in the same manner by other
similarly captioned measures used by other companies.

(6) Represents Adjusted EBIT divided by average total assets outstanding.

(7) Represents net income divided by average stockholders' equity.

(8) Represents the number of homes subject to pending sales contracts which
have not closed.

(9) Represents the uncompleted portion of design-build construction under
signed fixed-price contracts.

(10) Excludes a partial land sale in 1999, adjacent to the Turtle Stop property.
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The following discussion is based primarily on the consolidated financial
statements of the Company and should be read in conjunction with the
consolidated financial statements, including the notes thereto and other
financial information appearing elsewhere herein. The consolidated financial
statements of the Company are comprised of the operations, assets and
liabilities of the Company and of certain properties which were owned and
operated by entities affiliated with and controlled by the Company prior to the
completion of its initial public offering. These operations and properties were
acquired by the Company in connection with the consummation of the Company's
initial public offering in 1997. See Item 1. "Business - The Reorganization"
and Note 1 of Notes to Consolidated Financial Statements.

The Company is an integrated real estate development company which engages
in: (i) the design, development, construction and sale of single-family homes,
(ii) the performance of design-build services for third-party clients, including
Tax Credit Partnerships; (iii) the design, development and construction of
portfolio properties; and (iv) property operations and management. During the
past three years, the Company's focus was to increase revenue with its entry
into the single-family home development business in 1995 and its increased
development of Tax Credit Projects.

Revenue from home sales and portfolio property sales is recognized based
upon the sales price at the time of closing. Revenue from construction
contracts is recognized on the percentage-of-completion method, based upon the
ratio of costs incurred to total estimated costs. All other revenue is based on
accrual accounting. Revenue resulting from the sales of homes and portfolio
properties as well as from the award and timing of design-build construction
contracts may vary significantly from period to period.

The Company has experienced a slow down of construction in the fourth
quarter of 1999 and a halt of construction in Nevada and Utah in the first
quarter of 2000, primarily due to a shortage of cash flow. See "Liquidity and
Capital Resources Workout Plan."

<PAGE>
RESULTS OF OPERATIONS

The following table represents the Company's results of operations
expressed as percentages of total revenue for the past three years:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
Revenue:
<S> <C> <C> <C>
Construction revenue. . . . . . . . . . . . . . . . . . . . . 53.4% 55.9% 12.8%
Sales of homes. . . . . . . . . . . . . . . . . . . . . . . . 18.7 30.0 78.9
Sales of commercial properties. . . . . . . . . . . . . . . . 19.4 8.5 3.8
Rental revenue. . . . . . . . . . . . . . . . . . . . . . . . 6.0 3.8 2.7
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . 2.5 1.8 1.8
------- ------- --------
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . 100.0 100.0 100.0

Cost of revenue:
Cost of construction (1). . . . . . . . . . . . . . . . . . . 85.1 79.3 114.2
Write down of TCP's to FMV. . . . . . . . . . . . . . . . . . - - 160.6
Cost of homes sold (1). . . . . . . . . . . . . . . . . . . . 91.7 86.0 90.6
Cost of commercial properties sold (1). . . . . . . . . . . . 61.8 98.6 141.1
Rental operating cost (1) . . . . . . . . . . . . . . . . . . 20.2 23.2 29.4
------- ------- --------
Total cost of revenue . . . . . . . . . . . . . . . . . . . . 75.7 79.4 111.6
------- ------- --------
Gross profit (loss) . . . . . . . . . . . . . . . . . . . . . 24.3 20.6 ( 11.6)
General and administrative expenses . . . . . . . . . . . . . 4.7 5.5 8.2
Depreciation and amortization . . . . . . . . . . . . . . . . 2.3 1.8 1.8
------- ------- --------
Operating income (loss) . . . . . . . . . . . . . . . . . . . 17.3 13.3 ( 21.6)

Other expense:
Joint venture loss. . . . . . . . . . . . . . . . . . . . . . - - -
Interest expense, net . . . . . . . . . . . . . . . . . . . . (3.5) (1.3) (3.5)
------- ------- --------
Total other expense. . . . . . . . . . . . . . . . . . . . (3.5) (1.3) (3.5)
------- ------- --------
Income (loss) before provision (benefit) for income taxes
13.8% 12.0% (25.1)%
======= ======= ========
<FN>
(1) Shown as a percentage of the corresponding revenue item.
</TABLE>

1999 COMPARED TO 1998

Revenue. Total revenue was $130.1 million in 1999, representing a $37.9
million, or 41.2%, increase from $92.2 million in 1998. Construction revenue
was $16.6 million in 1999, representing a $34.9 million, or 67.7%, decrease from
$51.5 million in 1998. The decrease in construction revenue was primarily due
the decline in construction activity in the fourth quarter of 1999 due to the
Company's weakened cash flow position, creating slow payments to subcontractors,
which resulted in a substantial slowing of construction. Additionally, fewer
and smaller actual projects were under construction during 1999 compared to
1998, consistent with the Company's strategy to increase its focus on
homebuilding. Three large projects under construction during 1998 were
completed in early 1999; therefore lower revenues were recognized on these
projects as they neared completion during the first part of 1999 compared to
higher revenues recognized in 1998. Sales of homes were $102.7 million in 1999,
representing a $75.1 million, or 271.7%, increase from $27.6 million in 1998,
due to 924 home closings during 1999 compared to 251 home closings during 1998,
a 268.1% increase. Nevada home closings were 304 in 1999 compared to 148 in
1998. Diamond Key, acquired in November 1998, contributed 577 home closings in
1999 and 62 in 1998. Home closings from the Utah subsidiary, Maxim Homes, were
43 in 1999 and 41 in 1998. Sales of commercial properties were $4.9 million in
1999, representing a $2.9 million, or 37.4%, decrease from $7.8 million in 1998.
The decrease in sales of commercial properties was primarily due to four
commercial property sales, both in 1999 and 1998, but the 1999 commercial
property sales were for smaller properties, resulting in lower sales revenue.
Rental revenue was $3.5 million in 1999, substantially the same as in 1998.
Other revenue increased by $689,000, to $2.4 million or 41.1%, from $1.7 million
in 1998. The increase was primarily due to income received by HomeBanc Mortgage
Corporation of $794,000 (an affiliate of Diamond Key, acquired in December 1998)
for fees collected from customers for loan originations, commitments and
premiums; commissions and other revenues from Diamond Key of $231,000; income
from easements and other property management income of $250,000; partially
offset by commission income of $440,000 in 1998 on property sales while no
similar income was recognized in 1999 and a reduction of $167,000 in retail
revenue in 1999 from a convenience store, of which the operations were sold in
July 1999.

<PAGE>
Cost of Revenue. Total cost of revenue was $145.3 million in 1999, representing
a $72.1 million, or 98.6%, increase from $73.1 million in 1998. Cost of
construction was $19.0 million in 1999, representing a $21.9 million, or 53.5%,
decrease from $40.9 million in 1998, primarily due to a corresponding decrease
in construction revenue. Cost of construction as a percentage of construction
revenue increased to 114.2% in 1999, as compared to 79.3% in 1998. This
increase was primarily due to the Company's significant increase in the
proportion of revenues it generates from its homebuilding activities which has
lower margins than construction margins, the increased overhead allocation to
the Company's homebuilding activities on a per unit basis during 1999 and the
write-off of costs relating to certain jobs. During 1999, the Company wrote off
approximately $2.1 million related to development jobs that the Company
determined would not be completed or collected in the future. Cost of homes
sold was $93.0 million in 1999, representing a $69.3 million, or 291.6%,
increase from $23.8 million in 1998, which was primarily due to the increase in
sales of homes and increased direct construction and carrying costs. Cost of
commercial properties sold was $6.9 million in 1999, representing a $793,000, or
10.3%, decrease from $7.7 million in 1998, due primarily to smaller commercial
properties sold with a lower cost basis during 1999 compared to 1998. Cost of
commercial properties sold as a percentage of sales of commercial properties
increased to 141.1% in 1999 compared to 98.6% in 1998, primarily due to the
write down of commercial properties to cost of sales to lower of cost or fair
value. Rental operating costs were $1,040,000 in 1999, representing a $225,000,
or 27.6%, increase from $815,000 in 1998. Gross profit (loss) as a percentage
of revenue decreased to (11.6)% in 1999 compared to 20.6% in 1998, generally due
to increased construction and holding costs.

General and Administrative Expenses. General and administrative expenses
were $10.7 million in 1999, representing a $5.7 million, or 112.6%, increase
from $5.0 million in 1998, primarily due increased activities related to growth
in the Company's revenues, including the increase in homebuilding activities and
the acquisitions of Diamond Key, HomeBanc and Maxim. Payroll related expenses
increased $2.6 million in 1999 compared to 1998, primarily due to the addition
of Diamond Key for $1.8 million and the remainder primarily due to Nevada and
Utah homebuilding activities. See Item 1. "Business Employees." Marketing and
advertising costs of $2.4 million for 1999 compared to $477,000 for 1998 reflect
the increased number of home production and sales. Bad debt expense was $1.3
million in 1999 compared to $440,000 in 1998, primarily due to the write off of
$399,000 for private offering expenses that did not materialize, $240,000 for
potential litigation accrual, $185,000 for development jobs that will not be
pursued, and $231,000 of several notes receivable that are not collectable. In
addition, accounting, legal and agency fees increased $460,000 related to
increased employee expenses and public company costs due to the Company's
growth. General and administrative expenses as a percentage of total revenue
increased to 8.2% in 1999 compared to 5.5% in 1998.

Write down of Tax Credit Projects to Fair Value. During the fourth quarter
of 1999, the Company began to explore the possibility of selling the Tax Credit
Project general partnership interests and receivables to strengthen the
Company's cash flow position and has determined that the Due from TCP's and the
Investments in the TCP Joint Ventures are held for sale at December 31, 1999 and
are actively being marketed for sale. Therefore, at December 31, 1999, the
amounts are recorded at the lower of cost or fair value, less selling expenses
even though the estimated future cash flows exceeded the gross recievable
balance at December 31, 1999. The Company has obtained a fair market valuation
from an independent third party for the general partnership interests and the
receivables from the eight TCP properties. This valuation indicated a fair
value of $14.8 million, resulting in a write of down of the Tax Credit
partnership receivables by $23.9 million and write down the investments in these
projects by $1.7 million (See Notes 6 and 9 to the Consolidated Financial
Statements).

Write down of Properties Under Development to Fair Value. The Company began
to actively market some of their properties under development in the fourth
quarter of 1999. Upon review of independent appraisals on some of these
properties, it was determied that adjusting net book value to net realizable
value (appraised value less marketing costs) would result in a loss. The $1.3
million write down of properties in development relates to those held for sale
to accrue for estimated future losses.

<PAGE>
Depreciation and Amortization. Depreciation and amortization expense was
$2.4 million in 1999, representing a $675,000, or 40.0%, increase from $1.7
million in 1998, primarily due to an increase in goodwill amortization expense
of $424,000 related to the acquisitions of Diamond Key, Maxim and HomeBanc in
1998 and the increase in depreciation expense due to more operating properties
heldin the Company's portfolio throughout 1999 compared to 1998 due to the
Company's growth.

Interest Expense, Net. Interest expense, net was $4.5 million in 1999,
representing a $3.3 million, or 264.2%, increase from $1.2 million in 1998,
primarily due to an increase in the amount of outstanding borrowings and higher
interest rates during 1999 compared to 1998. The Company recorded an increase
in notes payable from $88.3 million at December 31, 1998 to $117.8 million at
December 31, 1999. Interest income decreased $262,000 or 23.7% to $843,000 at
December 31, 1999 from $1.1 million at December 31, 1998. Total interest
capitalized was $7.7 million and $4.9 million for the years ended December 31,
1999 and 1998, respectively.

Income (Loss) Before Provision (Benefit) for Income Taxes. As a result of
the foregoing factors, income (loss) before provision (benefit) for income taxes
was $(32.7) million, representing a $43.8 million, decrease from $11.0 million
in 1998. Income (loss) before provision (benefit) for income taxes as a
percentage of total revenue decreased to (25.1)% in 1999 compared to 12.0% in
1998.

1998 COMPARED TO 1997

Revenue. Total revenue was $92.2 million in 1998, representing a $32.8
million, or 55.2%, increase from $59.4 million in 1997. Construction revenue
was $51.5 million in 1998, representing a $19.8 million, or 62.5%, increase from
$31.7 million in 1997. The increase in construction revenue was primarily due to
the start of construction on the South Valley and Spanish Hills apartments
projects; the near completion of the Corte Madera design-build project, which
started in late 1997; and the completion of the Rancho Mesa apartment project
which started in mid-1997. Sales of homes were $27.6 million in 1998,
representing a $16.6 million, or 149.9%, increase from $11.1 million in 1997,
due to 251 home sales in 14 communities during 1998 compared to 134 homes sold
in two communities during 1997. Diamond Key, acquired in November 1998,
contributed 62 home sales. Sales of commercial properties were $7.8 million in
1998, representing a $3.7 million, or 32.2%, decrease from $11.5 million in
1997. The decrease in sales of commercial properties was primarily due to three
commercial property sales and three land sales during 1997 compared to only four
commercial property sales during 1998. Rental revenue was $3.5 million in
1998, representing a $68,000, or 1.9%, decrease from $3.6 million in 1997. Other
revenue increased by $168,000, to $1.7 million, or 11.1%, from $1.5 million in
1997. The increase was primarily due to income received by HomeBanc for fees
collected from customers for loan originations, commitments and premiums.

Cost of Revenue. Total cost of revenue was $73.1 million in 1998,
Representing a $28.2 million, or 62.6%, increase from $45.0 million in
1997. Cost of construction was $40.9 million in 1998, representing a $13.9
million, or 51.5%, increase from $27.0 million in 1997, primarily due to a
corresponding increase in construction revenue. Cost of construction as a
percentage of construction revenue decreased to 79.3% in 1998, as compared
to 85.1% in 1997, which was primarily due to increased volume, resulting in
lower construction overhead and absorption rates per project. Cost of homes
sold was $23.8 million in 1998, representing a $13.6 million, or 134.3%,
increase from $10.1 million in 1997, which was primarily due to the increase in
sales of homes. Cost of homes sold as a percentage of home sales revenue
decreased to 86.0% in 1998 from 91.7% in 1997 primarily due to decreased
construction costs as a result of increased efficiencies. Cost of
commercial properties sold was $7.7 million in 1998, representing a $583,000,
or 8.2%, increase from $7.1 million in 1997, due primarily to smaller
commercial properties sold with lower cost basis during 1997 compared to 1998.
Cost of commercial properties sold as a percentage of sales of commercial
properties increased to 98.6% in 1998 compared to 61.8% in 1997, primarily due
to the sale of one commercial property at a loss during 1998. Rental
operating costs were $815,000 in 1998, representing a $91,000, or
12.6%, increase from $724,000 in 1997. Gross profit as a percentage of revenue
decreased to 20.6% in 1998 compared to 24.3% in 1997, generally due to increased
construction costs and higher cost of commercial properties sold.

General and Administrative Expenses. General and administrative expenses
were $5.0 million in 1998, representing a $2.3 million, or 83.6%, increase from
$2.7 million in 1997, primarily due to an increase in salary expense associated
with an increase in the number of employees related to the Company's expansion
and growth in Reno, Nevada, Utah and Arizona and the write-off of a $405,000
receivable, representing delinquent rent and advances, during the second quarter
of 1998. General and administrative expenses as a percentage of total revenue
increased to 5.5% in 1998 compared to 4.7% in 1997, primarily due to lower sales
of commercial properties in 1998 and the write-off of the receivable.

<PAGE>
Depreciation and Amortization. Depreciation and amortization expense was
$1.7 million in 1998, representing a $294,000, or 21.1%, increase from $1.4
million in 1997, primarily due to more operating properties held in the
Company's portfolio throughout 1998 compared to 1997 and an increase in the
amortization of financing fees associated with borrowings incurred for land
acquisition and development.

Interest Expense, Net. Interest expense, net was $1.2 million in 1998,
representing an $869,000, or 41.4%, decrease from $2.1 million in 1997,
primarily due to an increase in the amount of interest capitalized on
construction financing during 1998 compared to 1997, resulting from an increase
in notes payable from $40.6 million at December 31, 1997 to $88.3 million at
December 31, 1998. Interest income increased from $985,000 at December 31, 1997
to $1.1 million at December 31, 1998 due to increased Tax Credit Partnership
interest recognized. Total interest capitalized was $4.9 million and $1.2
million for 1998 and 1997, respectively.

Income Before Provision for Income Taxes. As a result of the foregoing
factors, income before provision for income taxes was $11.0 million,
representing a $2.8 million, or 34.7%, increase from $8.2 million in 1997.
Income before provision for income taxes as a percentage of total revenue
decreased to 12.0% in 1998 compared to 13.8% in 1997.

LIQUIDITY AND CAPITAL RESOURCES

On June 24, 1997, the Company completed its initial public offering of
2,275,000 shares of Common Stock at $8.25 per share. The net proceeds of
approximately $17.3 million were used as follows: (i) $8.1 million to repay
indebtedness, of which $3.4 million represented indebtedness to the Company's
principal stockholders and $1.7 million represented indebtedness to other
related parties, (ii) $5.6 million to acquire land for future development, (iii)
$2.8 million to acquire the interests of various third-party partners in certain
properties and (iv) approximately $800,000 for development activities and
general corporate purposes.

Concurrently with the closing of the Offering, the Contributing
Stockholders contributed their partnership interests in certain properties to
the Company. In addition, certain obligations to the Contributing Stockholders
represented by the Notes were satisfied as follows: (i) approximately $700,000
of outstanding amounts due to the Company by the principal stockholders were
offset against the Notes, (ii) $3.65 million was repaid through the issuance by
the Company of 384,256 shares of Common Stock and (iii) $1.0 million was repaid
through the issuance by the Company of warrants for 400,000 shares of Common
Stock. The warrants were exercisable at $9.90 per share if the Company achieved
specified levels of after-tax net income in 1997 and 1998. The actual level of
after-tax net income in 1997 was below the specified level and therefore the
warrants lapsed.

WORKOUT PLAN

The Company has experienced a slow down of construction in the fourth
quarter of 1999 and a halt of construction in Nevada and Utah in the first
quarter of 2000, primarily due to cash flow problems and over expansion, and was
in default on substantially all notes payable at December 31, 1999. The
inadequate cash flow problem was due to several factors, including: the purchase
of Diamond Key Homes in November 1998 for approximately $12.9 million, including
$10.9 million in cash, a portion of which was borrowed funds; over expansion;
purchases of land in Utah in the first and third quarters of 1999 for $4.5
million, which the Company purchased using a combination of high interest rate,
short term debt and funds intended for working capital and other purposes, and
for which the Company was unable to obtain permanent replacement financing on
satisfactory terms; and the Company's failure to adequately monitor and manage
its cash flow. The aforementioned facts and circumstances have raised
substantial doubt that the company will be able to continue as a going concern
and, therefore, may be unable to realize its assets and dicharge its liabilities
in the normal course of business.

In the first quarter of 2000, the Company brought in outside consultants and
legal expertise to assist in formulating a workout business plan (the "Workout
Plan"). The key elements of the Workout Plan are: to establish adequate cash
management controls regarding cash flows and to accelerate the retirement of
debt, especially higher interest rate debt, by raising additional capital from
sources other than the sale of homes, such as the sale of land held for
development and for sale and operating properties and to negotiate forbearance
agreements with lenders. The Company believes that the proposed Workout Plan
will help the Company focus on operations, including improved cash management
and monitoring of cash flows and completion of construction and sales of
existing projects.

<PAGE>
Cash Flow Funds Controls. The Company is still in the process of finalizing
the details of various loan terms with its creditors and subcontractors. The
Company has been meeting with its lenders and subcontractors in order to discuss
with them the Company's operations, including the cash flow shortage, and the
proposed Workout Plan. However, there can be no assurance that the Company will
be able to obtain agreement from its creditors and subcontractors to the Workout
Plan.

As part of the Workout Plan the Company has agreed to certain controls on
its use of cash, including setting up a voucher control system with Nevada
Construction Services to coordinate payments to lenders and subcontractors. The
Company has also proposed, as an additional component of the Workout Plan, that
its subcontractors accept a pro rata share of proceeds from the sales of future
units through escrow disbursements, after the primary lenders have been paid,
until the subcontractors' obligations are satisfied. These payments will be made
through escrow to insure payment is made timely and accurately to the lenders
and subcontractors. The Company has also agreed to weekly monitoring of the
Company's progress to insure adherence to the Workout Plan.

Retirement of Debt and Sale of Properties. An agreement (effective May 12,
2000) has been reached with a group of the Company's various individual debt
holders ("Debt Holder"), which agreement is the cornerstone of the Workout Plan
and would allow the Company to conduct an orderly disposition of certain of its
assets so as to improve its balance sheet and its cash flow. The agreement
provides for the Debt Holder to acquire assets from the Company with a carrying
value of approximately $11.3 million, comprised of the Company's rights to a 914
acre parcel of undeveloped land in Tucson, Arizona, an 80 acre parcel of
undeveloped land in North Las Vegas, Nevada, and two properties under
development in Phoenix, Arizona. In exchange for such assets, the Debt Holder
will forgive any and all indebtedness of the Company in favor of the Debt
Holder, currently aggregating approximately $34.1 million ($27.8 million at
December 31, 1999) and bearing interest rates ranging from 0.0% to 30.0%, and
the company will receive the Debt Holder's interest in a condominium project
that has a fair value of approximately $8.5 million and related debt of $5.5
million (assumed by the Company) and the Debt Holder's assumed Company debt
of approximately $2.7 million on the two Phoenix, Arizona properties. This
agreement eliminates high interest rate debt the Company has recorded with
respect to these assets and it improves the balance sheet position in that the
primary asset being given in exchange for the extinguishment of debt is a
contract to acquire the 914 acre parcel, which is recorded as a $1.8 million
asset on the Company's Consolidated Balance Sheet. Through May 12, 2000 the
Company has sold three operating properties and two parcels of land, with
a carrying value of approximately $5.3 million and debt of approximately $4.2
million at December 31, 1999, for a total of approximately $6.1 million. These
sale transactions retired debt of approximately $4.2 million. The sale of
properties and extinguishment of debt will result in debt retirement of
approximately $39.9 million and a gain of approximately $26.1 million in 2000.
Although some of the Debt Holders' obligations are unsecured, much of the debt
is secured. Hence, this transaction will free up equity for the purposes of
generating cash either through loans or sales to meet the existing cash flow
shortages.

The cash short fall in the initial months, until business operations
stabilize, has not yet been addressed in the plan. However, with the Debt Holder
agreement in place, considerable equity would be freed up, and the Company's
cash flow demands from short term borrowings diminish significantly.
Additionally, it will take time to fully implement the Workout Plan and the
Company may need to obtain interim financing and there can be no assurances that
the Company will be able to obtain such interim financing on Satisfactory terms
or not at all.

The Company has also decreased its workforce in the first quarter of 2000 by 68
employees or 27.9% of the total Company's workforce, which is expected to result
in a reduction of approximately $2.4 million per year in payroll related costs.
See Item 1. "Employees."

On March 13, 2000, pursuant to a purchase/settlement agreement with
Volunteers of America (VOA) National Housing Corp. which was approved by the
Company's Board of Directors in the fourth quarter of 1999, the Company issued
457,142 shares of Saxton Common Stock to acquire certain of VOA's interest in
Tax Credit Partnerships. The purchase/settlement agreement required the Company
to deliver to VOA, $1,000,000 worth of stock (457,142 shares at $2.25 per share,
the market price on March 12, 2000). These shares represent approximately 5.8%
of the Company's Common Stock issued and outstanding on March 12, 2000. The
Company also agreed to pay $325,000 in cash to VOA, of which $125,000 was paid
in the first quarter of 2000, with the remainder to be paid in annual
installments, over the next two years. The $1,325,000 has been recorded as
Investment in Joint Ventures held for sale at December 31, 1999 and was included
in the market valuation of the TCP properties.

<PAGE>
The Company's claim for a federal income tax refund due to the net operating
loss for the taxable years ended December 31, 1997 and 1998, was processed by
the Internal Revenue Service and resulted in a refund of taxes paid in the
amount of $2,363 and $3,614 for such years, respectively.

The Company has historically relied upon land and project financing, as
applicable, partner and joint venture contributions in the form of land or cash,
developer's equity (value in excess of cost), other forms of debt, including
loans from affiliates, and cash flow from operations to provide capital for land
acquisitions and portfolio construction. The Company intends to continue to
provide for its capital requirements from some or all of these sources.

Lending Activities
- -------------------

On November 15, 1999, (the first anniversary of the closing of the Diamond
Key acquisition), in connection with the purchase of Diamond Key, the Company
issued 146,391 shares of the Company's Common Stock to Larison P. Clark. The
Company was also obligated to pay Mr. Clark $1.0 million in cash on November 15,
1999. The Company has paid Mr. Clark $300,000 through December 31, 1999 and the
remainder was recorded as a note payable for $700,000 with an interest rate of
18.0% per annum, due on May 3, 2000, of which $225,000 was paid in 2000.

During the second quarter of 1999, the Company's Executive Vice President,
Michele Saxton Pori, pledged 530,000 shares on Common Stock, or 6.9% of the
Company's outstanding shares as of December 31, 1999, as collateral for a $1.2
million personal loan. Ms. Pori reloaned the proceeds to the Company. The note
payable bears interest at 12.0% per annum and matured on February 3, 2000. The
outstanding balance at December 31, 1999 was $613,000. As of December 31, 1999,
these loans were in default. The Company understands that Ms. Pori intends to
repay, in full, the loan from the lender upon repayment of the loan she has made
to the Company.

On February 9, 1998, the Company entered into a $10.0 million revolving
loan agreement with a financial institution. The line of credit provides for
borrowings up to $1.0 million for general working capital requirements, $4.0
million for acquisition and development, including strategic acquisitions and
$5.0 million for land acquisitions. Borrowings under the line of credit are
secured by the pledge of certain Company receivables and any land acquired with
borrowings under the line of credit and bear interest at one percent over the
lender's prime rate in effect from time to time. The agreement is also subject
to certain financial covenants and restrictions. The revolving working capital
line for $1.0 million was payable on November 30, 1999, the maturity date, and
the remainder is payable one year and one day following each advance. The due
dates range from December 1, 2000 to September 14, 2001. As of December 31,
1998 and 1999, the Company had outstanding indebtedness of $5.0 million and $7.9
million, respectively. At December 31, 1999, the Company was in default on this
line of credit.

On July 30, 1997, the Company entered into a $5.0 million revolving line of
credit agreement with a financial institution. Loans under the agreement bear
monthly interest at 1.5% above the prime rate as defined in the agreement (9.25%
at December 31, 1998 and 8.50% at December 31, 1999), and require the Company to
pay a loan fee of 0.25% for each disbursement. Loans under the agreement are
available only for the acquisition of land and are secured by first trust deeds
on certain real property. As of December 31, 1999, the Company had outstanding
indebtedness of $1.5 million maturing on August 1, 2000 and $450,000 maturing on
March 12, 2000 for a total indebtedness of $1.9 million. Under the terms of the
agreement, the Company is required to meet certain financial covenants. At
December 31, 1999, the Company was in default on this loan.

With regard to the Company's lines of credit and related party
transactions, see Notes 5, 11 and 12 of Notes to Consolidated Financial
Statements.

<PAGE>
Cash Flow Uses
- ----------------

Net cash used in operating activities for the years ended December 31,
1997, 1998 and 1999 was $12.5 million, $35.9 million and $31.0 million,
respectively. This increase was primarily due to increases in properties in
development, Tax Credit Partnership receivables and construction contracts
receivable. Properties under development increased from $79.4 million in 1998 to
$90.0 million in 1999. The number of properties under development increased
from 41 in 1998 to 33 in 1999. Receivables from Tax Credit Partnerships
decreased from $32.0 million in 1998 to $12.6 million in 1999, primarily due to
increased land acquisition costs and increased construction cost receivables on
the Company's Rancho Mesa, Spanish Hills and South Valley Apartments projects
and the write down to fair value of all TCP properties. Construction contracts
receivable decreased from $8.8 million in 1998 to $25 million in 1999
primarily due to increased design-build construction costs related to two
projects.

