MOD U KRAF HOMES INC
10KSB, 1999-03-25
PREFABRICATED WOOD BLDGS & COMPONENTS
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I enclose for filing the Annual Report on Form 10-KSB of Mod-U-
Kraf Homes, Inc. for the year ended December 31, 1998.  The 
financial statements included in the Annual Report do not reflect 
any change from the preceding year in any accounting principles or 
practices or in the methods of application of those principles or 
practices.

                    SECURITIES AND EXCHANGE COMMISSION
                         Washington, D. C.  20549

                                FORM 10-KSB

      (Mark One)
     [ X ] Annual report under Section 13 or 15(d) of the Securities 
Exchange
Act of 1934 (Fee required)
     For the fiscal year ended  December 31, 1998
                               -------------------
     [   ]  Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
     For the transition period from __________ to __________

                   Commission file number:   0 - 7 0 9 3

                          MOD-U-KRAF HOMES, INC.
              ----------------------------------------------
              (Name of Small Business Issuer in Its Charter)

           VIRGINIA                                  54-0893908
 -------------------------------                ------------------- 
 (State or Other Jurisdiction of                 (I.R.S. Employer
  Incorporation or Organization)                Identification No.)

      P. O. BOX 573, ROCKY MOUNT, VIRGINIA              24151               
    ----------------------------------------         ----------
    (Address of Principal Executive Offices)         (Zip Code)

                             540 - 483 - 0291                  
             ------------------------------------------------
             (Issuer's Telephone Number, Including Area Code)

      Securities registered under Section 12(b) of the Exchange Act:

                                   NONE    
                               ------------
      Securities registered under Section 12(g) of the Exchange Act:

                               COMMON STOCK     
                             ----------------
                             (Title of Class)

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

Yes [ X ] No [   ]

      Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive 
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB.
[ X ]


	State issuer's revenues for its most recent fiscal year. $15,586,511
                                                           -----------

	State the aggregate market value of the voting stock held by non-
affiliates computed by reference to the price at which the stock was sold, 
or the average bid and asked prices of such stock, as of a specified date 
within the past 60 days.

                        $2,979,433 at March 17, 1999


                 APPLICABLE ONLY TO CORPORATE REGISTRANTS

	State the number of shares outstanding of each of the issuer's classes
of common equity, as of March 16, 1999.

               825,649 shares of Common Stock, $1 par value


	Transitional Small Business Disclosure Format: Yes [   ] No [ X ]


Item 1.    Description of Business
           -----------------------
	Mod-U-Kraf Homes, Inc. (the "Company"), was incorporated as a Virginia 
corporation on August 19, 1971.  It is engaged in the business of
manufacturing and selling custom-built sectionalized single family housing 
units of its own design.  The Company also customizes a commercial line of 
products consisting of multi-family and diversified specialty structures.  
	The Company's sectionalized housing units, available in 65 standard 
models, ranging in size from 705 square feet to 4,300 square feet for one 
and two family dwellings, consist of two or more virtually complete sections 
which are manufactured side by side on an assembly line.  Various designs 
are available, including Victorian, Cape Cod, vacation homes, two stories 
and country homes.  There are over 100 options to allow for custom choices. 
 Interior designs provide for great rooms, spacious kitchen-dining-living 
areas, ample closets, and fireplaces.  Multi-family projects can contain up 
to 24,000 square feet and are custom designed to meet the needs of the 
builder and as dictated by building site conditions (including inside and 
outside painting and installation of kitchen cabinets and floor coverings). 
 After completion, the units are loaded on specially designed transporters 
for delivery to the building site where they are off-loaded to a permanent 
foundation previously prepared by the purchaser.  After the sections are 
off-loaded, either by crane or rollers, they are secured together by a "zip 
up" procedure.  The purchaser may then complete the sections by making 
plumbing and electrical connections, carrying out final grading and 
landscaping, and adding brick veneer, if desired.  Prices on our products 
can vary depending upon the region into which they are to be shipped.  The 
Company believes that when completely erected on a lot, landscaped and ready 
for occupancy, its single family homes retail from $55,000 to $320,000 or 
more depending on the cost of the lot.  The prices of multi-family projects 
can range up to $1,300,000 or more depending on the total size of the 
project.
	During the past several years, the Company, utilizing the manufactured 
section concept, has increasingly entered into a new commercial building 
market consisting of condominiums, town-house apartments, dental clinics, 
medical office buildings, churches, motels and many other commercial 
structures adaptable to the Company's manufacturing methods and 
capabilities.
	During 1998, the Company produced 291.5 units as compared to 347.5 
units in 1997.  Gross sales of $15,586,511 and $16,072,448 in 1998 and 1997 
were comprised of 301.5 and 335.0 units sold, respectively.
	The chief raw materials used in production are lumber and lumber 
products, including plywood, moldings, door and window assemblies:  general 
building materials such as roofing, insulation, wallboard, fixtures and 
hardware; and heating equipment and other appliances.  These materials are 
presently available at competitive prices through several suppliers serving 
the area, and the Company has not experienced and does not foresee 
dependency upon any single source of supply for raw material.  The price of 
lumber has been subject to significant fluctuations which may affect the 
Company's profit margin and the prices it charges for its products.  The 
Company passes increased cost on to its customers by increasing sales prices 
from time to time.
	At March 1, 1999, the Company had a backlog of un-shipped orders for 
108.0 units (representing approximately $4,764,418 in gross sales).  
Comparable backlog figures at March 1, 1998 and 1997 were 70.0 units 
(representing approximately $3,125,458 in gross sales) and 58.0 units 
(representing approximately $2,535,317 in gross sales), respectively.  The 
Company believes that approximately 80% of the orders comprising the current 
backlog are firm.  The Company believes that 20% of the back log balance may 
not be treated as firm due to a variety of factors, including unavailability 
of financing for its customers, title defects or objections with respect to 
land upon which customers expect to erect their homes, and weather 
conditions which can affect delivery against contracts.  The average time 
required between booking and shipment of an order is approximately 75 days.
	Company units are sold primarily in Virginia, Maryland, West Virginia 
and North Carolina, although some sales have been made in South Carolina, 
Kentucky, Ohio, Delaware, Tennessee, Pennsylvania and New Jersey.  The 
Company offers its products primarily to home builders, land developers and 
realtors, although the company also acts as a "turnkey" contractor,  
selling several sectionalized homes directly to retail customers 
and, depending on the contract, either "zipping-up" the units or completing 
the entire