Net cash used in investing activities for the years ended December 31,
1997, 1998 and 1999 was $964,000, $19.0 million and $2.3 million, respectively.
The increase from 1997 to 1998 in cash used in investing activities is primarily
due to an increase in expenditures for property acquisitions and improvements,
due to $793,000 in cash utilized in connection with the acquisition of Maxim in
March 1998, and $10.9 million of cash utilized in connection with the
acquisition of Diamond Key in November 1998. The decrease in cash used in
investing activities from $19.0 million in 1998 to $2.3 million in 1999 is
primarily due to the reduction in 1999 of cash outlays for property acquisitions
and improvements from $14.2 million in 1998 to $358,000 in 1999. No
acquisitions of companies occurred in 1999, while the Company acquired two
homebuilders in 1998.

Net cash provided by financing activities for the years ended December 31,
1997, 1998 and 1999 was $13.0 million, $55.1 million and $33.7 million,
respectively. The increase from 1997 to 1998 was primarily due to the net
effect of the proceeds from the Offering. The decrease in cash provided by
financing activities from 1998 to 1999 is primarily due to net proceeds from
notes payable of $29.4 million during 1999 compared to $47.6 million in 1998.

On March 13, 2000, pursuant to a purchase/settlement agreement with
Volunteers of America (VOA) National Housing Corp. which was approved by the
Company's Board of Directors in the fourth quarter of 1999, the Company issued
457,142 shares of Saxton Common Stock to acquire certain of VOA's interest in
Tax Credit Partnerships. The purchase/settlement agreement required the Company
to deliver to VOA, $1,000,000 worth of stock (457,142 shares at $2.25 per share,
the market price on March 12, 2000). These shares represent approximately 5.8%
of the Company's Common Stock issued and outstanding on March 12, 2000. The
Company also agreed to pay $325,000 in cash to VOA, of which $125,000 was paid
in the first quarter of 2000, with the remainder to be paid in annual
installments, over the next two years. The $1,325,000 has been recorded as
Investment in Joint Ventures held for sale at December 31, 1999 and was included
in the market valuation of all TCP properties and was included in the market
valuation of all TCP properties.

Interest costs incurred, expensed and capitalized were as follows (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1999
------ -------
<S> <C> <C>
Interest incurred:
Residential . . . . . . . . . . . . $4,674 $10,789
Commercial. . . . . . . . . . . . . 2,522 2,197
------ -------
Total incurred $7,196 $12,986
====== =======

Interest expensed:
Residential $ 117 $ 3,450
Commercial 2,220 1,880
------ -------
Total expensed $2,337 $ 5,330
====== =======

Interest capitalized at end of year:
Residential $4,557 $ 7,339
Commercial 302 317
------ -------
Total interest capitalized $4,859 $ 7,656
====== =======
</TABLE>

<PAGE>
The Company has utilized, and may continue to utilize, options and
contingent sales contracts as a method of controlling and subsequently acquiring
land. By controlling land through these methods on the future discretionary
purchase of land, the Company attempts to minimize its cash outlays and reduce
its risk from changing market conditions. While the Company attempts to
prudently manage its acquisition and development of property, the development of
such property can have a negative impact on liquidity due to the timing of
acquisition and development activities.

If strategic acquisitions or joint venture opportunities arise, the capital
resources of the Company may be utilized, if available, to undertake such
opportunities. The timing and nature of these opportunities cannot be predicted
and the financing of any future strategic acquisition or joint venture may take
a variety of forms.

The Company anticipates that development of portfolio projects during 2000
will cost approximately $8.5 million in the aggregate, substantially all of
which is expected to be financed with construction loans, which there is no
assurance the Company will be able to continue. The real estate development
business is capital intensive and requires significant up-front expenditures to
acquire and entitle land and commence development. The Company typically
finances, and will continue to finance, its land acquisition and portfolio
development activities utilizing the proceeds of institutional loans secured by
real property. In some cases, the Company plans to utilize private financing,
typically on a short-term or interim basis. In cases where the Company holds a
property after completion of construction, the Company generally seeks to obtain
permanent financing secured by the property. There can be no assurance, however,
that the Company will be able to obtain satisfactory financing for the
development of any of its projects and the failure to obtain satisfactory
financing would have a material adverse effect on the Company, its operations
and its financial condition. The Company also expects purchases of construction
and computer equipment during 2000 to be nominal, based on the Company's debt
restructuring.

At December 31, 1999, the Tax Credit Partnerships were indebted to the
Company in the aggregate amount of approximately $16.8 million, representing
developer fees and land and construction costs. Of such amount, approximately
$14.3 million is payable to the Company by the Tax Credit Partnerships from
additional capital contributions of the investor limited partners. The Company
anticipates that approximately $1.8 million will be paid in 2000 and $2.5
million will be paid in 2001. Approximately $12.5 million is payable to the
Company from the net operating cash flows of the Tax Credit Partnerships.

During the fourth quarter of 1999, the Company began to explore the
possibility of selling the Tax Credit Project general partnership interests and
receivables to strengthen the Company's cash flow position and has determined
that the Due from TCP's and the Investments in the TCP Joint Ventures are held
for sale at December 31, 1999 and are actively being marketed for sale.
Therefore, at December 31, 1999, the amounts are recorded at the lower of cost
or fair value, less selling expenses. The Company has obtained a fair market
valuation from an independent third party for the general partnership interests
and the receivables from the eight TCP properties. This analysis indicated a
fair value of $14.8 million, resulting in a write down of the Tax Credit
partnership receivables by $23.9 million a and write down of the investments in
these projects by $1.7 million (See Notes 6 and 9 to the Consolidated Financial
Statements).

The Company has made its capital contributions to the eight Tax Credit
Partnerships. The Company is obligated, however, to make operating expense
loans, not to exceed an aggregate of $3.4 million, to meet operating deficits,
if any, of such Tax Credit Partnerships. The Company does not plan to pursue
any new Tax Credit Projects in the foreseeable future.

With regard to the Company's lines of credit and related party transactions, see
Notes 5, 11 and 12 of Notes to Consolidated Financial Statements.

BACKLOG

The Company's homes are generally offered for sale in advance of their
construction. The majority of the Company's homes are sold pursuant to standard
sales contracts entered into prior to commencement of construction. Such sales
contracts are typically subject to certain contingencies, such as the buyer's
ability to qualify for financing. Homes covered by such sales contracts are
considered by the Company as backlog. The Company does not recognize revenue on
homes covered by such contracts until the sales are closed and the risk of
ownership has been legally transferred to the buyer. At December 31, 1998 and
1999, the Company had 184 homes and 356 homes, respectively, in backlog,
representing aggregate sales values of approximately $19.7 million and $40.1
million, respectively. The large backlog at December 31, 1999 is primarily
attributable to the construction work slowdown in the fourth quarter of 1999.
There can be no assurance that the buyers will remain in place long enough for
the Company to close the sales.

<PAGE>
As part of its sales and marketing efforts, the Company builds and
maintains model homes in each of its active communities. The Company also builds
homes which are under construction or completed for which the Company does not
yet have sales contracts ("speculative homes") on a project-by-project basis.
See Item 1. "Business - Development Activities - Homebuilding - Marketing and
Sales." It is possible that, in the event of adverse economic or other business
conditions affecting home buying activity in the Company's markets, the Company
may be required to reduce prices or provide sales incentives to liquidate its
inventory of model or speculative homes. It is also possible that the Company
could be required to reduce prices or provide sales incentives to sell its model
homes at the conclusion of a particular community. Either of these actions, if
taken, could have the effect of depressing the Company's gross margin for the
relevant periods.

The Company is also involved in the design-build development of commercial
projects. Backlog for such commercial projects is defined as the uncompleted
work remaining under a signed fixed-price contract. The Company uses the
percentage-of-completion method to account for revenue from its design-build
contracts. At December 31, 1998 and 1999, the Company had backlog under its
design-build contracts of approximately $20.3 million and $10.9 million,
respectively. The decrease in backlog is primarily due to the Company's change
in focus to homebuilding projects.

EFFECTS OF CHANGING PRICES, INFLATION AND INTEREST RATES

Management believes that inflation has not had a material impact on the
Company's operations. Substantial increases in labor costs, workers'
compensation rates and employee benefits, equipment costs, material or
subcontractor costs could adversely affect the operations of the Company for
future periods to the extent that the Company is unable to pass such increases
on to its construction clients or the purchasers of its properties. The Company
had outstanding approximately $77.3 million of floating rate debt (exclusive of
the indebtedness of unconsolidated partnerships of which the Company is a
general partner), currently bearing a weighted-average interest rate of 9.5% per
annum at December 31, 1999. If the interest rates on the floating rate debt
increase in accordance with changes to the indices upon which the rates are
based, debt service obligations of the Company will increase.

The potential adverse impact of inflation on the Company's rental
operations is mitigated by the inclusion of rent adjustment clauses in its
longer-term nonresidential leases and by generally requiring tenants to pay
their share of operating expenses, including common area maintenance, real
property taxes, insurance and utilities. The Company's shorter-term
nonresidential leases and its residential leases, which are typically for terms
of 6 or 12 months, permit the Company to seek increased rents upon renewal or
re-letting of the leased space.

Management believes that the Company's future homebuilding activities may
be affected by fluctuations in interest rates and changing prices. Higher
interest rates may decrease the demand for new homes by making it more difficult
for homebuyers to qualify for mortgages or to obtain mortgages at interest rates
that are acceptable to the potential buyers. In addition, the Company, as well
as the homebuilding industry in general, may be adversely affected during
periods of high inflation, primarily as a result of higher land acquisition and
land development costs, as well as higher costs of labor and materials. The
Company attempts to pass on to its customers any increase in costs through
higher sales prices. There can be no assurance that inflation will not have a
material impact on the Company's future results of operations.

VARIABILITY OF RESULTS AND SEASONALITY

The Company historically has experienced, and in the future expects to
continue to experience, variability in revenue on a quarterly basis. Factors
expected to contribute to this variability include, among others; (i) the timing
of home and other property sale closings; (ii) the Company's ability to continue
to acquire land and options thereon on acceptable terms; (iii) the timing of
receipt of regulatory approvals for the construction of homes and other
development projects; (iv) the condition of the real estate market and the
general economic conditions in the greater Las Vegas, Phoenix, Salt Lake City,
Reno and Tucson metropolitan areas; (v) the prevailing interest rates and the
availability of financing, both for the Company and for the purchasers of the
Company's homes and other properties; (vi) the timing of the completion of
construction of the Company's homes and other portfolio properties; and (vii)
the cost and availability of materials and labor. The Company's historical
financial performance is not necessarily a meaningful indicator of future
results and, in particular, the Company expects its financial results to vary
from project to project and from quarter to quarter. In addition, although the
Company has not previously experienced significant seasonality in its business,
management expects that the Company's increased focus on homebuilding activities
may cause it to experience seasonal variations in its home sales as a result of
the preference of homebuyers to close new home purchases either prior to the
start of a new school year or prior to the end of year holiday season.

<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued, SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133").
SFAS 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS 133 requires recognition of all
derivative instruments in the statement of financial position as either assets
or liabilities and the measurement of derivative instruments at fair value.
SFAS 133, as amended, is effective for all quarters in fiscal years beginning
after June 15, 2000. The adoption of SFAS 133 is not expected to have a
material impact on the consolidated financial statements of the Company.

YEAR 2000

The Company's process for becoming Year 2000 ("Y2K") compliant has been to
perform an ongoing comprehensive study and review of computer hardware, software
and systems, both internal and external, and non-computer related systems which
may be affected by certain computerized functions. The Company completed this
process in preparation for Y2K issues, prior to the end of the year. As of
March 16, 2000, the Company is not aware of any Y2K problem in any of our
corporate applications, significant service providers, vendors, suppliers,
subcontractors, financial institutions, consultants, various government agencies
or non-information technology/embedded systems. However, the success to date of
our Y2K efforts and the efforts of third party vendors or business partners
cannot guarantee that there will not be a material adverse effect on our
business should a Y2K problem manifest or become apparent in the future.

The costs of expected modifications were estimated to be minimal and
immaterial. For the year ended December 31, 1999, approximately $105,000 was
charged to expense related to this issue. Remaining costs to be incurred in
2000, if any, are not expected to be material.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations and Business sections contain certain forward-looking
statements and information relating to the Company that are based on the beliefs
of management as well as assumptions made by and information currently available
to management. Such forward-looking statements include, without limitation, the
Company's expectation and estimates as to the Company's business operations,
including the introduction of new products and future financial performance,
including growth in revenues and net income and cash flows. In addition,
included herein the words "anticipates," "believes," "estimates," "expects,"
"plans," "proposes," "hopes," "intends" and similar expressions, as they relate
to the Company or its management, are intended to identify forward-looking
statements. Such statements reflect the current views of the Company's
management, with respect to future events and are subject to certain risks,
uncertainties and assumptions. In addition, the Company specifically wishes to
advise readers that the factors listed under the captions "Liquidity and Capital
Resources," "Effects of Changing Prices, Inflation and Interest Rates" and other
risk factors including but not limited to: the primary dependence on the
greater Las Vegas and Phoenix areas; insufficient history in geographic areas
other than Las Vegas; risks of homebuilding and other real estate development
and investments; indebtedness; potential inability to obtain future financing;
variability, erratic weather conditions and seasonality of results; dependence
on key personnel; control by current stockholders; regulatory and environmental
risks; and expansion into new markets could cause actual results to differ
materially from those expressed in any forward-looking statement. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
discussed herein as anticipated, believed, established or expected.

<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to changes in interest rates primarily as a result
of its borrowing activities, which includes borrowings under lines of credit.
These lines, along with cash flow from operations, are used to maintain
liquidity and fund business operations. The Company typically replaces
borrowings under its lines of credit, as necessary, with long-term fixed rate
and shorter termed variable rate financing generally secured by real estate.
The nature and amount of the Company's debt may vary as a result of business
requirements, market conditions and other factors. The extent of the Company's
interest rate risk is not quantifiable or predictable because of the variability
of interest rates and business financing requirements, but the Company does not
believe such risk is material. The Company does not currently use interest rate
derivative instruments to manage the Company's interest rate risk.

The table below presents principal amounts and related weighted-average
interest rates by year of maturity for the Company's debt obligations at
December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------------------------------------------
FAIR VALUE
2000 2001 2002 2003 2004 THEREAFTER TOTAL 1999
--------- --------- --------- --------- -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed . . . . . . $ 43,797 $ 1,451 $ 1,275 $ 34 $ - $ 5,728 $ 52,285 $ 53,424
Average int. rate 16.63% 10.13% 9.03% 9.75% -% 8.12% 15.33% -
Variable. . . . . $ 59,336 $ 3,644 $ 532 $ 76 $ 2,292 $ 11,395 $ 77,275 $ 77,275
Average int. rate 9.66% 9.50% 12.84% 10.00% 9.84% 8.15% 9.45% -
</TABLE>

The Company does not utilize financial instruments for trading or other
speculative purposes, nor does it utilize leveraged financial instruments. On
the basis of the fair value of the Company's market sensitive instruments at
December 31, 1999, the Company does not consider the potential near-term losses
in future earnings, fair values and cash flows from reasonably possible
near-term changes in interest rates to be material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is included under Item 14. of Part IV
of this report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On December 9, 1998, the Company dismissed KPMG LLP as the Company's
principal accountant and advised KPMG that they would not be engaged to conduct
the audit of the Company's financial statements for the fiscal year ended
December 31, 1998. KPMG LLP's reports on the financial statements of the
Company for the past two fiscal years ended December 31, 1997 did not contain
any adverse opinion or disclaimer of opinion and were not qualified as to
uncertainty, audit scope or accounting principles.

During the two most recent fiscal years and the interim periods subsequent
to the Company's year ended December 31, 1997, there have been no disagreements
with KPMG LLP on any matter of accounting principles or practices, financial
statement disclosure, auditing scope or procedure, or any reportable events as
defined in Item 304 (a) (1) (v) of Regulation S-K, except during the quarter
ended September 30, 1998 there was a disagreement as to the proper application
of generally accepted accounting principles to a real estate transaction. The
disagreement was ultimately resolved to the satisfaction of KPMG LLP without
discussion with the Audit Committee of the Board of Directors of the Company.
The Company has authorized the former accountant to respond fully to the
inquiries of the successor accountant concerning the subject matter of such
disagreement.

The Company provided KPMG LLP with a copy of this disclosure and requested
that KPMG LLP furnish it with a letter addressed to the Securities and Exchange
Commission (the "SEC") stating whether it agreed or disagreed with the above
statements. A copy of KPMG LLP's letter to the SEC, dated December 16, 1998,
was filed as Exhibit 16 to the Company's report on Form 8-K, dated December 9,
1998.

<PAGE>
The Company selected Deloitte & Touche, LLP as independent accountants for
the Company's fiscal year ended December 31, 1998 and 1999 to replace KPMG LLP.
The Company's Board of Directors approved the selection of Deloitte and Touche,
LLP as independent accountants upon the recommendation of the Company's Audit
Committee.

<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information with respect to the
executive officers and Directors of the Company as of December 31, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------- --- -------------------------------------------------------------
<S> <C> <C>
James C. Saxton . . . . 63 Chairman of the Board of Directors, Chief Executive Officer,
President and interim Chief Financial Officer
Douglas W. Hensley. . . 45 Executive Vice President of Corporate
Development and Services and Director
Marc S. Hechter (1) . . 47 Senior Vice President of Business Affairs and Director
Michele Saxton Pori . . 31 Executive Vice President and Director
James C. Saxton II. . . 28 President/Chief Operating Officer, Nevada Operations
and Vice President of Information Systems
Jeffrey A. Pori . . . . 33 Vice President of Marketing
Timothy J. Adams. . . . 38 Director
Paul Eisenberg. . . . . 73 Director
Bernard J. Mikell, Jr.. 61 Director
Robert L. Seale . . . . 58 Director
Robert R. Barengo (2) . 58 Director
Robert A. Hynote (2). . 48 Director
<FN>
(1) Effective June 9, 2000, Mr. Hechter resigned as an employee and as a
Director of the Company.

(2) Effective April 12, 2000, Mr. Barengo and Mr. Hynote resigned as Directors
of the Company.
</TABLE>

James C. Saxton founded the Company in 1986 and has served as its Chairman,
Chief Executive Officer and President since its formation. For the two years
prior to the formation of the Company, Mr. Saxton concentrated on the
development in Las Vegas of privately owned construction projects financed
through private investments. From 1970 to May 1984, Mr. Saxton was employed by
Intel Corporation in various sales and management positions. In November 1999,
Mr. Saxton was appointed interim Chief Financial Officer following the
termination of the former Chief Financial Officer, Kirk Scherer.

Douglas W. Hensley, CPA, has served as Executive Vice President of
Corporate Development and Services since August 1998. Prior to that time, Mr.
Hensley had been the Chief Financial Officer since March 1990, Executive Vice
President since January 1994 and a Director since June 1997. Mr. Hensley joined
the Company as Corporate Controller in February 1990. Prior to joining the
Company, Mr. Hensley was with Henson, Stewart & Hensley, Certified Public
Accountants, for six years; the last three years as a partner.

Marc S. Hechter has served as Senior Vice President of Business Affairs
since January 1998 and a Director of the Company since June 1997, having served
from May 1995 to January 1998 as Senior Vice President of Finance. From July
1993 to May 1995, Mr. Hechter served as a director of Jayne, Hechter and
Company, Inc., a consulting firm providing strategic planning and financial
advice. In such position, Mr. Hechter served as a financial consultant to the
Company from March 1994 to May 1995. Mr. Hechter served as Assistant General
Manager of Administration for the Nevada State Industrial Insurance System from
December 1991 to July 1993, and as Vice President of Wadhams and Associates,
Inc. from August 1990 to December 1991. Mr. Hechter is a past Administrator of
the Nevada Housing Division. On May 2, 2000, Mr. Hechter resigned as an
employee and as a Director of the Company, to pursue higher education, with such
resignation effective June 9, 2000.

Michele Saxton Pori, Executive Vice President and a Director, has served
the Company in various capacities with increasing levels of responsibility since
June 1990. The positions included: planning assistant, planning director,
marketing representative, financial analyst, Vice President of Development and
as a Director since the Company's formation. Ms. Pori is James C. Saxton's
daughter.

James C. Saxton II has served as President/Chief Operating Officer, Nevada
Operations since August 1999, Vice President of Development since March 1999 and
Vice President of Information Systems for the Company since November 1997. From
April 1995 to November 1997, Mr. Saxton served as an architect and Director of
Commercial Projects for the Company. He is the son of James C. Saxton.

<PAGE>
Jeffrey A. Pori has served as Vice President of Marketing of the Company
since April 1995. Mr. Pori also serves as President of the Company's licensed
real estate brokerage subsidiary. Mr. Pori joined the Company as Leasing Manager
in April 1991 and was promoted to Director of Marketing in December 1992. Prior
to joining the Company, Mr. Pori served as a sales representative for Nevada
Advertising from October 1990 to March 1991. Mr. Pori is married to Michele
Saxton Pori and is James C. Saxton's son-in-law.

Paul Eisenberg has served as a Director since June 1997 and is a retired
certified public accountant. Prior to his retirement in 1991, Mr. Eisenberg was
a partner in Eisenberg & Kimmell, Certified Public Accountants, for five years.

Bernard J. Mikell, Jr. has served as a Director since June 1997 and has
been engaged in the private practice of law, legislative advocacy and financial
consulting since August 1995. From July 1994 to August 1995, Mr. Mikell served
as Senior Vice President, Public Finance for Sutro & Co. Incorporated. From
April 1991 to July 1994, Mr. Mikell was engaged in the private practice of law
and financial consulting. Other previous positions include Vice President,
Municipal Finance for Goldman, Sachs & Co., Vice President, Public Finance for
Dean Witter Reynolds Inc. and General Counsel of the California Housing Finance
Agency.

Robert L. Seale has served as a Director since June 1997 and has been the
Managing Director of Gabelli Fixed Income, LLC since January 1999. From January
1991 through December 1998, Mr. Seale served as the elected Treasurer of the
state of Nevada. Prior thereto, Mr. Seale was Managing Partner of Pangborn &
Co., Ltd., Certified Public Accountants, from 1983 to 1989. Mr. Seale is a past
president of the National Association of State Treasurers.

Timothy J. Adams has served as a Director since June 1997 and has been
Director of Legal, Labor Ready, Inc. since October 1999. Mr. Adams was employed
by the Company as General Counsel from October 1996 to July 1999. From July
1987 to September 1996, Mr. Adams was engaged in the private practice of law,
most recently as a partner of Adams & Tobler, Ltd. Mr. Adams acted as counsel
to the Company from 1993 to 1999.

Robert R. Barengo has served as a Director since June 1999 and is currently
an attorney engaged in private practice. Mr. Barengo has over 25 years of
legislative and legal experience. Mr. Barengo's legislative experience in the
state of Nevada includes terms as Speaker of the Assembly, Chairman of the
Legislative Commission, Speaker Pro Tempore, Chairman of the Judiciary Committee
and Assemblyman. Mr. Barengo was also Judge Pro-Tem for the Sparks Municipal
Court and Reno Municipal Court from 1976 to 1995. From 1969 to 1972 he was the
Deputy District Attorney for Washoe County, Nevada. Mr. Barengo also serves as
an outside director on the boards of two other publicly traded companies. Since
1992, he has been a Director for the Riviera Holdings Corporation, a company
involved in the hotel and casino business and a Director for American Wagering,
Inc., a company involved primarily in race and sports book management and
services. On April 12, 2000, Mr. Barengo resigned as a Director of the Company.

Robert A. Hynote has served as a Director since June 1999 and has over 20
years in the finance field and is currently Senior Vice President, Municipal
Finance for Lehman Brothers, a leading global investment bank. From 1983 to
1999, Mr. Hynote was Vice President, Municipal Finance for Goldman Sachs and
Co., a leader in investments, finance and research. From 1979 to 1983, Mr.
Hynote was Vice President, Municipal Finance for Dean Witter Reynolds, Inc., a
market leader in securities, investment management, credit services and
electronic brokerage. On April 12, 2000, Mr. Hynote resigned as a Director of
the Company.

Each Director holds office until the next annual meeting of stockholders
or until his or her successor has been elected and qualified. Officers serve at
the pleasure of the Board of Directors.

The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee is comprised of Messrs. Eisenberg,
Mikell, Seale and Hynote with Mr. Seale serving as chairman. On January 12,
2000, the Board unanimously approved the addition of Mr. Barengo to this
Committee (Mr. Barengo subsequently resigned as a Director of the Company on
April 12, 2000). The Audit Committee is responsible for reviewing the audited
financial statements of the Company and making recommendations to the full Board
on matters concerning the Company's audits and the selection of independent
public accountants.

<PAGE>
The Compensation Committee is comprised of Messrs. Mikell, Seale and
Barengo, as outside Directors, with Mr. Mikell serving as chairman. On January
12, 2000, the Board unanimously approved the addition of Mr. Hynote to this
Committee (Mr. Hynote subsequently resigned as a Director of the Company on
April 12, 2000). The Compensation Committee is responsible for establishing
salaries, bonuses and other compensation for the Company's executive officers
and administering the Company's Management Stock Option Incentive Plan. See Item
11. "Executive Compensation - Stock Option Plans - Management Stock Option
Incentive Plan."

DIRECTOR COMPENSATION

Directors do not currently receive any compensation for their services,
except that Directors who are not employees of the Company receive a fee of
$1,000 per Board meeting attended and are reimbursed for certain expenses
incurred in attending Board and committee meetings. No fee is payable for
participation in Board committee meetings. In addition, such Directors are
eligible to participate in the Company's Non-Employee Director Stock Option
Plan. See Item 11. "Executive Compensation-Stock Option Plans - Non-Employee
Director Stock Option Plan." Directors who are employees of the Company do not
receive additional compensation for service as a Director.

Section 16 (a) Beneficial Ownership Reporting Compliance

Section 16 (a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's Directors and executive officers, and persons who own
more than ten percent of the Company's outstanding shares of Common Stock to
file with the SEC initial reports of ownership and reports of changes in
ownership of the Common Stock. Such persons are required by SEC regulations to
furnish the Company with copies of all such reports they file.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, Directors and greater than ten percent beneficial owners have been
satisfied, except that Ms. Melody J. Sullivan, Ms. Kathryn S. Wonders, Messrs.
Seale and Mikell each filed one late report, each relating, respectively, to one
transaction.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth a summary of the compensation paid by the
Company in the three fiscal years ended December 31, 1999, 1998 and 1997, to the
Company's Chief Executive Officer and each of its other most highly compensated
executive officers (collectively "Named Executive Officers"). The Named
Executive Officers include: (i) each person who served as Chief Executive
Officer during 1999 (one person); (ii) each person who (a) served as an
executive officer at December 31, 1999, (b) was among the four most highly paid
executive officers of the Company, not including the Chief Executive Officer,
during 1999, and (c) received over $100,000 in compensation in 1999 (two
persons); (iii) up to two persons who would be included under clause (ii) above
had they served as an executive officer at December 31, 1999 (two persons); and
(iv) certain persons who served as executive officers of a subsidiary of the
Company (two persons).

<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS/PAYMTS
---------------------------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS (#) COMPENSATION
- ----------------------------------- ---- -------- ------- -------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
James C. Saxton, Chairman,
of the Board,
President, Chief Executive
Officer and Interim Chief
Financial Officer . . . . . . . 1999 $382,228 $ - $ - - $ 2,650 (1)
1998 379,827 - - - 28,613 (3)
1997 341,800 - - - 2,204 (1)
Douglas W. Hensley, Executive
Vice President of Corporate
Development and Services . . . . . 1999 $ 98,052 $37,000 $ 12,883 - $ 4,425 (1)
1998 88,779 31,250 - 25,000 (5) 5,484 (1)
1997 80,417 33,500 - 25,000 (5) 2,204 (1)
Jeffrey A. Pori, Vice President
of Marketing and Commercial
Development. . . . . . . . . . . . 1999 $ 83,750 $40,000 $ - - $ 4,492 (1)
1998 55,538 - - 25,000 (5) 54,342 (4)
1997 39,012 - - 25,000 (5) 128,005 (2)
Brian K. Brady, President,
Maxim Homes, Inc.. . . . . . . . . 1999 $101,310 $ - $ 60,361(6) - $ 29,639 (1)
1998 77,083 - 59,637 - 9,530
1997 N/A N/A N/A N/A N/A
Larison P. Clark, Former President,
Diamond Key Homes, Inc.. . . . . . 1999 $252,000 $ - $ - ( 25,000) (7) $ -
1998 42,000 - - 25,000 (7) -
1997 N/A N/A N/A N/A N/A
Kirk Scherer, Former Executive
Vice President of Finance and
Chief Financial Officer. . . . . . 1999 $128,757 $24,000 $ - ( 20,000) (8) $ 48,757 (9)
1998 35,692 2,940 - 25,000 (8) -
1997 N/A N/A N/A N/A N/A

Timothy J. Adams, Former Vice
President, General Counsel
and Secretary. . . . . . . . . . . 1999 $ 53,392 $30,000 $ - ( 20,000) (10) $ 2,374 (1)
1998 82,000 70,000 - 5,000 5,484 (1)
1997 80,000 40,000 - 25,000 2,204 (1)
<FN>
(1) Represents medical insurance premiums paid.
(2) Represents commissions paid.
(3) Represents medical and life insurance premiums paid.
(4) Represents commissions and medical insurance premiums paid.
(5) Repriced options originally granted in 1997 and repriced in 1998.
(6) Includes $40,000 paid in 1999 and $20,361 accrued in 1999 in connection
with the provisions of Mr. Brady's employment agreement. Also includes
$27,970 in fringe benefits earned in 1998 and paid in 1999 and $20,361 in
fringe benefits earned in 1999 but not paid at December 31, 1999.
(7) Diamond Key Homes, of which Mr. Clark was President, was acquired by the
Company in November 1998. Mr. Clark's employment was terminated effective
December 31, 1999, and 25,000 options held by Mr. Clark were forfeited.
(8) Mr. Scherer's employment was terminated on November 8, 1999, and 20,000
options held by Mr. Scherer were forfeited.
(9) Represents amounts paid in 1999 in connection with the termination of Mr.
Scherer's employment ($46,541) and accrued vacation ($2,216).
(10) Mr. Adams' employment as an employee was terminated effective July 7, 1999.
Mr. Adams remains a Director of the Company and 20,000 options held by Mr.
Adams were forfeited.
</TABLE>

<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

During 1999, a total of 134,300 stock options were granted, none of which
were granted to the Named Executive Officers.

AGGREGATE OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information concerning unexercised
stock options held by the Named Executive Officers as of December 31, 1999:

<TABLE>
<CAPTION>
NUMBER OF SHARES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS IN-THE-MONEY OPTIONS AT
ON VALUE AT FISCAL YEAR-END FISCAL YEAR-END (1)
----------- ------------- ------------ --------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- -------- -------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
James C. Saxton. . . - - - - $ - $ -
Douglas W. Hensley . - - 66,447 20,000 - -
Jeffrey A. Pori. . . - - 10,112 20,000 - -
Timothy J. Adams (2) - - 10,000 - - -
Kirk Scherer (3) . . - - 5,000 - - -
Brian K. Brady . . . - - 3,000 12,000 - -
<FN>
(1) Amounts calculated by subtracting the exercise price of the options from
the value of the underlying Common Stock on December 31, 1999, which was
the closing market price on December 31, 1999 of $2.65 per share.

(2) Although Mr. Adams ceased being an employee of the Company in July 1999,
the Board allowed Mr. Adams to retain 10,000 vested options.

(3) Although Mr. Scherer's employment was terminated in November, 1999, the
Board allowed Mr. Scherer to retain 5,000 vested options, the expiration
dates of which were extended to November 9, 2002.
</TABLE>

The following table sets forth certain information concerning stock options
which had been previously awarded to the Named Executive Officers and which were
repriced during fiscal 1998:

TEN YEAR OPTION/SAR REPRICINGS

SECURITIES LENGTH OF
UNDERLYING ORIGINAL OPTION
NO. OF TERM
OPTIONS/ MARKET PRICE OF EXERCISE PRICE REMAINING
SARS STOCK AT TIME OF AT TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) (1) AMENDMENT
- ------------------ --------------- ------------ ------------------ ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Douglas W. Hensley January 2, 1998 25,000 $ 6.875 $ 8.25 $ 6.875 49 months
Jeffery A. Pori. . January 2, 1998 25,000 6.875 8.25 6.875 49 months
- ------------------
<FN>
(1) Closing price at January 2, 1998; the repricing date.
</TABLE>

EMPLOYMENT AGREEMENTS

The Company has entered into a three-year employment agreement with James
C. Saxton, the Company's President and Chief Executive Officer, which terminates
on March 10, 2001, subject to automatic one-year renewals unless either the
Company or Mr. Saxton gives 60 days prior notice to the other of its desire not
to renew. Pursuant to the terms of such agreement, Mr. Saxton will be entitled
to receive a base salary of $360,000 per year, increasing each year by 3% or
such other amount as is determined by the Board of Directors in its discretion,
and will receive supplemental life insurance and long-term disability insurance
at the Company's expense. Mr. Saxton will also be eligible to receive an annual
bonus at the discretion of the Board of Directors. The agreement requires Mr.
Saxton to devote his full-time attention and energies to the Company's business
and contains restrictive covenants pursuant to which Mr. Saxton has agreed not
to compete with the Company, within 90 miles of any location in which the
Company or any affiliate is doing business, for a period of one year following
termination of his employment if such termination is the result of the Company's
termination of Mr. Saxton "for cause" (as such term is defined in the employment
agreement), Mr. Saxton's election not to renew the agreement at the end of any
term thereof or if Mr. Saxton terminates the agreement for other than "good
reason" (as such term is defined in the employment agreement). The agreement
further provides that if Mr. Saxton is terminated other than "for cause," Mr.
Saxton will be entitled to receive any unpaid compensation accrued through the
last day of his employment together with certain severance payments. There were
no other material employment agreements with employees, Directors or Named
Executive Officers of the Company at December 31, 1999.

<PAGE>
INDIVIDUAL STOCK OPTION AGREEMENTS

In December 1994, the Company granted options to purchase an aggregate of
127,907 shares of Common Stock to various officers and other key employees under
separate letter agreements, including options to purchase 61,447 shares to
Douglas W. Hensley, options to purchase 25,562 to Marc S. Hechter and options to
purchase 5,112 shares to Jeffrey A. Pori. In 1995, options to purchase 23,497
shares lapsed, without vesting, upon certain employees' termination of
employment with the Company. In 1998 and 1999, options to purchase 5,112 shares
and 983 shares, respectively, lapsed upon a certain employee's termination of
employment with the Company.

The options granted to Mr. Hensley vested as to 20% of the shares on
December 29, 1995 and as to an additional 30% of the shares on December 29,
1996. The remaining shares underlying Mr. Hensley's options vested on December
29, 1997. As of December 29, 1998, 80% of the remaining options held by others
pursuant to such individual stock option grants had vested and the remaining 20%
vested on December 29, 1999. All such options are exercisable from the date of
vesting through December 28, 2004, at an exercise price of $6.10 per share, the
fair value of the underlying shares on the date of grant, as determined by the
Board of Directors in good faith.

STOCK OPTION PLANS

MANAGEMENT STOCK OPTION INCENTIVE PLAN

On June 30, 1997, the Company adopted a Management Stock Option Incentive
Plan (the "Option Plan") which provides for the grant of options to employees to
purchase Common Stock, up to a maximum of 500,000 shares. On December 7, 1998,
the Company's Board of Directors approved an increase from 500,000 to 750,000 in
number of shares subject to stock options under the Option Plan. The increase
was approved by the stockholders at the annual meeting of stockholders in June
1999. All officers, employees (including employees who are Directors),
consultants, advisers, independent contractors and agents are eligible to
receive options under the Option Plan, except that only employees will be
eligible to receive incentive stock options. No person eligible to receive
options under the Option Plan may receive options for the purchase of more than
an aggregate of 25,000 shares in any year. As of December 31, 1999, there were
397,750 options outstanding under the Option Plan. Stock options granted on
June 30, 1997 were issued at an exercise price equal to the initial public
offering price of $8.25 per share. Stock options granted after June 30, 1997
were granted at the closing stock price on the grant date as reported on the
Nasdaq Stock Market.

The Option Plan may be administered by the Board of Directors or, in its
discretion, by a committee of the Board of Directors appointed for that purpose
(the "Committee"), which, subject to the terms of the Option Plan, will have the
authority in its sole discretion to determine: (i) the individuals to whom
options shall be granted; (ii) the time or times at which options may be
exercised; (iii) the number of shares subject to each option, the option price
and the duration of each option granted; and (iv) all of the other terms and
conditions of options granted under the Option Plan, including the period during
which options may be exercised following the optionee's termination of
employment or other relationship with the Company. The exercise price of
incentive stock options granted under the Option Plan must be at least equal to
the fair value of the shares on the date of grant (110% of fair value in the
case of optionees who own more than 10% of the combined voting power of the
Company and its subsidiaries) and may not have a term in excess of 10 years from
the date of grant (five years in the case of optionees who own more than 10% of
the combined voting power of the Company and its subsidiaries). These limits do
not apply to non-qualified options. Options granted under the Option Plan will
not be transferable other than by will or the laws of descent and distribution.

The Option Plan is of indefinite duration, however, no grant of incentive
stock options will be permitted to be made under the Option Plan more than 10
years after its date of adoption. The Board of Directors will have authority to
terminate or to amend the Option Plan without the approval of the Company's
stockholders unless stockholder approval is required by law or by stock exchange
or Nasdaq Stock Market requirements applicable to the Company. The Board of
Directors or the Committee may amend the terms of any option granted under the
Option Plan. No amendment of any option or amendment or termination of the
Option Plan that impairs the rights of any holder of outstanding options may be
made without the consent of such holder.

<PAGE>
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

The Company has also adopted a Non-Employee Director Stock Option Plan (the
"Director Plan"). The Director Plan provides for the grant of non-qualified
options to purchase Common Stock to the members of the Company's Board of
Directors who are not employees. The maximum number of shares of Common Stock
which are available for issuance under the Director Plan is 50,000. The Director
Plan is administered by the Board of Directors.

The Director Plan is of indefinite duration. The Board of Directors will
have authority to terminate or to amend the Director Plan without the approval
of the Company's stockholders unless stockholder approval is required by law or
by stock exchange or Nasdaq Stock Market requirements applicable to the Company.
No such amendment may impair the rights of any holder of outstanding options
without the consent of such holder.

PROFIT SHARING PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN

On December 31, 1994, the Company's predecessor established the Jim Saxton,
Inc. Profit Sharing Plan (the "Profit Sharing Plan") for its eligible employees.
On December 29, 1995, the Company adopted the Saxton Incorporated Employee Stock
Ownership Plan (the "ESOP") and Trust (the "ESOP Trust"). In connection with the
merger of the Company and its predecessor on December 31, 1995, the Profit
Sharing Plan was merged into the ESOP and the assets of the trust established
under the Profit Sharing Plan were transferred to the ESOP Trust.

An "employee stock ownership plan" (as defined in Section 407(d)(6) of
Employee Retirement Income Security Act of 1974 and Section 4975(e)(7) of the
Internal Revenue Code) is designed to invest primarily in "qualifying employer
securities" of the Company. The account balances of participants in the Profit
Sharing Plan transferred to the ESOP Trust were invested by the ESOP Trust in
the Company's Common Stock. Thereafter, the Company may make periodic
contributions to the ESOP Trust out of its net profits in amounts determined by
the Board of Directors, which contributions may be made in cash or in shares of
the Company's Common Stock. Amounts contributed in cash will be used to purchase
shares of the Company's Common Stock. As of December 31, 1999, the ESOP Trust
held 44,142 shares of the Company's Common Stock.

Participants in the Profit Sharing Plan on December 31, 1995 were
immediately eligible to participate in the ESOP. All other employees will become
eligible to participate in the ESOP on the first day of the ESOP plan year
coinciding with or next following the date the employee completes one year of
service with the Company, although eligibility to participate in the salary
deferral feature described below may commence at an earlier date. Contributions
by the Company to the ESOP for the benefit of a participating employee will vest
over a seven-year period of participation in the ESOP and will be held in trust
until distributed pursuant to the terms of the ESOP. The Company has made no
contribution to the Plan for the years ended December 31, 1997, 1998 and 1999.

On February 16, 2000, the Board of Directors unanimously approved the
termination of the ESOP plan effective December 31, 1999. The remaining ESOP
plan shares will be distributed to the eligible participants during 2000,
pursuant to the plan's provisions.

The ESOP also includes a salary deferral feature (the "401(k) Feature")
which, if activated by the Company, will permit employees of the Company
participating in the ESOP to defer a portion of their compensation in accordance
with the provisions of Section 401(k) of the Internal Revenue Code. Matching
contributions by the Company may be made in amounts and at times determined by
the Company. Matching contributions by the Company, if any, under the 401(k)
Feature for the benefit of a participating employee will vest over a seven-year
period of participation in the ESOP and will be held in trust, together with the
participants' deferrals, until distributed pursuant to the terms of the 401(k)
Feature. The 401(k) Feature will be available to ESOP participants only for
those plan years which the Board of Directors of the Company determines that the
401(k) Feature shall apply.

<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Articles of Incorporation provide that, pursuant to Nevada
law, each Director shall not be liable for monetary damages for breach of the
Directors' fiduciary duty as a Director of the Company and its stockholders. In
addition, the Company's Bylaws provide that the Company will indemnify its
Directors and officers and may indemnify its employees and other agents to the
fullest extent permitted by law. The Company has also entered into
indemnification agreements with its officers and Directors.

<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 16, 2000
with respect to the beneficial ownership of the Company's outstanding Common
Stock by: (i) each person or group who was on such date the beneficial owner of
more than five percent of the outstanding Common Stock; (ii) each Director of
the Company; (iii) each Named Executive Officer; and (iv) all Directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY SHARES
NAME AND ADDRESS(1) OWNED(2)(3) BENEFICIALLY OWNED
- --------------------------------------------------------------- -------------- -------------------
<S> <C> <C>
James C. and Dorothy J. Saxton (4) . . . . . . . . . . . . . . 3,737,898 43.7%
Michele Saxton Pori . . . . . . . . . . . . . . . . . . . . . 531,611 6.2%
Lee-Ann Saxton (5) . . . . . . . . . . . . . . . . . . . . . 531,377 6.2%
James C. Saxton II . . . . . . . . . . . . . . . . . . . . . 530,000 6.2%
Douglas W. Hensley (5)(6) . . . . . . . . . . . . . . . . . . 69,638 *
Marc S. Hechter (6)(7) . . . . . . . . . . . . . . . . . . . 31,562 *
Jeffrey A. Pori (6) . . . . . . . . . . . . . . . . . . . . 11,608 *
Timothy J. Adams (5)(6) . . . . . . . . . . . . . . . . . . . 10,000 *
Paul Eisenberg . . . . . . . . . . . . . . . . . . . . . . 1,000 *
Bernard J. Mikell, Jr. . . . . . . . . . . . . . . . . . . . 4,000 *
Robert L. Seale . . . . . . . . . . . . . . . . . . . . . . 4,000 *
Robert R. Barengo (8) . . . . . . . . . . . . . . . . . . . . 1,000 *
Robert A. Hynote (8) . . . . . . . . . . . . . . . . . . . . - *
VOA National Housing Corporation . . . . . . . . . . . . . . 457,142 5.4%
All Directors and executive officers as a group (12 persons)(9) 4,932,317 57.7%
- ---------------------------------------------------------------
<FN>
* Less than 1%.
(1) The address of each beneficial owner of more than five percent of the
outstanding Common Stock is 5440 West Sahara Avenue, Third Floor, Las
Vegas, Nevada 89146, except for VOA National Housing Corporation whose
address is 1660 Duke Street, Alexandria, Virginia 22314.

(2) Unless otherwise noted, sole voting and dispositive power are possessed
with respect to all shares of Common Stock shown.

(3) Includes vested shares allocated to the account of the following
individuals and for all Directors and executive officers as a group under
the Company's ESOP: James C. Saxton - 5,798 shares; Michele Saxton Pori -
1,611 shares; Lee-Ann Saxton - 1,377 shares; Douglas W. Hensley - 2,941
shares, Jeffrey A. Pori - 1,496 shares; and all Directors and executive
officers as a group - 11,846 shares. ESOP participants have sole discretion
as to voting of such allocated shares.

(4) Includes 1,876,848 shares beneficially owned by James C. Saxton and
1,770,000 shares beneficially owned by Mr. Saxton's wife, Dorothy J.
Saxton, and 91,050 shares as joint tenants. Mr. and Mrs. Saxton may each be
deemed to beneficially own the shares owned by the other.

(5) Includes 4,319 shares owned by the Company's ESOP Trust which are allocated
to the accounts of three ESOP participants. The voting of such shares may
be directed by Lee-Ann Saxton, Douglas W. Hensley and Timothy J. Adams as
members of the ESOP Administrative Committee. Ms. Saxton and Messrs.
Hensley and Adams each disclaim beneficial ownership of all such shares.
The ESOP plan was terminated in February 2000, effective December 31, 1999.

(6) Represents shares which may be acquired upon exercise of options
exercisable within 60 days.

(7) Mr. Hechter resigned as an employee and as a Director, effective June 9,
2000.

(8) Mr. Barengo and Mr. Hynote resigned as Directors of the Company, effective
April 12, 2000.

(9) Includes 1,770,000 shares owned by Dorothy J. Saxton and 91,050 shares
owned by Dorothy J. Saxton and James C. Saxton as joint tenants, as to
which James C. Saxton may be deemed to beneficially own, and an aggregate
of 121,121 shares which may be acquired by Messrs. Hensley, Hechter, Pori,
Adams, Eisenberg, Mikell and Seale upon the exercise of options exercisable
within 60 days. Excludes shares owned by Lee-Ann Saxton, who is not an
executive officer or Director of the Company.
</TABLE>

<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to an agreement dated January 10, 1994, the Company agreed to
construct and sell an approximately 4,420 square-foot Turtle Stop convenience
store ("Turtle Stop") to L.'M.E.D.D., Inc., a privately-held corporation of
which Michele Saxton Pori is a 25% stockholder ("L'MEDD"), for approximately
$1.3 million, subject to the Company's arranging permanent financing on behalf
of L'MEDD. Under the terms of the agreement, either the Company or L'MEDD had
the right to terminate the agreement if permanent financing was not obtained.
Financing was not obtained, the sale was not consummated and, on June 18, 1997,
the Company terminated the agreement. Pursuant to a lease dated December 1,
1994, the Company leased the property to Operations Management Group ("OMG"), a
corporation owned by the stockholders of L'MEDD (including Ms. Pori), on a
triple-net basis. Under the terms of the lease, OMG was required to pay basic
monthly rent of $13,244 during the initial lease year, adjusted annually to
reflect increases in the cost of living. Management believes that the terms of
the lease with OMG are comparable to the terms which would have been negotiated
with an unaffiliated third-party. At December 31, 1999, OMG was indebted to the
Company in the aggregate amount of approximately $405,000, which represented
delinquent rent and advances by the Company to OMG for operating capital. The
Company assisted in the operation of Turtle Stop by maintaining the store books
and records and providing a Company employee to train on-site personnel for no
compensation. In March 1998, the Company evicted OMG from the premises after
exhaustive efforts to collect the delinquent rent and advances. The Company
wrote-off $405,000 during the second quarter of 1998 for such delinquent rent
and advances. The property is currently vacant and the collection of the
receivable is not probable and accordingly, was fully reserved. The Company
plans to sell the property. Management believes that neither the property nor
its operations are material to the Company as a whole.

During the year ended December 31, 1997 and 1998, the Company's working
capital needs were augmented through a number of loans from affiliated parties,
all of which were approved by a majority of the disinterested members of the
Company's Board of Directors. The transactions were as follows:

On July 1, 1997, the Company entered into an unsecured note payable with
James Lanzilotti, a relative of the Company's President and principal
stockholder, in the amount of $466,231, bearing interest at 12.0% payable
monthly and a maturity date of July 1, 1998, which was extended to July 1,
1999.

On August 1, 1997, the Company entered into an unsecured note payable with
Paul Eisenberg, a Director of the Company, in the amount of $1,000,000 bearing
interest at 12.0% payable monthly and a maturity date of August 1, 1998, which
was extended to August 1, 1999. This note is guaranteed by Mr. and Mrs. James
C. Saxton, two of the principal stockholders of the Company.

On August 27, 1997, the Company entered into an unsecured note payable with
James C. Saxton, the Company's President and principal stockholder, in the
amount of $721,000, bearing interest at 18.0% payable monthly and a maturity
date of November 27, 1998, which was extended to August 1, 1999.

On September 30, 1997, the Company entered into a transaction with James C.
Saxton, the Company's President and principal stockholder, in which the Company
sold to Mr. Saxton its interest in a joint venture for $755,000. The book value
of the Company's interest was $500,000 and the net gain of $255,000 is included
in "Other income" on the consolidated statements of income. The sales price
consisted of an offset to advances due to Mr. Saxton of $500,000 and a note
receivable of $255,000. The note receivable bore interest at 10.25% and matured
on September 30, 1998, at which time the receivable was used to apply to other
related party notes payable to Mr. Saxton. The receivable is considered paid in
full and related party notes payables to Mr. Saxton was reduced by a total of
$255,000. The $255,000 was applied to the following two related party notes:

On October 6, 1997, the Company entered into an unsecured note payable with
James C. Saxton, the Company's President and principal stockholder, in the
amount of $420,000, bearing interest at 18%, payable monthly and a maturity date
of November 6, 1998. The note was reduced by $166,000 from the transaction as
described above and the maturity date was extended to August 1, 1999.

On October 8, 1997, the Company entered into an unsecured note payable with
James C. Saxton, the Company's President and principal stockholder, in the
amount of $400,000, which was paid in full in September 1998 from an offsetting
transaction as described above.

During the fourth quarter of 1998, the Company's President and principal
stockholder, James C. Saxton, pledged 3,471,590 shares of Common Stock, or
approximately 44.1% of the Company's outstanding shares, at December 31, 1999 as
collateral for two personal loans to Mr. Saxton and three loans to the Company.
Mr. Saxton reloaned the proceeds from the two personal loans to the Company for
use in connection with the acquisition of Diamond Key. The two notes payable to
Mr. Saxton aggregating $7.6 million, bear interest at 12.0% per annum and
matured on February 1, 2000. The outstanding balance at December 31, 1999 was
$6.0 million. As of December 31, 1999, the loans were in default. The Company
understands that Mr. Saxton intends to repay, in full, the loans from the two
lenders upon repayment of the loans he has made to the Company. James C.
Saxton has agreed to restructure his debt by consolidating his loans, into one
new three-year loan with a principal balance equal to the existing balance plus
all accrued interest, with future interest reduced to 10.5%. No payments will
be required until November 2000 during which interest will accrued and be added
to principal. All accrued interest is required to be paid by December 31, 2000.

<PAGE>
During the second quarter of 1999, the Company's Executive Vice President,
Michele Saxton Pori, pledged 530,000 shares of Common Stock or 6.9% of its
outstanding shares at December 31, 1999, as collateral for a $1.2 million
personal loan. Ms. Pori reloaned the proceeds to the Company. The note payable
bears interest at 12.0% per annum and matured on February 3, 2000. The
outstanding balance at December 31, 1999, was $613,000. At December 31, 1999,
these loans were in default. The Company understands that Ms. Pori intends to
repay, in full, the loan from the lender upon repayment of the loan she has made
to the Company. Michele Saxton Pori has agreed to restructure her debt by
consolidating her loan into one new three year loan with a principal
balance equal to the existing balance plus all accrued interest, with
future interest reduced to 10.5%. No payments will be required until
November 2000 during which interest will accrued and be added to principal.
All accrued interest is required to be paid by December 31, 2000.

In the future, transactions with affiliates of the Company are anticipated
to be minimal. The Company will continue to require approval by a majority of
the Board of Directors, including a majority of the disinterested members of the
Board of Directors and will be made on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.

<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) Certain documents filed as part of Form 10-K.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999 . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999 . . . . . F-4

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1998 and 1999 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999 . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
Former Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
</TABLE>

(b) Reports on Form 8-K. The following reports on Form 8-K were filed during or
dated for the last quarter of fiscal year ended December 31, 1999 and for
the period between December 31, 1999 and the date hereof:

Form 8-K dated November 8, 19999 and filed on November 12, 1999 reporting
termination of Chief Financial Officer (Item 5).

Form 8-K/A dated November 8, 1999 and filed on December 20, 1999 relating
to press release with respect to agreement reached with former Chief
Financial Officer (Item 5).

Form 8-K dated and filed on March 24, 2000 relating to press release with
respect to pending fourth quarter loss issued on March 23, 2000. (Item 5).

Form 8-K dated April 12, 2000 and filed on April 24, 2000 related to
resignation of two directors, non-timely filing of Form 10-K and potential
delisting from Nasdaq. (Item 5).

Form 8-K dated April 27, 2000 and filed May 8, 2000 related to the
resignation of a director and the Chief Accounting Officer. (Item 5).

Form 8-K dated May 5, 2000 and filed May 9, 2000 related to an additional
Nasdaq delisting notification. (Item 5).

(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REF. DESCRIPTION
- ------ --- --------------------------------------------------------------------------------------
<C> <C> <S>

2.1 (1) Plan of Merger between Jim Saxton, Inc. and the Company, dated December 26,
1995, as filed with Nevada Secretary of State on December 29, 1995
2.2 (1) Reorganization documents
3.1 (1) Articles of Incorporation of the Company
3.2 (1) Articles of Merger merging Jim Saxton, Inc. into the Company, as filed with
Nevada Secretary of State on December 29, 1995
3.3 (1) Bylaws of the Company, as amended
4.1 (1) Specimen Common Stock Certificate
4.2 (1) Form of Representatives' Warrants
4.3 (1) Form of Saxton Warrants
10.1 (1) Saxton Incorporated Employee Stock Ownership Plan and Trust adopted December 29, 1995
10.1.1 (1) Amendment to Saxton Incorporated Employee Stock Ownership
Plan and Trust, adopted December 10, 1996
10.2 (1) Management Stock Option Incentive Plan
10.3 (1) Non-Employee Stock Option Plan
10.4 (1) 1994 Stock Option Agreement between the Company and Douglas W. Hensley
10.5 (1) Employment Agreement between the Company and James C. Saxton, dated March 10, 1997
10.6 (1) Form of Indemnification Agreement between the Company and each Director
and officer of the Company
10.7 (1) Tax Indemnification Agreement between the Company and each of James C.
Saxton, Dorothy J. Saxton, Michele Saxton Pori, Lee-Ann Saxton and James C. Saxton II
10.8 (1) Indemnification Agreement regarding liability on Company loans between
the Company and James C. Saxton and Dorothy J. Saxton
10.9 (1) Revolving line of Credit Facility between the Company and Key Bank
10.10 (2) Line of credit agreement between the Company and Key Bank dated January 9, 1998
10.11 (3) Agreement and Plan of Merger dated as of March 20, 1998 by and among
Saxton Incorporated, MIKA Max, Inc., Brian K. Brady and Maxim Homes, Inc.
10.12 (3) Employment Agreement dated as of March 20, 1998 between Maxim Homes, Inc.
and Brian K. Brady
10.13 (4) Stock and Membership Interest Purchase Agreement dated as of October 7, 1998 by
and among Saxton Incorporated, Diamond Key Homes, Inc., Diamond Key
Construction LLC, Larison P. Clark and Lisa B. Clark
10.14 (5) Amendment to Purchase Agreement dated as of October 7, 1998
10.15 (6) Letter to SEC from KPMG LLP dated December 16, 1998
10.16 (7) Promissory Note dated October 14, 1998 between the Company and James C. Saxton
10.17 (7) Promissory Note dated November 5, 1998 between the Company and James C. Saxton
10.18 (7) Employment Agreement dated as of November 13, 1998 between Diamond
Key Homes, Inc. and Larison P. Clark
10.19 (8) Amendment to Employment Agreement dated December 6, 1999 between
Diamond Key Homes, Inc. and Larison P. Clark.
10.20 (8) Purchase Agreement dated January 12, 2000, between VOA National
Housing Corporation and Saxton Incorporated
21.1 (8) List of subsidiaries of the Company
23.1 (8) Former Independent Auditors' Consent on Form S-8
23.2 (8) Independent Auditors' Consent on Form S-8
27 (8) Financial Data Schedule
99 (2) Independent Auditors' Report - KPMG LLP dated March 24, 1998
<FN>
(1) Filed as part of the Company's Registration Statement on Form S-1 (file No. 333-23927)
originally filed on June 24, 1997 and incorporated herein by reference.
(2) Filed as part of Form 10-K for the fiscal year ended December 31, 1997 and incorporated
herein by reference.
(3) Filed as part of Form 8-K dated March 20, 1998, filed on April 6, 1998 and incorporated
herein by reference.
(4) Filed as part of Form 8-K dated October 8, 1998, filed on October 28, 1998 and incorporated
herein by reference.
(5) Filed as part of Form 8-K dated and filed on November 20, 1998 and incorporated herein by
reference.
(6) Filed as part of Form 8-K dated December 9, 1998, filed on December 16, 1998 and
incorporated herein by reference.
(7) Filed as part of Form 10-K for the fiscal year ended December 31, 1998 and incorporated
herein by reference.
(8) Filed herewith.
</TABLE>

(d) Financial Statement schedules required by Regulation S-X.

No financial statement schedules are included because of the absence of the
conditions under which they are required or because the information is included
in the financial statements or the notes hereto.

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, there unto duly authorized as of May
16, 2000.

SAXTON INCORPORATED
----------------------------------
(Registrant)

By: /s/ James C. Saxton
James C. Saxton,
Chairman of the Board of Directors,
President,
Chief Executive Officer,
Interim Chief Financial Officer
and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- ------------------------------------------ ------------
<S> <C> <C>
/s/ James C. Saxton Chairman of the Board of May 16, 2000
- -------------------------
James C. Saxton Directors, President, Chief Executive
Officer, Interim Chief Financial Officer
and Director (Principal Executive Officer)

/s/ Douglas W. Hensley Executive Vice President, Development May 16, 2000
- -------------------------
Douglas W. Hensley Corporate Services and Director

/s/ Marc S. Hechter Senior Vice President of Business May 16, 2000
- -------------------------
Marc S. Hechter Affairs and Director

/s/ Kathryn Wonders General Counsel May 16, 2000
- -------------------------
Kathryn Wonders

/s/ Michele Saxton Pori Executive Vice President and May 16, 2000
- -------------------------
Michele Saxton Pori Director

/s/ Melody J. Sullivan Vice President, Chief Accounting Officer May 16, 2000
- -------------------------
Melody J. Sullivan (Principal Accounting Officer)

/s/ Paul Eisenberg Director May 16, 2000
- -------------------------
Paul Eisenberg

/s/Bernard J. Mikell, Jr. Director May 16, 2000
- -------------------------
Bernard J. Mikell, Jr.

/s/ Robert L. Seale Director May 16, 2000
- -------------------------
Robert L. Seale

/s/ Timothy J. Adams Director May 16, 2000
- -------------------------
Timothy J. Adams
</TABLE>

<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999 . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the years ended December 31, 1997, 1998
and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997,
1998 and 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-8
Former Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . . . . F-32
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of
Saxton Incorporated
Las Vegas, Nevada

We have audited the accompanying consolidated balance sheets of Saxton
Incorporated and subsidiaries (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of operations, 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 consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of its operations and its cash flows for years
then ended, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has experienced a
slowdown of construction in the fourth quarter of 1999 and a halt of
construction in Nevada and Utah in the first quarter of 2000, primarily due to a
shortage of available cash flow. The Company presently is unable to pay
interest or principal amounts outstanding on notes payable and all notes payable
were in default at December 31, 1999. The Company's difficulties in generating
sufficient cash flow and making required principal and interest payments
discussed in Note 1 raise substantial doubt about its ability to continue as a
going concern. Management's plan in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Deloitte & Touche LLP

Las Vegas, Nevada
May 12, 2000

F-2
<PAGE>
SAXTON INCORPORATED
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
------------- ----------
ASSETS
<S> <C> <C>
Real estate properties (all held for sale at December 31, 1999):
Operating properties, net of accumulated depreciation. . . . . . . . . . $ 23,117 $ 28,215
Properties under development . . . . . . . . . . . . . . . . . . . . . . 79,418 89,974
Land held for future development or sale . . . . . . . . . . . . . . . . 1,349 13,436
------------- -----------
Total real estate properties . . . . . . . . . . . . . . . . . . 103,884 131,625
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . 1,331 6,268
Due from Tax Credit Partnerships (held for sale at December 31, 1999). . . 31,997 12,587
Construction contracts receivable, net of allowance for doubtful accounts
of $403 and $100 at December 31, 1998 and 1999, respectively. . . . . . 8,773 2,451
Costs and estimated earnings in excess of billings on uncompleted
contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,618 760
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 936
Investments in joint ventures (held for sale at December 31, 1999) . . . . 3,577 3,249
Due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . 154 26
Goodwill, net of accumulated amortization of $151 and $734 at
December 31, 1998 and 1999, respectively. . . . . . . . . . . . . . . . . 7,877 7,251
Deferred tax asset, net. . . . . . . . . . . . . . . . . . . . . . . . . . 74 1,604
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . 9,710 6,271
------------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 170,995 $ 173,028
============= ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . . $ 24,892 $ 27,576
Tenant deposits and other liabilities. . . . . . . . . . . . . . . . . . . 6,295 7,357
Billings in excess of costs and estimated earnings on uncompleted
contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 220
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,306 117,763
Notes payable to related parties . . . . . . . . . . . . . . . . . . . . . 12,016 10,103
Capital lease obligations. . . . . . . . . . . . . . . . . . . . . . . . . 1,118 1,041
------------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 132,808 164,060
------------- -----------

Commitments and contingencies (notes 11, 12, 13, and 21)

Stockholders' equity:
Common stock, $.001 par value, authorized 50,000,000 shares,
issued and outstanding 7,732,922 shares at December 31, 1998 and
7,879,313 at shares at December 31, 1999. . . . . . . . . . . . . . . . . 8 8
Preferred stock, $.001 par value, authorized 5,000,000 shares;
no shares issued and outstanding. . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 21,482 22,482
Retained earnings (deficit). . . . . . . . . . . . . . . . . . . . . . . 16,697 ( 13,522)
------------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 38,187 8,968
------------- -----------

Total liabilities and stockholders' equity . . . . . . . . . . . $ 170,995 $ 173,028
============= ===========
</TABLE>

See accompanying notes to consolidated financial statements.
F-3

<PAGE>
SAXTON INCORPORATED
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
Revenue:
Construction revenue, including Tax Credit
Partnership ("TCP") construction revenue of $21,526,
34,345 and $15,756 for the years ended 1997,
<S> <C> <C> <C>
1998 and 1999, respectively. . . . . . . . . . . . . . . $ 31,707 $ 51,524 $ 16,621
Sales of homes . . . . . . . . . . . . . . . . . . . . . . 11,058 27,634 102,713
Sales of commercial properties . . . . . . . . . . . . . . 11,540 7,823 4,901
Rental revenue . . . . . . . . . . . . . . . . . . . . . . 3,583 3,515 3,532
Other revenue. . . . . . . . . . . . . . . . . . . . . . . 1,508 1,676 2,365
----------- ----------- -----------
Total revenue. . . . . . . . . . . . . . . . . . . . . 59,396 92,172 130,132
----------- ----------- -----------

Cost of revenue:
Cost of construction, including TCP cost of construction
of $17,315, $25,782, and $13,230 for the years ended
1997, 1998 and 1999, respectively. . . . . . . . . . . . 26,981 40,863 18,986
Write down of TCP's to fair value. . . . . . . . . . . . . - - 25,305
Cost of homes sold . . . . . . . . . . . . . . . . . . . . 10,139 23,754 93,014
Cost of commercial properties sold . . . . . . . . . . . . 7,127 7,710 6,917
Rental operating cost. . . . . . . . . . . . . . . . . . . 724 815 1,040
----------- ----------- -----------
Total cost of revenue. . . . . . . . . . . . . . . . . 44,971 73,142 145,262
----------- ----------- -----------

Gross profit (loss) 14,425 19,030 ( 15,130)
----------- ----------- -----------
General and administrative expenses. . . . . . . . . . . . 2,746 5,042 10,721
Depreciation and amortization. . . . . . . . . . . . . . . 1,393 1,687 2,362
----------- ----------- -----------
Operating income (loss) 10,286 12,301 ( 28,213)
----------- ----------- -----------

Other income (expense):
Interest expense, net of interest income of $985, $1,105
and $843 for the years ended December 31, 1997,
1998 and 1999 respectively ( 2,101) ( 1,232) ( 4,487)
Joint venture earnings (loss) 16 ( 25) (37)
----------- ----------- -----------
Total other expense ( 2,085) ( 1,257) (4,524)
----------- ----------- -----------
Income (loss) before provision (benefit) for
Income taxes 8,201 11,044 ( 32,737)
Provision (benefit) for income taxes 2,350 3,313 (2,518)
----------- ----------- -----------
Net income (loss) $ 5,851 $ 7,731 $( 30,219)
=========== =========== ===========

Earnings (Loss) Per Common Share:

Basic
- -----------------------------------------------------------

Net income (loss) $ 0.92 $ 1.01 $ ( 3.90)
=========== =========== ===========
Weighted-average number of common shares outstanding. . . . 6,341,879 7,656,189 7,751,772
=========== =========== ===========

Diluted
- -----------------------------------------------------------
Net income (loss) $ 0.92 $ 1.01 $ ( 3.90)
=========== =========== ===========
Weighted-average number of common shares
outstanding assuming dilution. . . . . . . . . . . . . . . 6,363,219 7,674,119 7,751,772
- ----------------------------------------------------------- =========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.
F-4

<PAGE>
SAXTON INCORPORATED
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1998 and 1999
(in thousands)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
SHARES COMMON PAID-IN EARNINGS PARTNERS'
OUTSTANDING STOCK CAPITAL (DEFICIT) CAPITAL TOTAL
----------- ------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 . . . . 4,950 $ 5 $ 1,014 $ 5,100 $ 172 $ 6,291
Stock issued to Employee Stock
Ownership Plan. . . . . . . . . . 10 - 7 ( 7) - -
Contributions. . . . . . . . . . . - - - - 819 819
Distributions. . . . . . . . . . . - - - - ( 2,321) ( 2,321)
Purchase of partnership interests. - - - - ( 648) ( 648)
Issuance of common stock
in connection with initial
public offering . . . . . . . . . 2,275 3 17,320 - - 17,323
Costs charged against the proceeds
of the initial public offering. . - - ( 2,321) - - ( 2,321)
Issuance of 400,000 common
stock warrants. . . . . . . . . . - - 1,000 - - 1,000
Issuance of common stock for
retirement of debt. . . . . . . . 384 - 3,650 - - 3,650
Net income . . . . . . . . . . . . - - - 3,873 1,978 5,851
----------- ------- ------------ ---------- ----------- ----------
Balance at December 31, 1997.. . . 7,619 8 20,670 8,966 - 29,644
Stock issued in connection
with acquisition of Maxim
Homes, Inc. . . . . . . . . . . . 42 - 338 - - 338
Stock issued in connection
with acquisition of Diamond Key
Homes, Inc. . . . . . . . . . . . 72 - 474 - - 474
Net income . . . . . . . . . . . . - - - 7,731 - 7,731
----------- ------- ------------ ---------- ----------- ----------
Balance at December 31, 1998 . . . 7,733 8 21,482 16,697 - 38,187
Stock issued in connection with
acquisition of Diamond Key
Homes, Inc. . . . . . . . . . . . 146 - 1,000 - - 1,000
Net loss . . . . . . . . . . . . . - - - (30,219) - (30,219)
----------- ------- ------------ ---------- ----------- ----------
Balance at December 31, 1999 . . . 7,879 $ 8 $ 22,482 $ (13,522) $ - $ 8,968
=========== ======= ============ ========== =========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
SAXTON INCORPORATED
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
- -----------------------------------------------------------------
Net income (loss) $ 5,851 $ 7,731 $( 30,219)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . 1,393 1,687 2,362
Write down of TCP's. . . . . . . . . . . . . . . . . . . . . . - - 25,305
Gain on sales of commercial properties ( 4,413) ( 475) ( 906)
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . 8 442 1,269
Joint venture (earnings) losses. ( 16) 25 37
Changes in operating assets and liabilities:
Decrease (increase) in Due from Tax Credit
Partnerships (held for sale at December 31, 1999) ( 1,182) ( 14,600) ( 4,066)
Decrease (increase) in Construction contracts receivable ( 2,078) ( 6,165) 6,308
Decrease (increase) in Costs and estimated earnings
in excess of billings on uncompleted contracts . . . . . . ( 1,597) 1,497 1,858
Increase in real estate properties (held for sale at
December 31, 1999) . . . . . . . . . . . . . . . . . . . . ( 11,094) ( 46,338) ( 32,153)
Increase in Goodwill - ( 7,877) -
Decrease (increase) in Deferred tax asset, net 60 20 ( 1,530)
Decrease (increase) in Prepaid expenses and other assets ( 3,473) 10,158 2,543
Increase in Accounts payable and accrued expenses. . . . . . 831 13,516 (2,912)
Increase (decrease) in Billings in excess of costs and
estimated earnings on uncompleted contracts. . . . . . . . 1,373 ( 1,610) 39
Increase in Tenant deposits and other liabilities. . . . . . 1,867 6,115 1,062
----------- ----------- -------------
Net cash used in operating activities. . . . . . . . . . . (12,470) (35,874) ( 31,003)
----------- ----------- -------------
Cash flows from investing activities:
- -----------------------------------------------------------------
Expenditures for property acquisitions and improvements ( 7,002) (14,168) ( 358)
Proceeds from Sales of commercial properties . . . . . . . . . . 9,360 4,983 4,901
Increase in Notes receivable from related parties ( 574) ( 102) 46
Payments on Due from related parties . . . . . . . . . . . . . . 71 56 65
Increase in Notes receivable ( 1,673) ( 792) ( 1,272)
Payments from Notes receivable . . . . . . . . . . . . . . . . . 1,108 2,672 4
Distribution from and (capital contributions to) joint ventures ( 2,254) - ( 1,110)
Cash paid to acquire net assets of Maxim Homes, Inc. and
Diamond Key Homes, Inc.. . . . . . . . . . . . . . . . . . . . - (11,669) -
----------- ----------- -------------
Net cash (used in) provided by investing activities. . . . (964) (19,020) 2,276
----------- ----------- -------------
Cash flows from financing activities:
- -----------------------------------------------------------------
Proceeds from issuance of Notes payable. . . . . . . . . . . . . 43,148 99,933 124,616
Principal payments on Notes payable and capital
lease obligations (40,760) ( 52,394) ( 95,236)
Proceeds from Notes payable to related parties 3,006 8,478 1,819
Payments on Notes payable to related parties ( 2,757) ( 902) ( 2,732)
Increase in outstanding checks in excess of deposits . . . . . . - - 5,197
Payments to purchase partnership interests ( 2,804) - -
Payments on subordinated dividend notes ( 2,700) - -
Capital contributions from partners . . . . . . . . . . . . . . 819 - -
Net proceeds from the issuance of common stock . . . . . . . . 17,323 - -
Distributions paid to partners (2,321) - -
----------- ----------- -------------
Net cash provided by financing activities. . . . . . . . . 12,954 55,115 33,664
----------- ----------- -------------
Net (decrease) increase in cash and cash equivalents . . . ( 480) 221 4,937
Cash and cash equivalents:
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 1,590 1,110 1,331
----------- ----------- -------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,110 $ 1,331 $ 6,268
=========== =========== =============
</TABLE>

See accompanying notes to consolidated financial statements.
SAXTON INCORPORATED
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(in thousands)

YEARS ENDED DECEMBER 31,
------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
- -------------------------------------------------------------
Cash paid during the year for interest, net of
amounts capitalized. . . . . . . . . . . . . . . . . . . . $3,192 $4,024 $1,735
====== ====== ======
Cash paid during the year for income taxes . . . . . . . . . $1,395 $4,947 $1,600
====== ====== ======

Non-cash financing and investing activities:
- -------------------------------------------------------------
Properties sold in exchange for notes receivable . . . . . . $2,180 $ - $ -
====== ====== ======
Capital lease obligations recorded in connection with
equipment acquisitions . . . . . . . . . . . . . . . . . . $ 179 $ 120 $ 144
====== ====== ======
Common stock issued to retire subordinated dividend
notes. . . . . . . . . . . . . . . . . . . . . . . . . . . $3,650 $ - $ -
====== ====== ======
Warrants for common stock issued to reduce
subordinated dividend note obligations . . . . . . . . . . $1,000 $ - $ -
====== ====== ======
Amounts due from related parties offset against
subordinated dividend notes in satisfaction of the
respective obligations . . . . . . . . . . . . . . . . . . $ 727 $ - $ -
====== ====== ======
Common stock issued to acquire net assets of
Maxim Homes, Inc.. . . . . . . . . . . . . . . . . . . . . $ - $ 338 $ -
====== ====== ======
Recognition of revenue for the prior sale of a commercial
property which was subject to certain conditions . . . . . $ - $2,834 $ -
====== ====== ======
Amounts due from related parties applied to notes payable to
related parties. . . . . . . . . . . . . . . . . . . . . . $ - $ 255 $ -
====== ====== ======
Common stock issued to acquire net assets of
Diamond Key Homes, Inc. . . . . . . . . . . . . . . . . $ - $ 474 $1,000
====== ====== ======

</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
SAXTON INCORPORATED
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998 AND 1999

(1) ORGANIZATION

The accompanying consolidated financial statements present the financial
position and results of operations and cash flow of the Company, including the
accounts of Saxton Incorporated, formerly Jim Saxton, Inc. ("JSI"), seven
general partnerships, three limited partnerships and nine wholly-owned
corporations, Big Tyme Food Marts, Inc. ("Big Tyme"), Nevada Housing
Opportunities Manager, LLC, RealNet Commercial Brokerage Inc., Chancellor
Capital, Tonopah Manager, Inc., Levitz Plaza Manager, Inc., Maxim Homes, Inc.
("Maxim"), HomeBanc Mortgage Corporation, Diamond Key Homes Inc., Diamond Key
Construction, LLC ("Diamond Key") and all the partnerships included in the
combination (predecessor partnerships) which are, or were before the initial
public offering (as defined below) under the common management of Saxton
Incorporated or executive officers of Saxton Incorporated. Such consolidated
group is collectively referred to as "Saxton Incorporated and Subsidiaries"
("Saxton" or the "Company"). After the Company's initial public offering in June
1997, the Company owned 100% of the economic interests in the partnerships.
Therefore, the partnerships were dissolved by operation of law and all assets,
subject to all liabilities, of such partnerships were transferred to the
Company. All significant intercompany balances and transactions have been
eliminated in consolidation.

Basis of Accounting

The accompanying consolidated financial statements have been prepared on a
going concern basis. The Company has experienced a slowdown of construction in
the fourth quarter of 1999 and a halt of construction in Nevada and Utah in the
first quarter of 2000 primarily, due to a shortage of available cash flow. The
Company presently is unable to pay interest or principal amounts outstanding on
notes payable and all notes payable were in default at December 31, 1999. The
Company is currently negotiating with lenders to for bear receiving principal
and interest or otherwise restructure the terms thereof. In the event the
Company is unable to successfully renegotiate an appropriate period of
forbearance or other satisfactory restructuring of the outstanding notes
payable, the lenders thereunder have the right to accelerate the loan and
exercise their remedies under the note agreements, including foreclosure of
their security interest in the Company's assets. The aforementioned facts
and circumstances have raised substantial doubt that the Company will be able to
continue as a going concern and, therefore, may be unable to realize its assets
and discharge its liabilities in the normal course of business.

The inadequate cash flow problem was due to several factors, including: the
purchase of Diamond Key Homes in November 1998 for approximately $12.9 million,
$10.9 million in cash, a portion of which was borrowed funds; purchases of land
in Utah in the first and third quarters of 1999 for $4.5 million, which the
Company purchased using a combination of high interest rate, short term debt and
funds intended for working capital and other purposes, and for which the Company
was unable to obtain permanent replacement financing on satisfactory terms;
over-expansion; and the Company's failure to adequately monitor and manage its
cash flow.

In the first quarter of 2000, the Company hired outside consultants and
legal expertise to assist in formulating and negotiating a workout business plan
(the "Workout Plan"). The key elements of the Workout Plan are: to establish
adequate cash management controls and to accelerate the retirement of debt,
especially higher interest rate debt, by raising additional capital from sources
other than the sale of homes, such as the sale of land held for development and
for sale and operating properties, and to negotiate forbearance agreements with
the lenders. The Company believes that the proposed Workout Plan will help the
Company focus on operations, including improved cash management and monitoring
of cash flows and completion of construction and sales of existing projects. See
Note 24 for subsequent events.

Although the Company believes that the Workout Plan will allow the Company
to avoid filing, or being forced into, bankruptcy, there can be no assurances
that the Workout Plan will be approved by the Company's creditors and
subcontractors or, that if approved, the Company will be able to successfully
take the steps necessary under the Workout Plan to avoid filing, or being forced
into, bankruptcy. The accompanying financial statements do not include any
adjustments related to the recoverability and classification of recorded assets
or its classifications of recorded liabilities that might be necessary should
the Company be unable to continue as a going concern.

Initial Public Offering

On June 24, 1997, the Company completed its initial public offering (the
"Offering") of 2,275,000 shares of Common Stock at $8.25 per share. The net
proceeds of approximately $17.3 million were used as follows: (i) $8.1 million
to repay indebtedness, of which $3.4 million represented indebtedness to the
Company's principal stockholders and $1.7 million represented indebtedness to
other related parties, (ii) $5.6 million to acquire land for future development,
(iii) $2.8 million to acquire the interests of various third-party partners in
certain properties and (iv) approximately $800,000 for development activities
and general corporate purposes. Deferred offering costs in connection with the
Offering were charged to Stockholders' Equity.

<PAGE>
Concurrently with the closing of the Offering, certain stockholders of the
Company (the "Contributing Stockholders") contributed their partnership
interests in certain properties to the Company. In addition, certain
obligations to the Contributing Stockholders represented by subordinated
dividend notes (the "Notes") were satisfied as follows: (i) approximately
$700,000 of outstanding amounts due to the Company by the principal stockholders
were offset against the Notes, (ii) $3.7 million was repaid through the issuance
by the Company of 384,256 shares of Common Stock and (iii) $1.0 million was
repaid through the issuance by the Company of warrants for 400,000 shares of
Common Stock which lapsed unexercised.

Concurrently with the sale of these shares in the Offering, the Company
consummated a 1 for 0.51312 reverse stock split and effected a plan of
reorganization. All share and per share data included in the accompanying
consolidated financial statements give effect to the reverse stock split.

The Company is engaged in the acquisition, design, development,
construction, ownership and operation of real property located in the fast
growing markets of Las Vegas, Phoenix, Salt Lake City, Reno and Tucson. The
properties consist of industrial buildings, retail centers, apartments,
single-family homes and land in various phases of development. The Company also
has non-controlling interests in joint ventures that are engaged in the
acquisition, development, ownership and operation of real property.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of the Company have been
prepared in conformity with accounting principles generally accepted in the
United States of America ("GAAP"). All significant intercompany accounts and
transactions have been eliminated in consolidation.

Real Estate Properties

Real estate operating properties are stated at cost less accumulated
depreciation. Costs incurred for acquisition and betterment of the property are
capitalized. Repair and maintenance costs are expensed as incurred. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. In the fourth quarter of 1999, the Company, due to liquidity
requirements, has determined that all properties are available for sale and has
classified them as held for sale at December 31, 1999. Accordingly, all
properties have been written down to the lower of cost or fair value, less
selling expenses.

The Company capitalizes interest costs and real estate taxes in connection
with properties that are under development. Capitalization of interest costs and
real estate taxes is discontinued when a project is substantially complete and
ready for its intended use. The Company incurred interest costs of approximately
$4,245,000, $7,196,000 and $12,986,000 for the years ended December 31, 1997,
1998 and 1999, respectively, of which the Company capitalized approximately
$1,159,000, $4,859,000 and $7,656,000 for the years ended December 31, 1997,
1998 and 1999, respectively.

Impairment of Long-Lived Assets

The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of, ("SFAS 121") on January 1, 1996.
SFAS 121 requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. In addition, long lived assets to be disposed of are
to be recorded at the lower of cost or fair value, less selling expenses. See
notes 6 and 9 for write down of TCP receivables and investment in joint
ventures.

<PAGE>
Depreciation and Amortization

For financial reporting purposes, the Company depreciates its buildings,
tenant improvements and furniture and equipment over their estimated useful
lives (buildings 31.5 to 40 years, tenant improvements over the term of the
related lease, and furniture and equipment 5 to 7 years) using the straight-line
method. Leasing costs are capitalized and amortized on a straight-line basis
over the term of the lease. Loan fees are deferred and amortized on a
straight-line basis (which approximates the effective interest method) over the
term of the loan. Capitalized leasing costs and loan fees are included in
prepaid expenses and other assets in the accompanying Consolidated Balance
Sheets.

Rental Revenue Recognition

Rental revenue is recognized on a straight-line basis over the terms of the
respective leases.

Construction Revenue and Cost Recognition

Revenue on fixed-price construction contracts is recognized on the
percentage-of-completion method of accounting based on the proportion of actual
contract costs incurred to total estimated contract costs. Revisions to contract
revenues and cost estimates are reflected in the accounting period in which they
become known. Provisions for estimated losses on uncompleted contracts are made
in the accounting period in which the events that give rise to such losses are
determined. Changes in job performance, job conditions and estimated
profitability, including those arising from contract penalty provisions and
final contract settlements, may result in revisions to costs and revenue and are
recognized in the period in which such revisions are determined.

Sale of Properties

Profit is generally recognized on sales of properties at the time escrow is
closed provided that (i) there has been a minimum down payment, ranging from a
minimum of 1% for home sales and 10% to 25% on commercial properties sold, (ii)
the buyer has met adequate continuing investment criteria and (iii) the Company,
as the seller, has no continuing involvement in the property. The Company's home
sales are generally subject to a one-year warranty. Where the Company has an
obligation to complete certain future development, or has other continuing
obligations, profit is deferred in the ratio of the cost of development to be
completed to the total cost of the property being sold under
percentage-of-completion accounting.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 periods. Actual results could differ materially
from those estimates.

Applying the percentage-of-completion method of recognizing revenue
requires the Company to estimate the outcome of its long-term contracts. The
Company forecasts such outcomes to the best of its knowledge and belief of
current and expected conditions and its expected course of action. Differences
between the Company's estimates and actual results often occur resulting in
changes to reported revenue and earnings. Such changes could have a material
effect on future financial statements.

Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities, at the date of purchase, of three months or less to be cash
equivalents. Included in accounts payable and accrued expenses on the Company's
Consolidated Balance Sheet at December 31, 1999 is $5.2 million of outstanding
checks in excess of deposits.

Investments in Joint Ventures (held for sale at December 31, 1999)

The equity method of accounting is used for investments in entities in
which the Company has the ability to exercise significant influence over
operating and financial policies. Under the equity method of accounting, the
Company recognizes its share of the net earnings or losses of these entities as
earned or incurred, increases the carrying value of its investment by the amount
of contributions made and reduces the carrying value of its investment by the
amount of all distributions received at December 31, 1999. The investments have
been recorded at the lower of cost or fair value, less selling expenses, as they
are held for sale at December 31, 1999.

<PAGE>
Income Taxes

The Company accounts for its income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes, ("SFAS 109") which requires recognition of deferred
tax assets and liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. 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.

Per Share Data

Prior to the Offering, per share data was not relevant and therefore is not
presented because the Company's financial statement presentation was of the
combined operations of various partnerships and corporations. In connection with
Offering, the Company now owns 100% of the economic interest of these
partnerships.

SFAS No. 128, Earnings per Share, ("SFAS 128") was issued by the Financial
Accounting Standards Board (the "FASB") in February 1997, effective for
financial statements issued after December 15, 1997. SFAS 128 provides
simplified standards for the computation and presentation of earnings per share
("EPS"), making EPS comparable to international standards. SFAS 128 requires
dual presentation of "Basic" and "Diluted" EPS, by entities with complex capital
structures, replacing "Primary" and "Fully-diluted" EPS under Accounting
Principles Board ("APB") Opinion No. 15.

Basic EPS excludes dilution from Common Stock equivalents and is computed by
dividing net income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
impact of potentially dilutive securities outstanding during the period, similar
to fully-diluted EPS, net of shares assumed to be repurchased using the treasury
stock method.

The following table reconciles the net income (loss) applicable to common
stockholders, Basic and Diluted shares and EPS for 1998 and 1999:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------
<S> <C> <C> <C>
PER-SHARE
INCOME SHARES AMOUNT
--------------- --------- --------
(in thousands)
BASIC EPS
Net income applicable to common stockholders. $ 5,851 6,341,879 $ 0.92
========
Effect of dilutive securities:
Stock options. . . . . . . . . . . . . . . - 21,340
--------------- ---------
DILUTED EPS
Net income applicable to common stockholders
and assumed conversions . . . . . . . . . $ 5,851 6,363,219 $ 0.92
=============== ========= ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------
<S> <C> <C> <C>
PER-SHARE
INCOME SHARES AMOUNT
--------------- --------- --------
(in thousands)
BASIC EPS
Net income applicable to common stockholders. $ 7,731 7,656,189 $ 1.01
========
Effect of dilutive securities:
Stock options. . . . . . . . . . . . . . . - 17,930
--------------- ---------
DILUTED EPS
Net income applicable to common stockholders
and assumed conversions . . . . . . . . . $ 7,731 7,674,119 $ 1.01
=============== ========= ========

YEAR ENDED DECEMBER 31, 1999
------------------------------------
PER-SHARE
LOSS SHARES AMOUNT
------------------------------------
(in thousands)
BASIC EPS
Net loss applicable to common stockholders. . $ (30,219) 7,751,772 $ (3.90)
========
Effect of dilutive securities:
Stock options. . . . . . . . . . . . . . . - -
--------------- ---------
DILUTED EPS
Net loss applicable to common stockholders
and assumed conversions . . . . . . . . . $ (30,219) 7,751,772 $ (3.90)
=============== ========= ========
</TABLE>

The Company had options and warrants outstanding to purchase Common Stock
that were excluded from the computation of diluted EPS since their exercise
price was greater than the average market price. The antidilutive options and
warrants outstanding for December 31, 1998 and 1999 were 115,650 and 693,165,
respectively.

<PAGE>
Stock Options

The Company adopted SFAS No. 123, Accounting for Stock-Based Compensation,
("SFAS 123") which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS 123 also allows entities to continue to apply the provisions
of APB Opinion No. 25 and provide pro forma net income and pro forma earnings
per share disclosures for employee stock option grants made in 1995 and future
years as if the fair-value-based method defined in SFAS 123 had been applied.
The Company has elected to continue to apply the provisions of APB Opinion No.
25 and provide the disclosure provisions of SFAS 123. See Note 16.

On March 13, 2000, pursuant to a purchase/settlement agreement with
Volunteers of America (VOA) National Housing Corp. which was approved by the
Company's Board of Directors in the fourth quarter of 1999, the Company issued
457,142 shares of Saxton Common Stock to acquire certain of VOA's interest in
Tax Credit Partnerships. The purchase/settlement agreement required the Company
to deliver to VOA, $1,000,000 worth of stock (457,142 shares at $2.25 per share,
the market price on March 12, 2000). These shares represent approximately 5.8%
of the Company's Common Stock issued and outstanding on March 12, 2000. The
Company also agreed to pay $325,000 in cash to VOA, of which $125,000 was paid
in the first quarter of 2000, with the remainder to be paid in annual
installments over the next two years. The $1,325,000 has been recorded as
Investment in Joint Ventures held for sale at December 31, 1999 and was included
in the market valuation of all TCP properties.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133").
SFAS 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS 133 requires recognition of all
derivative instruments in the statement of financial position as either assets
or liabilities and the measurement of derivative instruments at fair value.
SFAS 133, as amended, is effective for all quarters in fiscal years beginning
after June 15, 2000. The adoption of SFAS 133 is not expected to have a
material impact on the consolidated financial statements of the Company.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the
current period's presentation.

(3) ACQUISITIONS

On March 20, 1998, the Company acquired all of the capital stock of Maxim,
a Utah homebuilder. The acquisition was accounted for using the purchase method
of accounting. Maxim operates principally as a single-family residential
homebuilder, specializing in building homes generally ranging in price from
$145,000 to $185,000. The consideration, totaling $1,131,000, paid at closing
for this acquisition consisted of: (i) $224,000 in cash; (ii) approximately
$338,000 in the Company's Common Stock (42,280 shares at valued $8.00 per
share); and (iii) $569,000 in cash to retire a portion of Maxim's debt. In
addition, the Company may make five annual installments ("earn-out payments")
on March 31 of each year beginning in 1999, subject to certain levels of
required income. These earn-out payments are based on a specified percentage of
estimated after-tax net income of the Salt Lake City real estate operations of
the Company and are to be made 50% in the Company's Common Stock and 50% in
cash. No earn-out payments were required to be paid and no earn-out payments
were made during 1999.

On November 13, 1998, the Company acquired the outstanding capital stock
and ownership interests of Diamond Key and certain related entities for
approximately $12.9 million. The purchase was accounted for using the purchase
method of accounting and the price was approximately $10,876,000 paid in cash at
closing, approximately $250,000 which was paid in 1999, with an additional
amount of $2,000,000 to be paid 50% in cash and 50% in the Company's Common
Stock one year from the date of closing. On November 15, 1999, one year from
the date of closing and pursuant to the purchase agreement, the Company issued
146,391 shares of the Company's Common Stock to fulfill the stock payment
obligation. Of the $1.0 million to be paid in cash, $300,000 has been paid
through December 31, 1999 and the remainder has been recorded as a note payable
for $700,000, which was due on May 3, 2000 at an interest rate of 18.0% per
annum, which has not yet been paid.

<PAGE>
On December 22, 1998, the Company acquired the outstanding capital stock of
HomeBanc Mortgage Corporation ("HomeBanc"). The purchase was accounted for using
the purchase method of accounting and the price was $474,000 paid in the form of
71,500 shares of Saxton Common Stock at closing.

Goodwill related to the acquisitions of Maxim, Diamond Key and HomeBanc,
totalling approximately $8.0 million is amortized over 15 years. The
operations of these three acquisitions were included in the Company's
Consolidated Statements of Operations since their acquisition dates.

Revenues as a percentage of total revenues generated by geographic location
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Nevada. . . . . . 100.0% 82.4% 42.9%
Utah. . . . . . . - 9.4 8.0
Arizona . . . . . - 8.2 49.1
-------- -------- --------
Total . . . . . 100.0% 100.0% 100.0%
======== ======== ========
- -----------------
</TABLE>

The following represents summary unaudited pro forma information as if the
Diamond Key acquisition ("Acquisition") had occurred as of January 1, 1997. The
summary unaudited pro forma information below combines the actual results of the
Company and the results of Diamond Key before the Acquisition and reflects
increased amortization and goodwill, increased interest expense and certain
income tax adjustments related to the Acquisition that would have been incurred
had the Acquisition occurred on such date. The unaudited summary pro forma
information is not necessarily indicative of the results of operations of the
Company had the Acquisition occurred on such date, nor is it necessarily
indicative of future results. Unaudited pro forma information is as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
-------- -------------
<S> <C> <C>
Pro forma combined net income . $5,477 $10,171
Basic earnings per common share $ 0.86 $ 1.33
</TABLE>

(4) REAL ESTATE OPERATING PROPERTIES

Real estate operating properties are summarized as follows (in thousands):
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION
AND
COST AMORTIZATION NET
------------- -------------- -------
December 31, 1997:
<S> <C> <C> <C>
Buildings . . . . . $ 21,257 $ ( 2,630) $18,627
Tenant improvements 886 ( 154) 732
Land. . . . . . . . 6,574 - 6,574
------------- -------------- -------
$ 28,717 $ (2,784) $25,933
============= ============== =======

December 31, 1998:
Buildings . . . . . $ 19,530 $ ( 3,108) $16,422
Tenant improvements 761 ( 188) 573
Land. . . . . . . . 6,122 - 6,122
------------- -------------- -------
$ 26,413 $ (3,296) $23,117
============= ============== =======

December 31, 1999:
Buildings . . . . . $ 24,384 $ ( 3,470) $20,914
Tenant improvements 730 ( 116) 614
Land. . . . . . . . 6,687 - 6,687
------------- -------------- -------
$ 31,801 $ (3,586) $28,215
============= ============== =======
</TABLE>

Depreciation expense for the years ended December 31, 1997, 1998 and 1999
was approximately $635,000, $730,000 and $775,000, respectively, for the above
assets. For further information on real estate properties, see Note 19. At
December 31, 1999, these properties are recorded at the lower of cost or fair
value, less selling expenses, due to their classification as held for sale.

<PAGE>
(5) DUE FROM RELATED PARTIES

Amounts due from related parties consist of receivables primarily from
stockholders of the Company. The receivables are unsecured, bear no interest and
are payable on demand. Due from related parties at December 31, 1999, was
$26,000, compared to $154,000 at December 31, 1998.

(6) DUE FROM TAX CREDIT PARTNERSHIPS

Amounts due from Tax Credit Partnerships ("TCP") relate to developer fees
and accrued interest receivable thereon, land acquisition and construction costs
receivable pertaining to low-income housing tax credit projects of the Company
at various stages of completion. All eight of the Tax Credit projects were
located in the Las Vegas, Nevada area at December 31, 1998 and 1999 except one
project under development in Reno, Nevada and one project under development in
West Haven, Utah at December 31, 1999.

Tax Credit Partnerships are limited partnerships formed for the purpose of
constructing, owning and operating eligible low-income housing projects (as
defined under Section 42(d) of the Code). The Company generally retains
approximately a 1% or less general partnership interest and sells the remaining
99% to a large institutional investor, which in turn, publicly syndicates the
interest to third-party purchasers. These third-party purchasers acquire the
limited partnership interests to receive tax credits. Amounts due from Tax
Credit Partnerships will be collected from loan proceeds, contributions from
partners and cash flow from operations and consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1998 1999
------- -----------
Developer fees receivable (1). . . $13,364 $ 17,991
Land acquisition and construction
costs receivable. . . . . . . . . 17,868 17,760
Write down of TCP receivables. . . - ( 23,904)
Accrued interest receivable. . . . 765 740
------- -----------
$31,997 $ 12,587
======= ===========
</TABLE>

(1) Developer fees receivable are supported by notes receivable.

During the fourth quarter of 1999, the Company began to explore the
possibility of selling the Tax Credit Project general partnership interests and
receivables to strengthen the Company's cash flow position and has determined
that the Due from TCP's and the Investments in the TCP Joint Ventures are held
for sale at December 31, 1999 and are actively being marketed for sale.
Therefore, at December 31, 1999, the amounts are recorded at the lower of cost
or fair value, less selling expenses even though the estimated future cash
flows exceeded the gross recievable balance at December 31, 1999. The Company
has obtained a fair market valuation from an independent third party for the
general partnership interests and the receivables from the eight TCP properties.
This valuation indicated a fair value of $14.8 million, resulting in a write
down of the Tax Credit partnership receivables by $23.9 million and a write down
of the investments in these projects by $1.7 million (See Note 9).

(7) NOTES RECEIVABLE

Notes receivable consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1999
------ -----
<S> <C> <C>
Promissory notes from nonaffiliated entities, bearing interest at
11.0%, secured by a deed of trust, due May 2005 . . . . . . . . . . . $ 68 $ -
Promissory note from a nonaffiliated entity, bearing interest at
10.0%, due January 2000, secured by deed of trust . . . . . . . . . . 250 936
Promissory notes from nonaffiliated entities, bearing interest ranging
between 0% and 11%, with generally no scheduled maturity dates,
$19 of which are secured by deeds of trust 682 -
------ -----
$1,000 $ 936
====== =====
</TABLE>

<PAGE>
(8) CONSTRUCTION CONTRACTS

Construction contracts receivable includes amounts retained pending
contract completion, aggregating approximately $155,000 and $146,000 at December
31, 1998 and 1999, respectively. Based on anticipated completion dates, the
1999 retentions are expected to be collected in 2000.

Accounts payable and accrued expenses include amounts retained pending
subcontract completion aggregating approximately $3,060,000 and $3,458,000 at
December 31, 1998 and 1999, respectively.

Costs and estimated earnings in excess of billings, net on uncompleted
contracts are summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Costs incurred to date. . . . . . . . . . . . . . . . . . . . . . $ 98,470 $ 110,418
Estimated earnings to date. . . . . . . . . . . . . . . . . . . . 30,694 34,902
---------- ----------
129,164 145,320
Less billings to date . . . . . . . . . . . . . . . . . . . . . . (126,727) (144,780)
---------- ----------
Costs and estimated earnings in excess of billings on completed
contracts, (billings in excess of costs and estimated earnings on
uncompleted contracts), net . . . . . . . . . . . . . . . . . . . $ 2,437 $ (540)
========== ==========
</TABLE>

Costs and estimated earnings in excess of billings, net, are shown on the
accompanying Consolidated Balance Sheets as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1998 1999
------- ------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts. . . . . . . . . . . . . . . . . . . . . . . $2,618 $ 760
Billings in excess of costs and estimated earnings on
uncompleted contracts. . . . . . . . . . . . . . . . . . . . . . . (181) (220)
------- ------
Costs and estimated earnings in excess of billings on completed
contracts, (billings in excess of costs and estimated earnings on
uncompleted contracts), net . . . . . . . . . . . . . . . . . . . . $2,437 $(540)
======= ======
</TABLE>

The asset "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents construction revenue recognized in excess of amounts
billed on the respective construction contracts. The liability "Billings in
excess of costs and estimated earnings on uncompleted contracts" represents
amounts billed in excess of revenue recognized on the respective construction
contracts.

(9) INVESTMENTS IN JOINT VENTURES

The Company participates in several real estate development joint ventures,
primarily TCP's. The joint ventures have projects at various stages of
completion and development. The Company provides development and construction
services to these joint ventures. The Company's interests in these joint
ventures range from up to 1% to 50%. Summary financial information for the joint
ventures is as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
FINANCIAL POSITION 1998 1999
- ------------------ ------- --------
<S> <C> <C>

Real estate properties . . . . . . . . . . . . . . . . . . . . . . $93,937 $126,074
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,817 3,272
------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . 97,754 129,346

Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 64,613 83,274
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 24,717 40,052
------- --------
Net assets . . . . . . . . . . . . . . . . . . . . . . . $ 8,424 $ 6,020
======= ========

Company's share of net assets, net of write down of $1,666 in 1999 $ 3,577 $ 3,249
======= ========
</TABLE>

<PAGE>
During the fourth quarter of 1999, the Company's share of net assets was
written down to the lower of cost or fair value, less selling expenses, due to
their designation as "held for sale."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
RESULTS OF OPERATIONS 1997 1998 1999
- --------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Rental revenues for joint ventures . . $ 6,079 $ 8,730 $ 10,286
Interest expense . . . . . . . . . . . ( 3,749) ( 4,231) ( 5,248)
Other expense. . . . . . . . . . . . . (5,028) (7,154) (9,355)
---------- ---------- ----------
Net loss. . . . . . . . . . . . . $ (2,698) $ (2,655) $ (4,317)
========== ========== ==========

Company's share of net earnings (loss) $ 16 $ (25) $ (37)
========== ========== ==========
</TABLE>

(10) PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1998 1999
------------- -------
Rental and other accounts receivable . . . . . . . . . $ 575 $ 2,036
Development costs. . . . . . . . . . . . . . . . . . . 2,598 151
Income tax benefit . . . . . . . . . . . . . . . . . . - -
Furniture and equipment, net . . . . . . . . . . . . . 1,379 1,368
Option and escrow deposits and impounds. . . . . . . . 3,087 1,319
Inventories. . . . . . . . . . . . . . . . . . . . . . 101 -
Other assets, primarily prepaid expenses and loan fees 1,970 1,397
------------- -------
$ 9,710 $ 6,271
============= =======
</TABLE>

<PAGE>
(11) NOTES PAYABLE

Notes payable consist of the following (in thousands):

<TABLE>
<CAPTION>
OUTSTANDING BALANCE APPROXIMATE
AT DECEMBER 31, INTEREST MATURITY MONTHLY
1998 1999 RATES DATES PAYMENTS
----------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Notes payable to various financial institutions,
collateralized by first trust deeds on real
property with a carrying value of $128.3 February 2007 -
million at December 31, 1999. . . . . . . . . . $64,338 $ 84,722 7.9% - 15.3% November 2027 $ 656

Notes payable to various financial institutions, February 2000 -
unsecured . . . . . . . . . . . . . . . . . . . 1,990 2,108 9.5% - 10.5% December 2000 17

Notes payable to various financial institutions,
collateralized by other collateral. Includes
$521,000 collateralized by Common Stock
personally owned by the Company's President
and principal stockholder, James C. Saxton.
Includes $1.3 million collateralized by
receivables and includes $1.3 million payable
at December 31, 1999 to VOA to acquire January 2000 -
interests in VOA's tax credit partnerships. . . 6,103 3,146 9.0% - 11.0% January 2002 15
------- --------

Subtotal of various financial
institutions . . . . . . . . . . . . . . . 72,431 89,976
------- --------

Notes payable to various individuals, secured by December 1999 -
first trust deeds on real property . . . . . 14,375 14,132 0.0% - 20.0% September 2000 202

Notes payable to various individuals, December 1999 -
unsecured . . . . . . . . . . . . . . . 500 6,355 12.0% - 30.0% September 2000 112

Notes payable to various individuals,
collateralized by other collateral, including
$1.6 million collateralized by Common Stock
personally owned by the Company's President
and principal stockholder, James C. Saxton
(See Note 12.) Also includes $5.7 million
collateralized by second deeds of trust on
commercial properties owned by the September 2000 -
by the Company . . . . . . . . . . . . . . 1,000 7,300 20.0% December 2000 125
------- --------

Subtotal of notes payable to
various individuals . . . . . . . . . . . 15,875 27,787
------- --------

Total . . . . . . . . . . . . . . . . . . . $88,306 $117,763
======= ========
</TABLE>

All of the above notes payable were in default but not in foreclosure at
December 31, 1999.

The Company had 11 properties in foreclosure as of May 12, 2000, with the
first potential foreclosure sale date on June 12, 2000. The Company is
attempting to prevent foreclosure sales by completing pending property sales and
other sales, which could provide sufficient cash flows to payoff the related
debt. There can be no assurance that the Company will be successful in
preventing the foreclosure sales of these properties.

<PAGE>
The properties in foreclosure as of May 12, 2000 and their related debt
outstanding at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C>
COLLATERAL AMOUNT
CARRYING VALUE OUTSTANDING FORECLOSURE TRUSTEE
PROPERTY AT DECEMBER 31, 1999 AT DECEMBER 31, 1999 SALE DATE
- -------------------- --------------------- --------------------- --------------------
Smoke Ranch $ 2,531,000 $ 1,498,844 June 12, 2000
Madre Mesa North
and South . . . . . 3,699,000 1,328,902 June 22, 2000
Oquirrh Park II. . . 4,575,000 2,500,000 N/A
Sahara Vista B. . . 6,612,000 3,731,691 June 26, 2000
Regency Plaza. . . . 2,732,000 1,495,292 June 29, 2000
Suncliff V (1) . . . 899,000 1,707,655 June 16, 2000
El Mirage (1). . . . 2,515,000 1,950,000 June 16, 2000
Sahara West. . . . . 1,854,000 1,451,153 N/A
Sahara Vista A (2) . 4,809,000 3,948,647 N/A
Silver Springs C (3) 7,083,000 4,142,629 N/A
--------------------- ---------------------
Total $ 37,309,000 $ 23,754,813
===================== =====================
<FN>
(1) Property is sold effective May 12, 2000 with the debt assumed by buyer. The
outstanding balance of the loan in foreclosure for Suncliff V was $707,655 at
December 31, 1999.
(2) The Company has negotiated a forbearance until August 1, 2000.
(3) The Company has agreed to terms with the lender that will allow this loan to
become current and in use by the Company as a homebuilding production loan. The
outstanding balance on the loan in foreclosure was $4,066,000 at December 31, 1999.
</TABLE>

For the notes payable with maturity dates in 2000, management is
negotiating refinancing alternatives with the applicable lenders. See Note 1
for a discussion of management's plans to mitigate this situation.

On July 30, 1997, the Company entered into a $5,000,000 revolving line of
credit agreement with a financial institution. Loans under the agreement bear
monthly interest at 1.5% above the prime rate as defined in the agreement (9.25%
at December 31, 1998 and 8.50% at December 31, 1999), and require the Company to
pay a loan fee of 0.25% for each disbursement. Loans under the agreement are
available only for the acquisition of land and are secured by first trust deeds
on certain real property. As of December 31, 1999, the Company had outstanding
indebtedness of $1,479,000 maturing on August 1, 2000 and $450,000 maturing on
March 12, 2000 for a total indebtedness of $1,929,000 (included in notes payable
to financial institutions). Under the terms of the agreement, the Company is
required to meet certain financial covenants. At December 31, 1999, the Company
was in default on this loan.

On February 9, 1998, the Company entered into a $10,000,000 revolving loan
agreement with a financial institution. The line of credit provides for
borrowings of up to $1,000,000 for general working capital requirements,
$4,000,000 for acquisition and development, including strategic acquisitions and
$5,000,000 for land acquisitions. Borrowings under the line of credit are
secured by the pledge of certain Company receivables and any land acquired with
borrowings under the line of credit and bears interest at one percent over the
lender's prime rate in effect from time to time. The agreement is also subject
to certain financial covenants and restrictions. The revolving working capital
line for $1,000,000 was payable on November 30, 1999, the maturity date, and the
remainder is payable one year and one day following each advance. The due dates
range from December 1, 2000 to September 14, 2001. As of December 31, 1998 and
1999, the Company had outstanding indebtedness of $5,000,000 and $7,416,000,
respectively (included in notes payable to financial institutions). At December
31, 1999, the Company was in default on this line of credit.

<PAGE>
The approximate principal maturities of notes payable outstanding as of
December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
2000. . . . . . . . . . $92,290
2001. . . . . . . . . . 5,008
2002. . . . . . . . . . 1,733
2003. . . . . . . . . . -
2004. . . . . . . . . . 2,269
Thereafter. . . . . . . 16,463
-------
$117,763
=======

</TABLE>

(12) NOTES PAYABLE TO RELATED PARTIES AND OTHER RELATED PARTY TRANSACTIONS

Notes payable to related parties are unsecured notes payable to certain
stockholders, officers and Directors of the Company for development purposes.
Interest only payments are due monthly at rates ranging from 12.0% to 19.0%,
with all amounts due at various dates in 2000. During the first quarter of
1999, the Company borrowed $724,000 and $300,000 from the Company's President
and principal stockholder, James C. Saxton. The notes matured on February 1,
2000 and bear interest at 19.0% and 18.0% per annum, respectively. At December
31, 1999, the outstanding balances were $724,000 and $300,000, respectively and
these loans were in default.

On November 15, 1999, (the first anniversary of the closing of the Diamond
Key acquisition), in connection with the purchase of Diamond Key, the Company
issued 146,391 shares of the Company's Common Stock to Larison P. Clark. The
Company was also obligated to pay Mr. Clark $1.0 million in cash on November 15,
1999. The Company has paid Mr. Clark $300,000 through December 31, 1999, and the
remainder was recorded as a note payable for $700,000 with an interest rate of
18.0% per annum, due on May 3, 2000 of which $225,000 was paid in 2000.

During the second quarter of 1999, the Company's Executive Vice President,
Michele Saxton Pori, pledged 530,000 shares of Common Stock, or 6.9% of the
Company's outstanding shares as of December 31, 1999, as collateral for a $1.2
million personal loan. Ms. Pori reloaned the proceeds to the Company. The note
payable bears interest at 12.0% per annum and matured on February 3, 2000. The
outstanding balance at December 31, 1999 was $613,000. At December 31, 1999,
these loans were in default. The Company understands that Ms. Pori intends to
repay, in full, the loan from the lender upon repayment of the loan she has made
to the Company.

During the fourth quarter of 1998, the Company's President and principal
stockholder, James C. Saxton, pledged 3,471,590 shares of common stock, or
approximately 44.1% of the Company's outstanding shares at December 31, 1999, as
collateral for two personal loans to Mr. Saxton and three loans to the Company.
Mr. Saxton reloaned the proceeds from the two personal loans to the Company for
use in connection with the acquisition of Diamond Key. The two notes payable to
Mr. Saxton, aggregating $7,575,000, bear interest at 12.0% per annum and matured
on February 1, 2000. The outstanding balance at December 31, 1999 was $6.0
million. As of December 31, 1999, these loans were in default. The Company
understands that Mr. Saxton intends to repay, in full, the loans from the two
lenders upon repayment of the loans he has made to the Company.

(13) LEASE OBLIGATIONS

The Company is obligated under various capital leases for equipment and
vehicles that expire at various dates over the next five years. These equipment
and vehicle leases require minimum payments aggregating approximately $44,000
per month with interest rates ranging from 7.9% to 16.5%.

The Company is party to a sale and leaseback agreement for a convenience
store that the Company constructed and the related land. The lease is for a
20-year period, which expires in 2015, but the Company has four 5-year options
to extend. The land portion of the leaseback has been classified as an
operating lease and the building portion of the leaseback has been classified as
a capital lease in accordance with SFAS No. 13, Accounting for Leases. The
book value of the land of approximately $709,000 was removed from the accounts
and the related gain on the sale of approximately $103,000 was deferred. The
deferred gain is being recognized over the lease term. In July 1999, the
Company sold its operations and the assets of this convenience store for
$350,000 and agreed to sublease the premises. The sublease incorporated the
terms and provisions of the original sale and leaseback agreement. The Company
recorded a lease receivable of approximately $664,000 from this sublease, which
was equivalent to the lease payable at the time of the sale. The net book value
of the building of approximately $607,000, the related deferred gain on the
building of $93,000 and the assets of the convenience store of $207,000 were
removed from the accounts. The future minimum lease payments have been included
in the table below.

<PAGE>
At the end of 1996, the Company sold a property to a third party that the
Company leased back under a master lease agreement requiring monthly payments of
approximately $20,700 until the property reached a certain level of occupancy.
The Company had accounted for this transaction using the deposit method. During
1998, the master lease agreement was terminated and the Company removed the
deposit liability of approximately $2,675,000 and recognized the sale of the
property of approximately $2,832,000. There was no activity regarding this
transaction during 1999.

Future minimum lease payments under lease obligations, excluding contingent
rents, are as follows at December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
TOTAL PORTION PORTION
--------- ---------- --------
Year ending December 31:
<S> <C> <C> <C>
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 504 $ 403 $ 101
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 218 103
2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 164 105
2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 128 107
2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 108 109
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,377 1,170 1,207
--------- ---------- --------
Total minimum payments. . . . . . . . . . . . . . . . . . $ 3,923 2,191 $ 1,732
========= ========
Amount representing interest (at rates ranging from 7.9% to 16.5%) (1,150)
---------
Long-term capital lease obligations . . . . . . . . . . . . . . . . $ 1,041
=========
</TABLE>

Assets leased under capital leases consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1998 1999
-------------- ------
Operating properties . . . . . . . . . . . . . $ 589 $ -
Equipment. . . . . . . . . . . . . . . . . . . 671 738
-------------- ------
1,260 738
Less accumulated depreciation and amortization (361) (420)
-------------- ------
$ 899 $ 318
============== ======
</TABLE>

Amortization of assets held under capital leases is included with
depreciation expense.

(14) RENTAL INCOME

Operating properties are leased to tenants under various arrangements
classified as operating leases. The leases provide for rent and reimbursement of
various common area maintenance charges paid by the Company. Minimum future
rentals (excluding percentage rents and renewal options) on non-cancelable
leases are as follows at December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
2000. . . . . . . . . . . $2,527
2001. . . . . . . . . . . 2,538
2002. . . . . . . . . . . 1,934
2003. . . . . . . . . . . 1,563
2004. . . . . . . . . . . 1,368
Thereafter. . . . . . . . 5,488
------
15,418
======
</TABLE>

Approximately 23%, 33% and 29% for the years ended 1997, 1998 and 1999,
respectively, of each year's rental revenue reflected in the accompanying
consolidated financial statements is derived from one tenant.

(15) EMPLOYEE STOCK OWNERSHIP PLAN

On December 31, 1994, the Company established a profit sharing plan (the
"Profit Sharing Plan") for its eligible employees. On December 29, 1995, the
Company adopted an employee stock ownership plan (the "ESOP") and trust (the
"ESOP Trust"). In connection with the merger of Saxton and JSI on December 31,
1995, the Profit Sharing Plan was merged into the ESOP and the assets of the
trust established under the Profit Sharing Plan have been transferred to the
ESOP Trust.

<PAGE>
An "employee stock ownership plan" (as defined in Section 407(d)(6) of the
Employee Retirement Security Act of 1974 ("ERISA") and Section 4975(e)(7) of the
Internal Revenue Code) is designed to invest primarily in "qualifying employer
securities." The account balances of participants in the Profit Sharing Plan
transferred to the ESOP Trust have been invested by the ESOP Trust in the
Company's Common Stock. Thereafter, the Company may make periodic contributions
to the ESOP Trust out of its net profits in amounts determined by the Board of
Directors, which contributions may be made in cash or in shares of the Company's
Common Stock. Amounts contributed in cash will be used to purchase shares of the
Company's Common Stock.

Participants in the Profit Sharing Plan on December 31, 1995 were
immediately eligible to participate in the ESOP. All other employees become
eligible to participate in the ESOP on the date coinciding with or next
following the date the employee completes one year of service with the Company.
Contributions by the Company to the ESOP for the benefit of a participating
employee vest over a seven-year period of participation in the ESOP and are held
in trust until distributed pursuant to the terms of the ESOP. The Company has
made no contributions to the Plan for the years ended 1997, 1998 and 1999.

On February 16, 2000, the Board of Directors unanimously approved the
termination of the ESOP plan effective December 31, 2000. The remaining ESOP
plan shares will be distributed to the eligible participants during 2000,
pursuant to the plan's provisions.

(16) STOCK OPTIONS

In December 1994, the Company granted options to purchase an aggregate of
127,907 shares of Common Stock to various officers and other key employees under
separate letter agreements. In 1995, options to purchase 23,497 shares lapsed
without vesting upon certain employees' termination of employment with the
Company. In 1998 and 1999, options to purchase 5,112 shares and 983 shares,
respectively, lapsed upon certain employees' termination of employment with the
Company. Options granted to one officer of the Company vested 20% on December
29, 1995, 30% on December 29, 1996 and 50% on December 29, 1997. The remaining
options vest 20% per year on December 29th for five years beginning December 29,
1995. All options are exercisable from the date of vesting through December 28,
2004 at an exercise price of $6.10 per share.

On June 30, 1997, the Company adopted a Management Stock Option Incentive
Plan (the "Option Plan") which provides for the grant of options to employees to
purchase Common Stock, up to a maximum of 500,000 shares. Stock options which
terminate without having been exercised, shares forfeited or shares surrendered
will again be available for distribution in connection with future awards under
the Option Plan. On December 7, 1998, the Company's Board of Directors approved
an increase from 500,000 to 750,000 in the number of shares subject to stock
options under the Option Plan. The increase was approved by the stockholders at
the annual meeting of stockholders in June 1999. As of December 31, 1999, the
Company has outstanding 397,750 stock options to certain officers and employees
of the Company pursuant to the Option Plan. These options will vest in equal
annual installments over five years commencing one year from the award date and
will expire between June 30, 2007 and December 23, 2009. Stock options granted
on June 30, 1997 were issued at an exercise price equal to the initial public
offering price of $8.25 per share. Stock options granted after June 30, 1997
were granted at the closing stock price on the grant date as reported on the
Nasdaq Stock Market. On January 2, 1998, the Company gave employees the
opportunity to reprice their stock options. The repricing involved changing
their stock price from $8.25 per share to $6.875 per share (the closing stock
price on January 2, 1998) and changing their grant date from June 30, 1997 to
January 2, 1998. Employees holding 148,300 of stock options elected to reprice
on January 2, 1998. As of December 31, 1999, stock options had been granted with
exercise prices ranging from $2.625 per share to $8.375 per share.

Under the Director Plan, each person who becomes a non-employee director is
automatically granted, as of the date of his election or appointment to the
Board of Directors, an initial option to purchase 500 shares of Common Stock. On
the first trading day of each April commencing with April 1998, each
non-employee director then serving on the Board of Directors and who has served
for at least three months is granted an option to purchase an additional 500
shares of Common Stock. Options granted under the Director Plan have an exercise
price equal to the fair value of the shares on the date of grant and are
generally exercisable one year from the date of grant. Options granted under the
Director Plan have a term of 10 years from the date of grant and are not
transferable other than by will or the laws of descent and distribution. As of
December 31, 1999, there were 5,500 stock options outstanding to non-employee
directors pursuant to the Director Plan, and they will expire between June 30,
2007 and June 7, 2009. Of the 5,500 stock options outstanding under the Director
Plan, 3,000 are 100% vested and exercisable. Stock option grant prices range
from $5.63 per share to $8.25 per share under the Director Plan.

<PAGE>
SFAS 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans and for transactions in which an entity
issues its equity instruments to acquire goods or services from non-employees.
Those transactions must be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable.

Stock options granted under the Company's Option Plan are qualified stock
options that: (i) are generally granted at prices which are equal to the fair
value of the stock on the date of grant; (ii) are subject to a grantee's
continued employment with the Company and vest over a five year period; and
(iii) expire ten years (plus six months for some options granted during 1997)
subsequent to the award.

<PAGE>
A summary of the status of the Company's stock options granted under the
Option Plan as of December 31, 1997, 1998 and 1999 and the activity is presented
below:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
--------------- ---------------
<S> <C> <C>
Outstanding at January 1, 1997. . . . . . - $ -
Granted . . . . . . . . . . . . . . . . . 278,500 8.25
Exercised . . . . . . . . . . . . . . . . - -
(Forfeited) . . . . . . . . . . . . . . . (52,400) 8.25
---------------
Outstanding at end of year. . . . . . . . 226,100 8.25
===============

Options exercisable at December 31, 1997. - -
===============

WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
--------------- ---------------
Outstanding at January 1, 1998. . . . . . 226,100 $ 8.25
Granted . . . . . . . . . . . . . . . . . 401,450 6.78
Exercised . . . . . . . . . . . . . . . . - -
(Forfeited) . . . . . . . . . . . . . . . (125,400) 7.73
---------------
Outstanding at end of year. . . . . . . . 502,150 6.84
===============

Options exercisable at December 31, 1998. 10,680 8.05
===============

WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
--------------- ---------------
Outstanding at January 1, 1999. . . . . . 502,150 $ 8.05
Granted . . . . . . . . . . . . . . . . . 134,300 5.26
Exercised . . . . . . . . . . . . . . . . - -
(Forfeited) . . . . . . . . . . . . . . . (238,700) 6.72
---------------
Outstanding at end of year. . . . . . . . 397,750 6.42
===============

Options exercisable at December 31, 1999. 72,240 7.14
===============
</TABLE>

The fair value of each option granted during 1999 is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: (i) dividend yield of zero; (ii) expected
volatility of 48.6%; (iii) risk-free interest rate of 6.5% for 1999; and (iv)
expected life of 5 years. The weighted-average fair value of options granted
during 1999 was $3.21. The remaining weighted-average life of the options
outstanding at December 31, 1999 was 8.62 years with an exercise price range of
$2.625 to $8.375.

No compensation cost is recorded in the accompanying Consolidated Statements
of Operations for 1997, 1998 or 1999. Had compensation cost for the Company's
grants for stock options been determined consistent with SFAS 123, the Company's
pro forma net income (loss) and pro forma net income (loss) per common share
would approximate the pro forma amounts below (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
------------------------ ------------------------ --------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
------------ ---------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) applicable to Common Stock $ 5,851 $ 5,714 $ 7,731 $ 7,541 $ ( 30,219) $ (30,394)
Net income (loss) per common share:
Basic EPS. . . . . . . . . . . . . . . . $ 0.92 $ 0.90 $ 1.01 $ 0.98 $ ( 3.84) $ ( 3.86)
Diluted EPS. . . . . . . . . . . . . . . $ 0.92 $ 0.90 $ 1.01 $ 0.98 $ ( 3.84) $ ( 3.86)
</TABLE>

<PAGE>
(17) INCOME TAXES

Income tax expense (benefit) in the accompanying consolidated statements of
operations include the following amounts for the years ended December 31, 1997,
1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
------ -------- ----------
Federal:
<S> <C> <C> <C>
Current. $1,498 $ 3,364 $( 1,936)
Deferred 852 ( 113) ( 468)
State:
Current. - 55 -
Deferred - 7 (114)
------ -------- ----------
Total $2,350 $ 3,313 $ (2,518)
====== ======== ==========
</TABLE>

The provision (benefit) for income taxes differs from the amount computed
by applying the statutory federal income tax rate to income (loss) before taxes.
The sources and tax effects of the differences at December 31, 1997, 1998 and
1999 are as follows (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- -----------
<S> <C> <C> <C>
Computed "expected" federal income tax
expense (benefit). . . . . . . . . . . . . . $ 2,788 $3,765 $( 11,131)
Earnings of combined entities not subject to
taxation. . . . . . . . . . . . . . . . . . ( 496) - -
Change in valuation allowance . . . . . . . . - - 8,652
Other . . . . . . . . . . . . . . . . . . . . 58 ( 452) ( 39)
-------- ------- -----------
Provision (benefit) for income taxes. . . . . $ 2,350 $3,313 $( 2,518)
======== ======= ===========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1998 and 1999
are as follows (in thousands):

<TABLE>
<CAPTION>
1998 1999
-------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss. . . . . . . . . . $ - $ 1,728
Write down of TCP's and other assets. - 8,652
Write down of land held for sale. . . - 924
Other . . . . . . . . . . . . . . . . 74 403
-------- ---------
Total deferred tax assets . . . . . 74 11,707
-------- ---------
Valuation allowance . . . . . . . . . - ( 8,652)
-------- ---------
Net deferred tax assets . . . . . . 74 3,055
Deferred tax liabilities:
Depreciation/amortization . . . . . ( 247) ( 524)
Capitalization of expenses. . . . . ( 419) ( 927)
-------- ---------
Total deferred tax liabilities. (666) (1,451)
-------- ---------
Net deferred tax assets (liabilities). $ (592) $ 1,604
======== =========
</TABLE>

A valuation allowance has been recorded for the write down of the TCP's
since the realization of the asset may not be raelized until the related asset
is sold and management cannot estimate when the asset will be sold, if at all.
Therefore, it is not more likely than not that the deferred tax asset will be
Realized in accordance with the provisions of SFA's No. 109.

<PAGE>
(18) REAL ESTATE PROPERTIES

Schedule of real estate properties as of December 31, 1999 (in thousands,
except dates and life):

<TABLE>
<CAPTION>
Cost Capitalized at
Cost Capitalized (Gross Amount)
Initial Cost Subsequent to Acq. Close of Period
--------------- ------------------ --------------------------
Encum- Bldg & Improve- Carrying Bldg & Accm Net Book
Description Type brances Land Impr ments Costs Land (a) Impr (a) Total Depr Value
- ---------------------- ------ ------- ------- ------ -------- -------- -------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Properties:
Levitz I. . . . . . Retail $ 7,226 $ 1,694 $ - 5,190 $ 667 $ 1,941 $ 5,857 $ 7,798 $ 1,304 $ 6,494
Furniture Expo . . Retail 2,684 714 - 1,757 237 795 1,994 2,789 447 2,342
Big Tyme (b) . . . . Retail - - - - - - - - - -
Lev. Pad B (Woodys) Retail 413 209 - 283 48 235 331 566 71 495
Turtle Stop . . . . Retail 852 148 - 760 84 130 844 974 137 837
Sahara/Decatur (c). Retail 476 205 - 392 56 205 448 653 45 608
Nellis & Stewart (c) Retail 440 269 - 436 65 269 420 689 34 655
Las Vegas Sun . . . Office 1,229 192 - 810 93 192 903 1,095 376 719
SI/Americana . . . . Office 1,451 609 - 1,409 188 609 1,596 2,205 351 1,854
GSA (c) . . . . . . Office 928 447 - 1,175 151 447 1,326 1,773 155 1,618
Sahara Vista Bldg. A Office 3,949 842 - 3,905 405 842 4,310 5,152 343 4,809
Arcata Park . . . . Indus. 851 140 - 1,036 95 184 1,131 1,315 232 1,083
Sahara Vista Bldg. B Office 3,732 837 - 5,736 522 839 5,865 6,704 92 6,612
Sunrise Ridge . . . Resid. - 89 - - - - 89 89 - 89
------- ------- ------ -------- -------- -------- -------- -------- ------ --------
Sub-total . . . . . 24,231 6,395 - 22,889 2,611 6,688 25,114 31,802 3,587 28,215
------- ------- ------ -------- -------- -------- -------- -------- ------ --------

Properties Under
Development:
Regency, Lot B & C . Retail 1,412 752 - 1,555 266 911 1,821 2,732 - 2,732
Rancho/Vegas . . . . Retail 598 83 - 913 138 - 1,051 1,051 - 1,051
Silver Springs . . . Resid. 9,356 1,488 - 15,081 2,729 1,077 17,810 18,887 - 18,887
Northpark III (b) . Indus. - - - - - - - - - -
Taylor Ranch (c) . . Resid. 4,820 3,503 - 6,375 664 - 7,039 7,039 - 7,039
Madre Mesa . . . . . Resid. 867 2,263 - 3,160 539 - 3,699 3,699 - 3,699
Sutter Creek . . . . Resid. 1,856 988 - 6,447 717 - 3,251 3,251 - 3,251
Kendall Creek . . . Resid. 3,793 810 - 6,711 1,104 - 7,169 7,169 - 7,169
Seven Hills/LM . . . Office 504 840 - 856 131 - 987 987 - 987
Flamingo-Lindell . . Office 975 1,550 - 607 380 - 1,670 1,670 - 1,670
Smoke Ranch . . . . Office 1,480 2,651 - 2,936 518 - 2,531 2,531 - 2,531
Wood Ranch . . . . . Resid. - - - - - - - - - -
Riverwalk . . . . . Resid. - - - - - - - - - -
Eagle Mountain . . . Resid. - - - - 27 - 27 27 - 27
Overlake . . . . . . Resid. 482 474 - - 30 - 113 113 - 113
Murfield . . . . . . Resid. 1,461 597 - 1,025 181 30 1,181 1,211 - 1,211
Sunrise Pointe . . . Resid. 1,417 388 - 1,930 330 1,035 2,210 3,245 - 3,245
Pueblo Seco . . . . Resid. 4,821 908 - 7,236 1,348 747 7,589 8,336 - 8,336
Apache Junction I . Resid. 510 1,091 - 11,791 2,102 328 231 559 - 559
Apache Junction II . Resid. 247 891 - 5,523 1,449 95 294 389 - 389
Apache Junction III. Resid. 1,679 - - 8,327 367 481 1,832 2,313 - 2,313
Bolero Court . . . . Resid. - - - - - - - - - -
Copper Creek . . . . Resid. 696 1,275 - 1,444 349 726 431 1,157 - 1,157
Castle Rock . . . . Resid. 3,281 1,472 - 6,092 203 3,920 1,707 5,627 - 5,627
Desert Vista I . . . Resid. 936 331 - 2,724 473 34 119 153 - 153
Desert Vista II . . Resid. 590 1,351 - 635 235 1,065 1,458 2,523 - 2,523
El Mirage (c) . . . Resid. 3,000 - - 2,132 369 2,003 512 2,515 - 2,515
Gladden Farms .(d). Resid. - - - 13 83 - 553 553 - 553
Neely Ranch . . . . Resid. - - - - - - - - - -
Rancho Cimarron . . Resid. - - - - - - - - - -
Rancho Cimarron II . Resid. - - - - - - - - - -
Rancho Vistoso . . . Resid. - - - - - - - - - -
Rita Ranch I . . . . Resid. 96 1,017 - 4,480 810 52 188 240 - 240
Rita Ranch II . . . Resid. 947 622 - 1,210 213 635 743 1,378 - 1,378
Sonoran Vista I . . Resid. - 366 - 556 114 - - - - -
Sonoran Vista II . . Resid. 714 1,416 - 1,248 324 999 622 1,621 - 1,621
Stonehenge . . . . . Resid. - - - - - - - - - -
Suncliff I . . . . . Resid. 59 273 - 3,467 581 15 131 146 - 146
Suncliff III . . . . Resid. - 163 - 706 139 170 678 848 - 848
Suncliff IV . . . . Resid. 2,426 496 - 4,861 890 323 3,249 3,572 - 3,572
Suncliff V (c) . . . Resid. 808 696 - 129 70 - 899 899 - 899
Pelican Creek . . . Resid. 2,711 870 1,254 2,450 433 - 2,883 2,883 - 2,883
Valley View Diablo . Retail 450 - - - 24 650 - 650 - 650
------- ------- ------ -------- -------- -------- -------- -------- ------ --------
Sub-total . . . . . 52,992 29,625 1,254 112,620 18,330 15,296 74,678 89,974 - 89,974
------- ------- ------ -------- -------- -------- -------- -------- ------ --------

Land Held for
Development and
Sale:
East II Retail . . . Land 300 518 - 113 - 631 - 631 - 631
Flamingo Point,Lot 6 Land 100 679 - 3 - 487 - 487 - 487
West Haven . . . . . Land - 3,004 - 691 - 3,695 - 3,695 - 3,695
Oquirrh Park (d) . . Land 3,460 8,051 - 395 - 8,623 - 8,623 - 8,623
------- ------- ------ -------- -------- -------- -------- -------- ------ --------
Sub-total . . . . . 3,860 12,252 - 1,202 - 13,436 - 13,436 - 13,436
------- ------- ------ -------- -------- -------- -------- -------- ------ --------

Total . . . . . . . $81,083 $48,272 $1,254 $136,711 $20,941 $35,420 $ 99,792 $135,212 $3,587 $131,625
======= ======= ====== ======== ======== ======= ======== ======== ====== ========

Life
on which
Date of Date Dep is
Description Constr Acqd Computed
- ---------------------- ------- ---- --------
<S> <C> <C> <C>
Operating Properties:
Nellis Exp. Vlge (b) 1987 1986 40
Levitz I. . . . . . 1991 1990 40
Furniture Expo . . 1992 1990 32
Big Tyme (b) . . . . 1995 1995 20
Lev. Pad B (Woodys) 1993 1990 34
Turtle Stop . . . . 1994 1987 40
Sahara/Decatur (c). 1996 1995 32
Nellis & Stewart (c) 1996 1995 40
Las Vegas Sun . . . 1987 1987 32
SI/Americana . . . . 1991 1991 32
GSA (c) . . . . . . 1994 1989 40
Sahara Vista Bldg. A 1996 1989 40
Arcata Park . . . . 1989 1987 40
Sahara Vista Bldg. B 1999 1997 40
Sunrise Ridge . . . 1999 1997 40
Sub-total . . . . .

Properties Under
Development:
Regency, Lot B & C . - 1991 -
Rancho/Vegas . . . . - 1990 -
Silver Springs . . . - 1996 -
Northpark III (b) . - 1997 -
Taylor Ranch (c) . . - 1997 -
Madre Mesa . . . . . - 1997 -
Sutter Creek . . . . - 1997 -
Kendall Creek . . . - 1998 -
Seven Hills/LM . . . - 1998 -
Flamingo-Lindell . . - 1998 -
Smoke Ranch . . . . - 1998 -
Wood Ranch . . . . . - 1998 -
Riverwalk . . . . . - 1998 -
Eagle Mountain . . . - 1999 -
Overlake . . . . . . - 1999 -
Murfield . . . . . . 1999
Sunrise Pointe . . . - 1998 -
Pueblo Seco . . . . - 1998 -
Apache Junction I . - 1998 -
Apache Junction II . - 1998 -
Apache Junction III. - 1998 -
Bolero Court . . . . - 1998 -
Copper Creek . . . . - 1998 -
Castle Rock . . . . - 1998 -
Desert Vista I . . . - 1998 -
Desert Vista II . . - 1998 -
El Mirage (c) . . . - 1998 -
Gladden Farms . . . - 1999 -
Neely Ranch . . . . - 1998 -
Rancho Cimarron . . - 1998 -
Rancho Cimarron II . - 1998 -
Rancho Vistoso . . . - 1998 -
Rita Ranch I . . . . - 1998 -
Rita Ranch II . . . - 1998 -
Sonoran Vista I . . - 1998 -
Sonoran Vista II . . - 1998 -
Stonehenge . . . . . - 1998 -
Suncliff I . . . . . - 1998 -
Suncliff III . . . . - 1998 -
Suncliff IV . . . . - 1998 -
Suncliff V (c) . . . - 1998 -
Pelican Creek . . . - 1999 -
Valley View Diablo . - 1999 -
Sub-total . . . . .

Land Held for
Development and
Sale:
East II Retail . . . - 1996 -
Flamingo Point,Lot 6 - 1990 -
West Haven . . . . . - 1999 -
Oquirrh Park (d) . . - 1999 -
Sub-total . . . . .
<FN>
(a) The basis of the land and building was increased to reflect transactions
related to the acquisition of certain partnership interests in
connection with the Company's initial public offering.
(b) The property was sold during 2000. See Note 24.
(c) A partial sale occurred in 2000 on this property.
(d) An additional $1.3 million is included in deposits.
</TABLE>

<PAGE>
The following table reconciles the historical cost of properties (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
Balance at beginning of year. . . $ 41,305 $ 54,082 $ 107,182
Additions during year:
Acquisitions, improvements, etc 28,558 83,979 117,921
Deductions during year:
Cost of real estate sold. . . . (15,781) (30,879) ( 89,891)
--------- --------- -----------
Balance at end of year. . . . . . $ 54,082 $107,182 $ 135,212
========= ========= ===========
</TABLE>

The following table reconciles the accumulated depreciation (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year $2,497 $2,784 $3,298
Additions during year:
Depreciation for the year. 635 730 775
Deductions during year:
Cost of real estate sold . ( 348) ( 216) ( 486)
------- ------- -------
Balance at end of year . . . $2,784 $3,298 $3,587
======= ======= =======
</TABLE>

<PAGE>
(19) RESIDENTIAL DEVELOPMENT

The Company's single-family residential development activities during the
year ended December 31, 1999 as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
ESTIMATED
NUMBER OF NUMBER OF NUMBER OF NUMBER OF AVERAGE
HOMES AT HOMES HOMES SOLD HOMES IN PRICE PER
PROJECT NAME HOME TYPE LOCATION COMPLETION SOLD (1) IN 1999 BACKLOG (2) HOME (3)
- ---------------------------- ------------- ---------------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NEVADA
- ----------------------------
Completed Projects:
Sunrise Ridge . . . . . . . Townhomes Las Vegas 154 154 10 - $ 91,046
---------- ---------- ---------- -----------
Total completed projects 154 154 10 -

Under Development:
Pelican Creek . . . . . . . Detached Las Vegas 79 1 1 34 128,657
Crescendo at Silver Springs Cluster homes Las Vegas 285 121 121 31 119,135
Sutter Creek . . . . . . . Detached Las Vegas 150 113 112 13 119,864
Sterling at Silver Springs Cluster homes Las Vegas 240 50 50 25 107,807
Kendall Creek . . . . . . . Townhomes Sparks 102 10 10 29 111,708
---------- ---------- ---------- -----------
Total under development . . 856 295 294 132

Total Nevada . . . . . . . 1,010 449 304 132
---------- ---------- ---------- -----------

UTAH
- ----------------------------
Completed Projects:
Wood Ranch . . . . . . . . Detached South Jordan 70 70 13 - 185,551
Riverwalk . . . . . . . . . Detached American Fork 13 13 13 - 173,661
---------- ---------- ---------- -----------

Total completed projects . 83 83 26 -
Under Development:
Murfield . . . . . . . . . Detached Syracuse 142 - - - 141,143
The Falls at Overlake . . . Detached Tooele 49 - - - 125,990
Sunrise Pointe I . . . . . Detached West Valley City 77 17 17 2 148,132
---------- ---------- ---------- -----------
Total under development . 268 17 17 2

Total Utah . . . . . . . 351 100 43 2
---------- ---------- ---------- -----------

ARIZONA
- ----------------------------
Completed Projects:
Neely Ranch . . . . . . . . Detached Gilbert 22 22 3 - 156,833
Rancho Vistoso . . . . . . Detached Oro Valley 17 17 1 - 209,000
Rancho Cimarron 1 . . . . . Detached Gilbert 63 63 1 - 169,000
Bolero Court . . . . . . . Detached Phoenix 130 130 97 - 98,838
Stonehenge . . . . . . . . Detached Gilbert 57 57 5 - 143,209
Sonoran Vista 11 . . . . . Detached Gilbert 150 150 8 - 120,025
---------- ---------- ---------- -----------

Total completed projects 439 439 115 -
Under Development:
Sunrise Canyon 1 . . . . . Detached Apache Junction 268 260 141 18 101,000
Sunrise Canyon 2 . . . . . Detached Apache Junction 132 116 88 7 104,000
Sunrise Canyon 3 . . . . . Detached Apache Junction 81 7 7 73 99,000
Copper Creek . . . . . . . Detached Oro Valley 61 29 15 5 107,500
Castle Rock . . . . . . . . Detached Phoenix 166 54 20 20 151,000
Desert Vista 1 . . . . . . Detached Oro Valley 40 39 8 - 165,000
Desert Vista 2 . . . . . . Detached Oro Valley 33 1 1 4 192,000
Rita Ranch 1 . . . . . . . Detached Tucson 72 70 57 21 101,500
Rita Ranch 2 . . . . . . . Detached Tucson 63 - - 21 101,500
Suncliff 1 . . . . . . . . Detached Peoria 246 245 48 1 101,000
Suncliff 3 . . . . . . . . Detached Peoria 28 - - - 112,500
Suncliff 4 . . . . . . . . Detached Peoria 135 51 51 42 103,500
Sonoran Vista 2 . . . . . . Detached Gilbert 24 8 6 6 212,500
Pueblo Seco . . . . . . . . Townhomes Mesa 166 20 20 25 95,000
---------- ---------- ---------- -----------

Total under development . 1,515 900 462 243

Total Arizona . . . . . . . 1,954 1,339 577 243
---------- ---------- ---------- -----------

Grand Total . . . . . . . 3,315 1,888 924 377
========== ========== ========== ===========
<FN>

(1) "Number of Homes Sold" represents home sales which have closed in current or prior periods for properties under
development.
(2) "Number of Homes in Backlog" represents homes that have sales contracts but not yet closed. There can be no assurance
that the buyers will remain in place long enough for the Company to close the sale.
(3) "Estimated Average Price" represents the average sales price per home of actual homes sold or the proposed offering
price of homes to be built in future phases or in development.
(4) The Company owns or otherwise controls the land for each planned home development. In most cases, the planned home
development requires additional entitlements, permits or other actions prior to construction, and there can be no assurance that
all regulatory approvals can be obtained.
</TABLE>

<PAGE>
(20) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, construction contracts
receivable, costs and estimated earnings in excess of billings on uncompleted
contracts, accounts payable and accrued expenses, tenant deposits and other
liabilities and billings in excess of costs and estimated earnings on
uncompleted contracts approximate fair value because of the short maturity of
these instruments.

Due from Tax Credit Partnerships

The due from TCP's are valued at fair value, less selling expenses, based
upon an appraisal obtained from an independent third party as of December 31,
1999.

Notes Receivable, Due From Related Parties, Notes Payable and Notes Payable to
Related Parties

The fair value of the Company's notes receivable, due from related parties,
notes payable and notes payable to related parties approximates their respective
carrying values, generally, due to the short term nature of the notes and
current prevailing interest rates.

(21) COMMITMENTS AND CONTINGENCIES

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.

The Company and its two principal stockholders are guarantors on
construction loans relating to the Tax Credit Partnerships. Total construction
loans payable for these Tax Credit Partnerships were approximately $37.1 million
and $29.9 million at December 31, 1998 and 1999, respectively.

(22) INFORMATION CONCERNING SEGMENTS

In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise Related Information ("SFAS 131"). SFAS 131 supersedes SFAS No. 14,
Financial Reporting for Segments of a Business Enterprise replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments, SFAS 131 also requires disclosures about products
and services, geographic areas and major customers. The adoption of SFAS 131
did not affect the consolidated financial results of the Company.

The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates its
business by certain lines of business components. As of December 31, 1999, the
Company's four reportable operating segments are: Homebuilding, Design-Build
Services, Sales of Commercial Property and Property Operations and Management.
Retail operations and corporate activities are included in the "Other" column.
The financial results of the Company's operating segments are presented on an
accrual basis. There are no significant differences among the accounting
policies of the segments as compared to the Company's consolidated financial
statements. The Company evaluates the performance of its segments and allocates
resources to them based on revenues and gross profit. There are no material
intersegment revenues. The tables below present information about the Company's
operating segments as of or for the years ended December 31, 1997, 1998 and
1999, respectively (in thousands):

DECEMBER 31, 1997
-----------------------------------------------------------------------------------

SALES OF PROPERTY
DESIGN-BUILD COMMERCIAL OPERATIONS AND
SERVICES HOMEBUILDING PROPERTY MANAGEMENT OTHER TOTAL
<S> <C> <C> <C> <C> <C> <C>
------------- ------------- --------------- ------------ ---------- ----------
Revenue . . . . . . . $ 31,707 $ 11,058 $ 11,540 $ 3,583 $ 1,508 $ 59,396
Costs . . . . . . . . 26,981 10,139 7,127 724 - 44,971
------------- ------------- --------------- ------------ ---------- ----------
Gross profit . . . . $ 4,726 $ 919 $ 4,413 $ 2,859 $ 1,508 $ 14,425
============= ============= =============== ============ ========== ==========

Depreciation and
amortization expense $ - $ - $ - $ 692 $ 701 $ 1,393

Interest expense. . . $ - $ - $ - $ ( 2,033) $ ( 1,053) $ ( 3,086)
Interest income . . . $ - $ - $ - $ 971 $ 14 $ 985

Total assets. . . . . $ 25,658 $ 14,842 $ - $ 42,962 $ 6,658 $ 90,120
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------------------------------------------------
SALES OF PROPERTY
DESIGN-BUILD COMMERCIAL OPERATIONS AND
SERVICES HOMEBUILDING PROPERTY MANAGEMENT OTHER TOTAL
------------- -------------- --------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue . . . . . . . $ 51,524 $ 27,634 $ 7,823 $ 3,515 $ 1,676 $ 92,172
Costs . . . . . . . . 40,863 23,754 7,710 815 - 73,142
------------- -------------- --------------- ------------ -------- ----------
Gross profit . . . . $ 10,661 $ 3,880 $ 113 $ 2,700 $ 1,676 $ 19,030
============= ============== =============== ============ ======== ==========

Depreciation and
amortization expense $ - $ 62 $ - $ 722 $ 903 $ 1,687

Interest expense. . . $ - $ ( 1) $ - $ ( 2,187) $( 149) $( 2,337)
Interest income . . . $ - $ - $ - $ 383 $ 722 $ 1,105

Total assets. . . . . $ 45,642 $ 71,845 $ - $ 48,377 $ 5,131 $ 170,995
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------------------------------------------------
SALES OF PROPERTY
DESIGN-BUILD COMMERCIAL OPERATIONS AND
SERVICES HOMEBUILDING PROPERTY MANAGEMENT OTHER TOTAL
-------------- -------------- --------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . $ 16,621 $ 102,713 $ 4,901 $ 3,532 $ 2,365 $ 130,132
Costs. . . . . . . . . 18,986 93,014 6,917 1,040 - 119,957
Write down of TCP's. . 25,305 - - - - 25,305
-------------- -------------- --------------- ------------ ---------- ----------
Gross profit (loss) . $ ( 27,670) $ 9,699 $ (2,016) $ 2,492 $ 2,365 $( 15,130)
============== ============== =============== ============ ========== ==========

Depreciation and
amortization expense. $ - $ 495 $ - $ 742 $ 1,125 $ 2,362

Interest expense . . . $ - $ ( 81) $ - $ ( 1,879) $( 3,370) $( 5,330)
Interest income. . . . $ - $ 27 $ - $ 816 $ - $ 843

Total assets . . . . . $ 17,170 $ 109,349 $ - $ 33,843 $ 19,054 $ 179,416
</TABLE>

<PAGE>

(23) QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables reflect the Company's unaudited quarterly results of
operations (in thousands, except per share amounts):

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------------------------------------------------
MARCH 31, 1998 JUNE 30, 1998 SEPTEMBER 30, 1998 DECEMBER 31, 1998
---------------- --------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Total revenue . . . . . . . . . . . . . $ 12,709 $ 21,868 $ 18,998 $ 38,597
Total cost of revenue . . . . . . . . . 9,602 16,624 14,937 31,979
---------------- --------------- -------------------- ------------------
Gross profit . . . . . . . . . . . . 3,107 5,244 4,061 6,618
---------------- --------------- -------------------- ------------------
General and administrative expenses . . 752 1,684 1,164 1,442
Depreciation and amortization . . . . . 391 375 431 490
---------------- --------------- -------------------- ------------------
Operating income . . . . . . . . . . 1,964 3,185 2,466 4,686
---------------- --------------- -------------------- ------------------

Total other income (expense). . . . . . (369) (460) ( 534) 106
---------------- --------------- -------------------- ------------------
Income before provision for
income taxes . . . . . . . . . . . . 1,595 2,725 1,932 4,792
Provision for income taxes . . . . . . 444 895 561 1,413
---------------- --------------- -------------------- ------------------
Net income $ 1,151 $ 1,830 $ 1,371 $ 3,379
================ =============== ==================== ==================

EARNINGS PER COMMON SHARE:

Basic
- ---------------------------------------
Net income. . . . . . . . . . . . . . . $ 0.15 $ 0.24 $ 0.18 $ 0.44
================ =============== ==================== ==================
Weighted-average number of common
shares outstanding . . . . . . . . . . 7,624,310 7,661,422 7,661,422 7,676,965
================ =============== ==================== ==================

Diluted
- ---------------------------------------
Net income. . . . . . . . . . . . . . . $ 0.15 $ 0.24 $ 0.18 $ 0.44
================ =============== ==================== ==================
Weighted-average number of common
share outstanding assuming dilution. 7,679,049 7,671,509 7,661,781 7,688,556
================ =============== ==================== ==================
</TABLE>

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------------------------------------------------------
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
---------------- --------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Total revenue . . . . . . . . . . . . . $ 29,552 $ 34,416 $ 38,650 $ 27,514
Total cost of revenue . . . . . . . . . 24,391 28,100 33,289 59,482
---------------- --------------- -------------------- -------------------
Gross profit (loss) 5,161 6,316 5,361 (31,968)
---------------- --------------- -------------------- -------------------
General and administrative expenses . . 2,040 2,362 2,813 3,506
Depreciation and amortization . . . . . 531 577 627 627
---------------- --------------- -------------------- -------------------
Operating income (loss) 2,590 3,377 1,921 ( 36,101)
---------------- --------------- -------------------- -------------------

Total other income (expense) (1,358) (1,872) (1,198) (96)
---------------- --------------- -------------------- -------------------
Income (loss) before provision
(benefit) for income taxes 1,232 1,505 723 ( 36,197)
Provision (benefit) for income taxes ( 378) ( 411) ( 176) ( 3,483)
---------------- --------------- -------------------- -------------------
Net income (loss) $ 854 $ 1,094 $ 547 $ ( 32,714)
================ =============== ==================== ===================

EARNINGS (LOSS) PER COMMON SHARE:

Basic
- ---------------------------------------
Net income (loss) $ 0.11 $ 0.14 $ 0.07 $ ( 4.19)
================ =============== ==================== ===================
Weighted-average number of common
shares outstanding . . . . . . . . . . 7,732,922 7,732,922 7,732,922 7,807,709
================ =============== ==================== ===================

Diluted
- ---------------------------------------
Net income (loss) $ 0.11 $ 0.14 $ 0.07 $ ( 4.19)
================ =============== ==================== ===================
Weighted-average number of common
share outstanding assuming dilution. 7,734,817 7,734,185 7,733,089 7,807,709
================ =============== ==================== ===================
</TABLE>

<PAGE>
(24) SUBSEQUENT EVENTS

Retirement of Debt and Sale of Properties.
- --------------------------------------------
An agreement (effective May 12, 2000) has been reached with a group of the
Company's various individual debt holders ("Debt Holder"). The agreement
provides for the Debt Holder to acquire assets from the Company with a carrying
value of approximately $11.3 million, comprised of the Company's rights to a 914
acre parcel of undeveloped land in Tucson, Arizona, an 80 acre parcel of
undeveloped land in North Las Vegas, Nevada, and two properties under
development in Phoenix, Arizona. In exchange for such assets, the Debt Holder
will forgive any and all indebtedness of the Company in favor of the Debt
Holder, currently aggregating approximately $34.1 million ($27.8 million at
December 31, 1999) and bearing interest rates ranging from 0.0% to 30.0%, and
the Company will receive the Debt Holder's interest in a condominium project
that has a fair value of approximately $8.5 million and related debt of $5.5
million (assumed by the Company) and the Debt Holder's assumed Company debt of
approximately $2.7 million on the two Phoenix, Arizona properties. The primary
asset being given in exchange for the extinguishment of debt is a contract to
acquire the 914 acre parcel, which is recorded as a $1.8 million asset on the
Company's Consolidated Balance Sheet. Through May 12, 2000 the Company has sold
three operating properties and two parcels of land, with a carrying value of
approximately $5.3 million and debt of approximately $4.2 million at December
31, 1999, for a total of approximately $6.1 million. These sale transactions
resulted in additional retirement of debt of approximately $4.2 million. The
sale of properties and extinguishment of debt will result in debt retirement of
approximately $39.9 million and a gain of approximately $26.1 million in 2000.

Reduction in Workforce
- ------------------------

The Company has decreased its workforce in the first quarter of 2000 by 68
employees or 27.9% of the Company's workforce, which is expected to result in a
reduction of approximately $2.4 million per year in payroll related costs.

VOA Agreement
- --------------

On March 13, 2000, pursuant to a purchase/settlement agreement with
Volunteers of America (VOA) National Housing Corp. which was approved by the
Company's Board of Directors in the fourth quarter of 1999, the Company issued
457,142 shares of Saxton Common Stock to acquire certain of VOA's interest in
Tax Credit Partnerships. The purchase/settlement agreement required the Company
to deliver to VOA, $1,000,000 worth of stock (457,142 shares at $2.25 per share,
the market price on March 12, 2000). These shares represent approximately 5.8%
of the Company's Common Stock issued and outstanding on March 12, 2000. The
Company also agreed to pay $325,000 in cash to VOA, of which $125,000 was paid
in the first quarter of 2000, with the remainder to be paid in annual
installments, over the next two years. The $1,325,000 has been recorded as
Investment in Joint Ventures held for sale at December 31, 1999 and was included
in the market valuation of all TCP properties.

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Saxton Incorporated:

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Saxton Incorporated and subsidiaries
(the "Company") for the year ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 results of operations and cash flows of
Saxton Incorporated and subsidiaries for the year ended December 31, 1997, in
conformity with accounting principles generally accepted in the United States
of America.

KPMG LLP

Las Vegas, Nevada
March 24, 1998

<PAGE>

AMENDMENT TO
EMPLOYMENT AGREEMENT AND
PURCHASE AGREEMENT

REFERENCE IS MADE to that certain Employment Agreement dated November 13, 1998
by and between Diamond Key Homes, Inc., and Larison P. Clark (the "Employment
Agreement"), and that certain Stock and Membership Interest Purchase Agreement
dated October 7, 1998 by and between Diamond Key Homes, Inc., Diamond Key
Construction, LLC, Larison P. Clark, Lisa Clark, and Saxton Incorporated (the
"Purchase Agreement"). Unless otherwise indicated, capitalized terms used herein
shall have the same meaning ascribed to such terms on the agreements.

RECITALS

A. WHEREAS, Executive and the Company have agreed to terminate Executive's
employment relationship, effective December 31, 1999 (the "Separation
Date");

B. WHEREAS, Seller has agreed to finance, on terms set forth below, the
Company's payment of the Deferred Cash;

C. WHEREAS, the Company agrees to release Seller from certain potential
claims under the Purchase Agreement; and

D. WHEREAS, the Company agrees to partially release Executive from the
constraints of the non-compete clause contained in the Employment
Agreement.

NOW THEREFORE, in consideration of the foregoing, the Employment Agreement
and Purchase Agreement are amended as follows:

TERMS OF AGREEMENT

1. Section 2 of the Employment Agreement is hereby amended to reflect that
the "Period of Employment" shall end as of the Separation Date.

2. Section 5(b) of the Employment Agreement is amended to read as follows:

(1) Executive agrees that during the Period of Employment, and for two
years following the end of such Period of Employment if the
termination of employment results from (i) Executive's discharge by
the Company for Cause; (ii) Executive's written notice to the Company
of his decision not to extend the Period of Employment on any Renewal
Date as provided in Section 1 hereof, or (iii) Executive's decision to
terminate this Agreement other than "for good reason" within the
meaning of Section 4(d) hereof, he will not become a stockholder,
director, officer, employee or agent of or consultant to any
corporation (other than an Affiliate), or member of or consultant to
any partnership or other entity, or engage in any business as a sole
proprietor or act as a consultant to any such entity, or otherwise
engage, directly or indirectly, in any enterprise, in each case which
uses the name "Diamond Key" or a variant thereof and/or which is in
the business of production homebuilding within ninety (90) miles of
any location in which the Company, Saxton or any Affiliate does
business or in which Executive has knowledge that the Company, Saxton
or any Affiliate has committed (financially or otherwise) to conduct
business, including but not limited to greater Phoenix and Tucson,
Arizona areas;

<PAGE>
(2) Notwithstanding the restrictions set forth in Section 5(b)(1)
above, Executive may for himself or others conduct business as a land
banker and develop and finance land for other production homebuilders
anywhere, with the exception of the project known as Gladden Farms,
located in Tucson, Arizona, in which Executive may not conduct
business as a land banker and develop and finance Gladden Farms
without the express written approval of the Company and Saxton;

(3) Competition, as used in this Section 5(b) shall not include the
ownership (solely as an investor and without any other participation
in or contact with the management of the business) of less than two
percent (2%) of the outstanding shares of stock of any corporation
engaged in any such business, which shares are regularly traded on a
national securities exchange or in an over-the-counter market.

(4) Executive agrees that for two (2) years following the Separation
Date, neither Executive nor any person or enterprise controlled by
Executive will solicit for employment any person employed by the
Company, Saxton or any other Affiliate at, or at any time within three
(3) months prior to, the time of the solicitation, without the prior
written approval of Saxton.

(5) If Executive materially breaches the foregoing covenant not to
compete and/or non-solicitation, the Company shall be entitled to
liquidated damages of $1,000,000. Executive and the Company agree that
actual damages for breach of this provision would be substantial but
difficult to calculate and that such amount represents a reasonable
estimate thereof.

3. Section 5(c) of the Employment Agreement is deleted in its entirety.

4. Pursuant to Section 2.6(b)(ii) of the Purchase Agreement, Buyer and
Seller hereby agree that the remainder of the Deferred Cash is equal to
the sum of Seven Hundred Thousand Dollars ($700,000.00) and shall be paid
as follows:

January 3, 2000 $100,000.00
February 3, 2000 $125,000.00
March 3, 2000 $150,000.00
April 3, 2000 $175,000.00
May 3, 2000 $150,000.00 + all accrued interest

<PAGE>
The foregoing terms for payment of the Deferred Cash shall be memorialized
in a promissory note the form and content of which shall be substantially
similar to Exhibit A (the "Note"), hereto.

5. Buyer and the Company hereby (i) release Seller and Clark from any and
all liability arising from or related to any of the items identified under
Sections I, II and IV in the outline dated November 29,1999 attached hereto and
(ii) agree that neither Buyer nor the Company shall be entitled to offset any
Losses pursuant to Article 8 of the Purchase Agreement against amounts due to
Seller and/or Clark in connection with the Note.

6. Except as expressly amended hereby, the Employment Agreement and Purchase
Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment to the
Employment Agreement and Purchase Agreement as of this 6th day of December,
1999.

DIAMOND KEY HOMES, INC., DIAMOND KEY CONSTRUCTION, LLC,
An Arizona corporation, An Arizona limited liability company,

By: SAXTON INCORPORATED,
By: ------------------------------- a Nevada corporation, managing
James C. Saxton, CEO member

By:
-------------------------------
James C. Saxton, President
- -------------------------------
LARISON P. CLARK
SAXTON INCORPORATED,
a Nevada corporation

- ------------------------------- By:-------------------------------
LISA CLARK James C. Saxton, President

<PAGE>
EXHIBIT A
---------
PROMISSORY NOTE

$700,000.00 U.S. Las Vegas, Nevada
December 6, 1999

FOR VALUE RECEIVED, SAXTON INCORPORATED, a Nevada corporation ("Maker"),
promises to pay to LARISON P. CLARK and LISA B. CLARK, husband and wife, or
order (collectively "Holder"), the principal sum of SEVEN HUNDRED THOUSAND
DOLLARS ($700,000.00), together with interest thereon from the date hereof at
the rate of twelve percent (12%) per annum. This Note is given to evidence the
remaining balance of the "Deferred Cash" due Holder under Section 2.6(b)(ii) of
that certain Stock and Membership Interest Purchase Agreement dated as of
October 7, 1998 between Holder, Maker, Diamond Key Homes, Inc. and Diamond Key
Construction LLC.

PAYMENTS. Commencing on January 3, 2000 and continuing on the third (3rd) day of
- --------
the next calendar month, Maker shall make monthly payments to the Holder in the
following amounts:

January 3, 2000 $100,000.00
February 3, 2000 $125,000.00
March 3, 2000 $150,000.00
April 3, 2000 $175,000.00
May 3, 2000 $150,000.00

All remaining unpaid interest accrued thereon shall be due and payable in full
on May 3, 2000. Payments shall be made in lawful monies of the United States of
America and delivered to Holder at 3013 E. Ocotillo Road, Phoenix, Arizona
85016, or such other address as Holder may give Maker in writing from time to
time. All payments shall be made pursuant to the attached procedures. All
payments shall be applied first to any late charges accruing hereunder, then to
accrued interest and finally to the principal balance hereof.

<PAGE>
PREPAYMENT. Maker may prepay this Note in part or in full at any time, without
- ----------
premium or penalty.

DEFAULT. Time is of the essence hereof. If Maker fails to pay any sums due
- -------
hereunder within five (5) days after the same are due, the entire unpaid amount
of this Promissory Note shall immediately become due and payable. There shall be
added to said delinquent sums a late charge equal to five percent (5%) of the
amount due. In addition, all delinquent sums hereunder (whether principal,
interest and/or late charges) shall bear interest from the date due until fully
paid, at the rate of eighteen percent (18%) per annum, compounded monthly. Also,
upon any non-payment or other default under this Note, provided said default is
not cured within five (5) days of Maker's receipt of written notice of the same,
all provisions and restrictions under Section 5 of the employment agreement
dated as of November 13, 1998 by and between Diamond Key Homes, Inc. and Larison
P. Clark (the "Employment Agreement") or any related restrictions pursuant to
the Employment Agreement shall terminate effective upon Maker's failure to cure
as provided for herein.

ENFORCEMENT. Maker hereby waives presentment, protest and notice of dishonor. In
- -----------
the event Maker fails to pay any sums due hereunder as and when the same are due
and payable, Holder shall have the right, at its option and without limiting any
other rights and remedies available to Holder, to declare the entire principal
amount hereof and any interest and late charges accrued hereunder, to be
immediately due and payable in full. In the event of any action to enforce the
provisions of this Note or to collect any sums due hereunder, the prevailing
party shall be entitled to recover its costs and reasonable attorneys therein.

MISCELLANEOUS. This Note shall be binding upon Maker and its successors and
- -------------
assigns. This Note shall be governed by and controlled in accordance with the
laws of the State of Arizona without resort to conflict of law principals. Maker
hereby submits to the jurisdiction of the Federal Court or the State Superior
Court in Phoenix, Arizona, and hereby waives any right to assert the defense of
inconvenient forum or venue in connection with any action therein commenced with
respect to this Note. The terms and provisions of this Note may not be amended
except by written instrument executed by Maker and Holder. If any provision
hereof is declared invalid or unenforceable by any court of competent
jurisdiction, said determination shall not affect the validity or enforceability
of the remaining provisions hereof.

<PAGE>
MAKER:
- -----

SAXTON INCORPORATED,
a Nevada corporation

By:
-------------------------------
James C. Saxton, President

<PAGE>
Diamond Key/ Larry Clark
$700,000 Issues
11/29/99

1. Undisclosed Liabilities

At this point I agree with Dan's summary showing LC owing $77,379. This is
subject to a final audit.

II. Undisclosed Assets/Income

LC is trying to claim income from escrow income (escrow income not refunded
to potential buyers who fell out) as well as income from a summary
judgement amounting to $114,282. There is no provision in the agreement for
undisclosed assets/ income. The summary judgement is expected to be settled
for the full amount this week.

DK has found another undisclosed asset for $48,000 on an overpayment to a
sub. That check is being cut this week.

III. Warranty Reserve

At this point I agree with Dan's summary showing SI/DK owing $40,547. This
is subject to final audit.

IV. Legal Issues

A. Post Office/ Val Vista- DK still has not collected on the shared
development costs between these two groups. Status is uncertain as to
collection. Estimated to be $125,000. Talked to Dan: he says a check
for $114,000 from the Post Office will be here before 12/31/99. Val
Vista has offered to settle at $70,000, DK has countered and Dan
thinks they will end up at about $85,000. The total of $199,000 will
exceed the book receivable.

B. Sales Tax Audit- Unresolved, yet I think we all agree this is a dumb
case. Dan Garret owes me a call back concerning the status.

C. 3 Lots at Sonaran Vista- DH raised this issue this morning and I have
not had a chance to research it. Dan says they have not had a loss on
any lots or specs to-date. DK still has a few lots left however.

D. Employment Litigation- 4 cases totaling $70,000. If anything is paid
some of it will be ours, but some would be LC 's.

E. Professional Fees Audit- Some of the fees paid to date may be LC's
costs not ours. This audit has not yet been done.

F. Strip Mining Buy-Back House- if this house pre dates our purchase
of DK, it may be an adjustment item.

PURCHASE AGREEMENT
------------------

THIS PURCHASE AGREEMENT (the "Agreement") is entered into as of the 12th
day of January, 2000, by and between VOA National Housing Corporation, a
Louisiana not-for profit corporation ("VOA National"), VOA Nevada Affordable
Housing Corporation, a Nevada not-for-profit corporation, VOA Las Vegas
Affordable Housing Corporation I, a Nevada not-for-profit corporation, VOA
Saratoga Affordable Housing Corporation II, a Nevada not-for-profit corporation
("VOA Saratoga"), Saxton Incorporated, a Nevada corporation ("Saxton"), Lake
Tonopah, Limited Partnership, a Nevada limited partnership ("Tonopah LP"), Lake
Tonopah, LLC, a Nevada limited liability company ("Tonopah LLC"), Saratoga Palms
North II Limited Partnership, a Nevada limited partnership ("SPNII"), Northtown
Development, Ltd., a dissolved California limited partnership, and Nevada
Housing Opportunities LLC, a Nevada limited liability company ("NHO").

RECITALS
--------

A. WHEREAS Tonopah LP was established to acquire property and develop
said property into the Lake Tonopah Apartments, to lease the Lake Tonopah
Apartments and to perform activities incidental or related to the foregoing,
including management and operation of the Lake Tonopah Apartments. VOA Nevada
and Tonopah LLC are general partners of Tonopah LP;

B. WHEREAS on or about July 26, 1996, VOA National entered into a
property management agreement with Tonopah LP for VOA National's management of
Lake Tonopah Apartments ("Tonopah Management Agreement");

C. WHEREAS Tonopah LP, Saxton, Tonopah LLC and VOA Nevada entered into
a Development Agreement, an Amended and Restated Development Agreement and
Addendum to Development Agreement (collectively "Tonopah Development Agreement")
to facilitate the Lake Tonopah Apartments;

D. WHEREAS SPNII was established to acquire property and develop
Said property into the Saratoga Palms North II Apartments, to lease the
Saratoga Palms North II Apartments and to perform activities incidental or
related to the foregoing, including management and operation of the Saratoga
Palms North II Apartments. VOA Saratoga and NHO are general partners of
SPNII;

E. WHEREAS on or about July 29, 1996, VOA National entered into a
property management agreement with SPNII for VOA National's management of
Saratoga Palms North II Apartments ("SPNII Management Agreement");

F. WHEREAS SPNII, SAXTON, NHO and VOA Saratoga entered into a
Development Agreement, an Amended and Restated Development Agreement and
Addendum to Development Agreement (collectively the "SPNII Development
Agreement") to facilitate the construction of the Saratoga Palms North
II Apartments.

G. WHEREAS a dispute has arisen and exists between the parties with
respect to (1) VOA National's right to manage the Lake Tonopah Apartments
and the Saratoga Palms North II Apartments; and (2) the parties' respective
rights under the Development Agreements.

H. WHEREAS on or about June 5, 1998, VOA National filed a Complaint in
the District Court of Clark County, Nevada (the "Court") as Case No. A389300
(the "Litigation") to adjudicate the rights of the parties with respect to the
above referenced dispute;

NOW, THEREFORE, the parties here by agree as follows:

1. No Admission of Liability: None of the parties admits any liability, but
-------------------------
rather enters in this agreement for the sole purpose of resolving their disputed
claims without the cost and expense of litigation. All parties acknowledge that
they are represented by council of their choosing.
2. Recitals: The foregoing Recitals are true and correct and are
incorporated herein.

3. Payment of Settlement Funds:
------------------------------
a. In consideration of the terms set forth herein, Saxton shall pay to VOA
National, VOA Nevada and VOA Saratoga (collectively, the "VOA Entities") the
consideration set forth below, hereby valued at One Million Three Hundred Twenty
Five Thousand Dollars ($1,325,000.00) (the "Settlement Amount"), which the VOA
Entities may distribute among themselves in the manner that they choose.
(1) The sum of One Hundred Twenty Five Thousand Dollars ($125,000.00) shall
be paid in cash upon execution of this Agreement;
(2) The sum of One Hundred Thousand Dollars ($100,000.00) shall be paid in
cash on the first anniversary date of the execution of this Agreement;
(3) The sum of One Hundred Thousand Dollars ($100,000.00) shall be paid in
cash on the second anniversary date of the execution of this Agreement; and
(4) Shares of common stock, par value $0.001 per share (the "Common Stock"),
of Saxton with an aggregate value of One Million Dollars ($1,000,000.00), with
such shares to be valued at the average closing market price of Saxton's Common
Stock on the NASDAQ Stock Market (or in the absence of any trading on any such
day the average of the closing bid and asked quotations) on each of last twenty
(20) trading days immediately preceding the date of this Agreement (the "VOA
Common Stock"). The VOA Entities shall be entitled to registration rights with
regard to the VOA Common Stock as set forth in Exhibit A attached hereto.

4. Transfer of Partnership Interests: In consideration of receipt of the
------------------------------------
Settlement Amount;
a. VOA Nevada hereby conveys, transfers and assigns all rights, title and
interest to any and all partnership interest it holds in Tonopah LP to Tonopah
LLC.
b. VOA Saratoga hereby conveys, transfers and assigns all rights, title and
interest to any and all partnership interest it holds in SPNII and NHO.
5. Termination of Contract Rights: In consideration of the settlement terms
------------------------------
set forth herein:
a. Tonopah LP and VOA National hereby agree to terminate the Tonopah
Management Agreement upon execution of this Agreement. Each party agrees to
relinquish and waive any and all rights it holds under the Tonopah Management
Agreement, and release the other from all obligations under the Tonopah
Management Agreement.
b. Tonopah LP, Saxton, Tonopah LLC and VOA Nevada hereby agree to terminate
the Tonopah Development Agreement upon execution of this Agreement. Each party
agrees to relinquish and waive any and all rights it holds under the Tonopah
Development Agreement, and release the other from all obligations under the
Tonopah Development Agreement.
c. SPNII and VOA National hereby agree to terminate the SPNII Management
Agreement upon execution of this Agreement. Each party agrees to relinquish and
waive any and all rights it holds under the SPNII Management Agreement, and
release the other from all obligations under the SPNII Management Agreement.
d. SPNII, Saxton, NHO and VOA Saratoga hereby agree to terminate the SPNII
Development Agreement upon execution of this Agreement. Each party agrees to
relinquish and waive any and all rights it holds under the SPNII Development
Agreement, and release the other from all obligations under the SPNII
Development Agreement.
6. Release and Indemnification:
-----------------------------
a. Except with respect to obligations created by or arising out of this
Agreement, the VOA Parties (including VOA Las Vegas Affordable Housing
Corporation I, a non-for-profit corporation), for themselves and for their
respective former and current successors, assigns, affiliates, agents,
attorneys, representatives, consultants, partners, officers, directors,
shareholders, employees and insurers (the "VOA Releasors"), and for each of
them, hereby remise, release, acquit and forever discharge Tonopah LP, Tonopah
LLC, Saxton, SPNII, Northtown Development, Ltd., and NHO (collectively, the
"Saxton Parties") and their respective former and current successors, assigns,
affiliates, agents, attorneys, representatives, partners, officers, directors,
shareholders, employees and insurers and each of them, from any and all manner
of actions, suits, liens, debts, dues, damages, claims (including without
limitation, claims under contracts or other agreements of any kind),
liabilities, judgments, bonds, executions or demands (collectively, "Claims") of
whatever nature, kind of description whatsoever, known and unknown, suspected
and unsuspected, disclosed and undisclosed, fixed and contingent, whether
directly of by way of indemnity, contribution or otherwise, which the VOA
Releasors ever had, now have or hereafter can, shall or may have by reason of
any matter, cause of circumstance whatsoever arising or occurring prior to the
date of this Agreement, including without limitation all Claims: (1) that were
asserted or could have been asserted in the Litigation; and (2) arise out of or
relate in any way to the Lake Tonopah Apartments, the Tonopah Management
Agreement, the Tonopah Development Agreement the Saratoga Palms North I
Apartments, the Saratoga Palms North II Apartments, the SPNII Management
Agreement or the SPNII Development Agreement.
b. Except with respect to obligations created by or arising out of this
Agreement, the Saxton Parties, for themselves and for their respective former
and current successors, assigns, affiliates, agents, attorneys, representatives,
partners, officers, directors, shareholders, employees and insurers, and for
each of them, hereby remise, release, acquit and forever discharge the VOA
Parties (including VOA Las Vegas Affordable Housing Corporation I, a
non-for-profit corporation), and their respective former and current successors,
assigns, affiliates, agents, attorneys, representatives, partners, officers,
directors, shareholders, employees and insurers and each of them, from any and
all manner of Claims of whatever nature, kind or description whatsoever, known
and unknown, suspected and unsuspected, disclosed and undisclosed, fixed and
contingent, whether directly or by way of indemnity, contribution or otherwise,
which the Tonopah Releasers ever had, now have or hereafter can, shall or may
have by reason of any matter, cause or circumstance whatsoever arising or
occurring prior to and including the date of this Agreement, including without,
limitation all Claims (1) that were asserted or could have been asserted in the
Litigation; and (2) arise out of relate in any way to the Lake Tonopah
Apartments, the Tonopah Management Agreement, the Tonopah Development Agreement,
the Saratoga Palms North I Apartments, the Saratoga Palms North II Apartments,
the SPNII Management Agreement or the SPNII Development Agreement.
c. It is the intention of each of the parties to fully and finally settle
and release all Claims between them. Each party hereby acknowledges that such
party is aware that such party may later discover facts in addition to or
different from those which such party now knows or believes to be true with
respect to the subject matter of this Agreement and that it is such the party's
intention, notwithstanding, to fully, finally and forever settle and release all
of the claims released by this Agreement, known or unknown, suspected, or
unsuspected, which now exist, may exist or previously existed between the
parties. In furtherance of such intention, the releases given in this Agreement
shall be and shall remain in effect as full and completed releases,
notwithstanding the discovery or existence of any such additional or different
facts. The parties further accept and assume the risk that such facts may turn
out to be different from the facts now known or believed to be true by the
parties and agree that the releases given in this Agreement shall remain in all
respects effective and shall not be subject to termination or rescission by
reason of any such difference in fact.
7. Dismissal of Litigation: Concurrently with the execution of this
-------------------------
Agreement, VOA National, Saxton, Tonopah LP, SPNII and NHO shall execute a
stipulation and order to dismiss the Litigation with prejudice. Each party
shall bear its own attorney's fees and costs (the "Stipulation").
Notwithstanding the foregoing, the parties hereby stipulate and agree that the
Court shall retain jurisdiction over the enforcement of this Agreement.
8. Additional Documentation: Cooperation: Each party shall, upon the
---------------------------------------
request of the other, execute, acknowledge and deliver to the other party any
instrument that may be required in order to carry out the terms of this
Agreement. Each party appears to cooperate to effectuate the terms of this
Agreement and shall take all appropriate action necessary or useful in doing so.
9. Representations and Warranties:
--------------------------------
a. The parties hereto represent and warrant that they have read and
understood this Agreement and that they are the parties legally entitled to
settle and release every Claim herein referred to and to give a valid, full and
final acquittance therefor.
b. Each of the parties represents and warrants that it has full power and
authority to execute this Agreement and that the Agreement, when executed and
delivered, constitutes its valid and binding agreement.
c. Each of the signatories hereto represents and warrants that he or she has
been duly authorized to execute this Agreement on behalf of the party or parties
for whom she or he signs.
d. This Agreement contains the entire agreement and understanding between
the parties concerning the subject matter thereof, and supersedes and replaces
all prior negotiations and agreements, written or oral. No waiver, amendment or
modification of any of the provisions of this Agreement shall be of any force or
effect unless contained in writing signed by each of the parties hereto. Each
party hereto acknowledges that no other party, and no agent or attorney of any
other party, has made any promise, representation or warranty whatsoever,
express or implied, not contained in this Agreement to induce the execution of
such document and each party hereto acknowledges that he, she or it has not
executed any of these documents in reliance upon any promise, representation or
warranty not expressly contained therein.
e. Each party hereto represents and warrants that is has not heretofore
assigned or transferred, or purported to assign or transfer, to any firm,
corporation, entity or person, any of the Claims herein released, and knows of
no third party that asserts or purports to have an interest in any such released
Claim.
f. The Saxton Parties represent and warrant that all necessary approvals
(e.g., corporate, governmental, lender, etc.) have been obtained to effectuate
the intents and purposes of this Agreement.
10. Miscellaneous:
-------------
a. This Agreement is binding upon the parties' heirs, successors, assigns,
employees, agents, representatives, or anyone claiming by or through them.
b. This Agreement shall be governed by and construed in accordance with the
laws of Nevada. Any controversy or claim arising from or relating to this
Agreement, the Lake Tonopah Apartments, the Tonopah Management Agreement, the
Tonopah Development Agreement, the Saratoga Palms North II Apartments, the SPNII
Management Agreement or the SNPII Development Agreement shall be resolved by
the Court, pursuant to the reservation of jurisdiction set forth in Section 7,
hereof. To the extent the Court does not, or chooses not to retain jurisdiction
over the aforementioned matters, any controversy or claim shall be resolved via
binding arbitration in Clark County, Nevada, under the Commercial Arbitration
Rules of the American Arbitration Association. Judgement on the arbitration
decision or award may be entered in any court having jurisdiction. The
prevailing party in any such proceeding shall be entitled to recover all
expenses, including reasonable attorneys' fees and nontaxable costs, incurred
with respect thereto.
c. Time is of the essence for this Agreement.
d. This Agreement has been negotiated between the parties. Any rule of
construction regarding construing the terms or language hereof against the
drafter shall have no bearing or effect.
e. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Telecopy transmittals ("faxes") of this Agreement and
faxes of signatures hereon, respectively shall be deemed originals thereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.

VOA NATIONAL: VOA NEVADA:
- ------------- -----------
VOA National Housing Corporation, VOA Nevada Affordable Housing Inc.,
Louisiana not-for-profit corporation a Nevada not-for-profit

By: __________________________ By: ____________________________
Name: Ron Patterson Name: Ron Patterson
Title: Senior Vice President Title: Assistant Secretary

VOA SARATOGA: SAXTON:
- ------------- ------
VOA Saratoga Affordable Housing Saxton Incorporated, a Nevada
Corporation II, a Nevada Not-for-profit Corporation
corporation

By: __________________________ By: ____________________________
Name: Ron Patterson Name: James C. Saxton, President
Title: Assistant Secretary

TONOPAH LP: SPNII:
- ------------- ------
Lake Tonopah Limited Partnership, a Saratoga Palms North II Limited
Nevada limited partnership Partnership, a Nevada limited
partnership

By: Lake Tonopah Limited Liability By: Nevada Housing Opportunities LLC
Company, a Nevada limited liability a Nevada limited liability
company, its general partner company, its general partner

By: Tonopah Manager, Inc., a Nevada By: Saxton, Incorporated,
Corporation, its managing member a Nevada corporation, its
managing member

By: By:
--------------------------- ---------------------------
James C. Saxton, President James C. Saxton, President

TONOPAH LLC: NHO:
- ------------ ---
Lake Tonopah Limited Liability Nevada Housing Opportunities LLC, a
Company, a Nevada limited liability Nevada limited liability company
company

By: Tonopah Manager, Inc., a Nevada By: Saxton Incorporated, a Nevada
corporation, its managing member corporation, its managing member

By: _______________________ By: _______________________
James C. Saxton, President James C. Saxton, President

VOA Las Vegas Affordable Housing Northtown Development, Ltd., a
Corporation I, a Nevada not-for-profit dissolved California limited
Corporation partnership

By: ___________________________ By: ________________________________
Name: Ron Patterson James C. Saxton, General Partner
Title: Assistant Secretary

<PAGE>
EXHIBIT A
---------

REGISTRATION RIGHTS
-------------------

(A) In connection with the registration of the VOA Common Stock pursuant to
Section 3(a)(4) of the Settlement Agreement, Saxton will:

(i) Prepare and file with the Securities and Exchange Commission within 30
days after the date of the Settlement Agreement a registration statement under
the Securities Act of 1933 (the "1933 Act") on an appropriate form under Rule
415 under the 1933 Act or any similar rule that may be adopted by the SEC (the
"Registration Statement"), with respect to the offer and sale of the VOA Common
Stock by the VOA Entities from time to time in accordance with the methods of
distribution elected by the VOA Entities and set forth in such Registration
Statement, and use its reasonable best efforts to cause such Registration
Statement to become effective for such period as may be reasonably necessary to
effect the sale of the VOA Common Stock by the VOA Entities; provided, however,
that Saxton shall not be obligated to cause such registration statement to
become or remain effective past the second anniversary of the date of the
Settlement Agreement; or such later date after which the VOA Entities shall be
able to sell the VOA Common Stock without the need to comply with paragraphs
(c), (e), (f),and (h) of Rule 144 under the 1933 Act; provided, further, that in
the event that Saxton proposes to undertake an underwritten public offering
immediately prior to the filing of or during the pendency of effectiveness of
such registration statement, the VOA Entities will be entitled to join the
underwritten offering with respect to all or a portion of the VOA Common Stock
requested by the VOA Entities to be included therein (subject to the approval of
the managing underwriter, which may exclude such shares entirely or require pro
rata cut-back with other selling shareholders) and, to the extent they do not so
join such underwritten offering, the VOA Entities shall, if so required by the
underwriters, execute a "lock-up" agreement with respect to the sale or other
disposition of any VOA Common Stock not so included or permitted to be included
for a period commencing with the date of the initial offering of shares by the
underwriters and ending 135 days thereafter. The term "Registration Statement"
shall include any amendments and supplements thereto, including any
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein. The term "Prospectus" shall mean a prospectus included in the
Registration Statement (including a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the 1933 Act) as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of the VOA Common Stock.

(ii) prepare and file with the Securities and Exchange Commission such
amendments to such registration statement and supplements to the Prospectus
contained therein as may be necessary to keep such Registration Statement
effective for such period set forth herein;

(iii) furnish to the VOA Entities such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as such VOA Entities may reasonably request in order to facilitate the
public offering of such shares of VOA Common Stock by the VOA Entities;

(iv) promptly take action necessary to (x) make the Registration Statement,
and any amendment thereto, and any Prospectus forming a part thereof, and any
amendment or supplement thereto (and each report or other document incorporated
therein by reference, in each case) comply in all material respects with the
1933 Act, the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, (y) to correct any Registration Statement, which, when
it becomes effective, contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (z) to correct any Prospectus forming a
part of any Registration Statement which includes an untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made, not
misleading.

Upon the occurrence of any event contemplated in clauses (y) or (z) above,
such actions shall include preparing a post-effective amendment to any
Registration Statement or any amendment or supplements to the Prospectus or to
file any other document necessary to cure such deficiency. Saxton agrees to
promptly notify the VOA Entities of the occurrence of any event contemplated in
clauses (y) or (z) above.

(v) (1) Advise the VOA Entities, promptly after it receives notice or
obtains knowledge, of (1) the issuance of any stop order by the Securities and
Exchange Commission suspending the effectiveness of such Registration Statement
or the initiation or threatening of any proceeding for that purpose, or (2)
suspension of the qualification of any VOA common stock for sale in any
jurisdiction or the initiation of any proceeding for such purpose, and promptly
use its reasonable best efforts to prevent the issuance of any stop order, or
such suspension, and to obtain the withdrawal of such stop order or suspension
should it be issued.

Each VOA Entity, upon receipt of any notice from Saxton of the happening of
any event of the kind described in Section (A)(iv)(y) or (z), or (v), will
forthwith discontinue disposition of shares of VOA Common Stock until each VOA
Entity's receipt of the copies of the supplemented or amended prospectus
contemplated by Section (A)(iv) or until it is advised in writing by Saxton that
the use of the Prospectus may be resumed and has received copies of any
additional or supplemental filings which are incorporated by reference in the
Prospectus. If so directed by Saxton, each VOA Entity will deliver to Saxton
all copies, other than permanent file copies then in each VOA Entity's
possession, of the Prospectus required to be supplemented or amended.

(B) Notwithstanding anything to the contrary herein, if at any time after
the filing of a registration statement or after it is declared effective by the
Securities and Exchange Commission, Saxton determines, in its reasonable good
faith business judgement, that such registration and the offering of shares of
VOA Common Stock covered by such registration would adversely affect in any
material way any financing, acquisition, corporate reorganization or other
material transaction or development involving Saxton or any of its subsidiaries
or require Saxton to disclose material matters that otherwise would not be
required to be disclosed at such time and such disclosure of material matters
would adversely affect Saxton in a material way, then Saxton may require the
suspension of the distribution of any share of (VOA Common Stock (a "Blackout
Period") by giving notice to the VOA Entities; provided, however, that Saxton
shall use reasonable efforts to cause all Blackout Periods hereunder not to
exceed a total duration of four (4) months in any 12-month period. Any such
notice need not specify the reasons for such suspension if Saxton determines, in
its reasonable good faith business judgement, that doing so would adversely
affect in a material way such transaction or development or would result in the
disclosure of material nonpublic information. In the event that such notice is
given, then until Saxton has determined, in its reasonable good faith business
judgment, that such registration and distribution would no longer materially
interfere with the matters described in the preceding sentence and has given
notice thereof to the VOA Entities, Saxton's obligations hereunder will be
suspended. Saxton shall extend the period of time Saxton is required to
maintain effective any registration statement required pursuant to clauses (i)
and (ii) hereof by a length of time equal to the aggregate length of the
Blackout Periods.

(i) Each VOA Entity will cooperate with Saxton in connection with the
preparation of the applicable registration statement, and for so long as Saxton
is obligated to keep such registration statement effective, each VOA Entity will
provide to Saxton, in writing in a timely manner, for use in such registration
statement (and expressly identified in writing as such), all information
regarding each VOA Entity and such other information as may be necessary and
required by applicable law to enable Saxton to prepare such registration
statement and the related prospectus covering the applicable shares of VOA
Common Stock and to maintain the currency and effectiveness thereof;

(iii) Each VOA Entity will enter into such agreements with Saxton and any
broker-dealer or similar securites industry professional containing
representations, warranties, indemnities and agreements as are customarily
entered into and made by a seller of securities and seller's controlling
shareholders with respect to secondary.

(iv) during such time as any VOA Entity may be engaged in a distribution of
the VOA Common Stock, such VOA Entity will comply with all applicable laws,
including Regulation M promulgated under the Securities Exchange Act of 1934,
and, to the extent required by such laws, will, among other things: (a) not
engage in any stabilization activity in connection with the securities of Saxton
in contravention of such rules; (b) distribute the shares of VOA Common Stock
acquired by it solely in the manner described in the applicable registration
statement; (c) if required by applicable law, rules or regulations, cause to be
furnished to each agent or broker-dealer to or through whom such shares may be
offered, or to the offeree if an offer is made directly by such VOA Entity, such
copies of the applicable prospectus (as amended and supplemented to such date)
and documents incorporated by reference therein as may be required by such
agent, broker-dealer or offeree, provided that Saxton shall provide such VOA
Entity with an adequate number of copies thereof; and (d) not bid for or
purchase any securities of Saxton;

(v) on notice from Saxton of the happening of any of the events specified in
Section (A)(iv) or (v), or that, as set forth in section (B), it requires the
suspension by the VOA Entities of the distribution of any of the shares of VOA
Common Stock owned by the VOA Entities, then the VOA Entities will cease
offering or distributing the shares of VOA Common Stock owned by the VOA
Entities until the offering and distribution of the shares of VOA Common Stock
owned by the VOA Entities may recommence in accordance with the terms hereof and
applicable law; and the VOA Entities shall not sell more than 10,000
shares, in the aggregate, of VOA Common Stock during any one month pursuant to
any registration statement provided for hereunder or otherwise.

(D) Saxton shall pay all expenses incurred by Saxton in complying with the
obligations hereunder. Fees and disbursements of counsel and accountants for
the VOA Entities, underwriting discounts and commissions and transfer taxes for
the VOA Entities and any other expenses incurred by the VOA Entities shall be
borne by the VOA Entities.

(E) The registration rights granted to the VOA Entities pursuant hereto are
not assignable. Any assignment shall be null and void ab initio.

(F) Each VOA Entity acknowledges that (i) it is an "accredited investor"
within the meaning of Regulation D promulgated under the 1933 Act, (ii) it is
acquiring the shares of VOA Common Stock for its own account, and (iii) that it
is not acquiring the shares of VOA Common Stock with a view to any distribution
theory within the meaning of the 1933 Act. Accordingly, each VOA Entity agrees
that it will not offer or sell shares of VOA Common Stock other than (x)
pursuant to an effective registration statement under the 1933 Act or (y)
pursuant to any exemption from the registration requirements of the 1933 Act.

(G) Each VOA Entity acknowledges that the shares of VOA Common Stock have
not been and will not, except as provided herein, be registered under the 1933
Act.

(H) Each VOA Entity acknowledges that shares of VOA Common Stock it acquires
hereunder will contain customary 1933 Act legends.

(I) Indemnification
---------------

(i) Indemnification by Company. Saxton agrees to indemnify and hold
----------------------------
harmless each holder of VOA Common Stock, any officer, director, employee or
agent of any such holder and any person or entity who controls any such party
within the meaning of either Section 15 of the 1933 Act of Section 20 of the
Exchange Act (each, and "Indemnified Holder") from and against any and all loss,
claim, damages, liability or expense (including the reasonable costs of
investigation and legal expenses ("Claims") arising out of or based upon any
untrue statement of a material fact contained in any Registration Statement
(including all material and documents incorporated therein by reference) or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made not misleading except insofar as such
untrue statement or alleged untrue statement or omission or alleged omission was
based upon information furnished in writing to Saxton by such Indemnified Holder
expressly for use in the document containing such untrue statement or alleged
untrue statement or omission or alleged omission.

(ii) Indemnification Procedures. If any action or proceeding (including any
governmental investigation or inquiry) shall be brought or asserted against an
Indemnified Holder in respect of which indemnity may be sought from Saxton, such
Indemnified Holder shall promptly notify Saxton in writing, and Saxton shall
assume the defense thereof, including the employment of counsel satisfactory to
such Indemnified Holder and the payment of all expenses.

Such Indemnified Holder shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such separate counsel shall be the expense of such Indemnified
Holder unless (i) Saxton has agreed to pay such fees and expenses, (ii) Saxton
shall have failed to assume the defense of such action or proceeding or has
failed to employ counsel satisfactory to such Indemnified Holder in any such
action or proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Holder and
Saxton, and such Indemnified Holder shall have been advised by counsel that
there may be one or more legal defenses available to such Indemnified Holder
that are different from or additional to those available to Saxton.

If such Indemnified Holder notifies Saxton in writing that it elects to
employ separate counsel at the expense of Saxton as permitted by the provisions
of the preceding Section, Saxton shall not have the right to assume the defense
of such action or proceeding on behalf of such Indemnified Holder. The
foregoing notwithstanding, Saxton shall not be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any time for such
Indemnified Holder and any other Indemnified Holders (which firm shall be
designated in writing by such Indemnified Holders) in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances.

(iii) Indemnification by Holder of VOA Common Stock. Each (holder of VOA
------------------------------------------------
Common Stock) agrees to indemnify and hold harmless Saxton, its directors and
officers and each Person, if any, who controls Saxton within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from Saxton to such holder, but only with
respect to information relating to such holder furnished in writing by such
holder expressly for use in any Registration Statement, Prospectus or
preliminary Prospectus. In no event, however, shall the liability hereunder of
any selling holder of VOA Common Stock be greater than the amount of proceeds
received by such holder upon the sale of the VOA Common Stock.

In case any action or proceeding shall be brought against Saxton or its
directors or officers of any such controlling person, in respect of which
indemnity may be sought against a holder of VOA Common Stock, such holder shall
have the rights and duties given Saxton and Saxton or its directors or officers
or such controlling person shall have the rights and duties given to each
Indemnified Holder by Sections I (i) and I (ii) above.

(iv) Contribution. If the indemnification provided for in this Section I
------------
(iv) is unavailable to an indemnified party under Section I (i) or Section I
(iii) above (other than by reason of exceptions provided in those sections) in
respect of any Claims referred to in such sections, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Claims in such proportion as in appropriate to reflect the relative
fault of Saxton on the one hand and of the Indemnified Holder on the other in
connection with the untrue statements or omissions which resulted in such Claims
as well as any other relevant equitable considerations. The amount paid or
payable by a party as a result of the Claims referred to above shall be deemed
to include, subject to the limitations set forth in Section I (ii), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.

The relative fault of Saxton on the one hand and of the Indemnified Holder
on the other shall be determined by reference to, among other things, whether
the untrue statement or alleged untrue statement or omission or alleged omission
relates to information supplied by Saxton or by the Indemnified Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or alleged untrue statement or omission
or alleged omission.

Saxton and each holder of VOA Common Stock agree that it would not be just
and equitable if contribution pursuant to this Section I (iv) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above.

No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

List of Subsidiaries of the Company
Exhibit 21.1

NAME STATE OF INCORPORATION OR ORGANIZATION
---- ------------------------------------------

Chancellor Capital Nevada

Big Tyme Food Marts, Inc. Nevada

Nevada Housing Opportunities Manager, LLC Nevada

RealNet Commercial Brokerage, Inc. Nevada

Maxim Homes, Inc. Utah

Diamond Key Homes, Inc. Arizona

Diamond Key Construction, LLC Arizona

HomeBanc Mortgage Corporation Arizona

Levitz Plaza Manager, Inc. Nevada

Saxton Arizona Construction, Inc. Arizona

Saxton Nevada, Inc. Nevada

Saxton Utah Construction Utah

Saxton Utah Inc. Utah

Max Management, Inc. Utah

All subsidiaries listed above are wholly-owned by Saxton Incorporated.

<ARTICLE> 5
<MULTIPLIER> 1000

<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6268
<SECURITIES> 0
<RECEIVABLES> 16100 <F1>
<ALLOWANCES> 100
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 145232
<DEPRECIATION> 5560
<TOTAL-ASSETS> 179416
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 8968
<TOTAL-LIABILITY-AND-EQUITY> 179416
<SALES> 124235
<TOTAL-REVENUES> 130975
<CGS> 144222 <F2>
<TOTAL-COSTS> 145262
<OTHER-EXPENSES> 13120 <F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5330
<INCOME-PRETAX> (32737)
<INCOME-TAX> (2518)
<INCOME-CONTINUING> (30219)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30219)
<EPS-BASIC> (3.84)
<EPS-DILUTED> (3.84)

<FN>
<F1>Recievables are comprised of due from tax credit partnerships, construction
contracts receivables, notes recievable and due from related parties.
<F2>Cost of goods sold is comprised of constuction, write-down of tax
partnerships to fair value, cost of homes sold and cost of commercial properties
sold.
<F3>Other expenses are comprised of general and administrative, depreciation
and amortization expenses and joint venture losses

</TABLE>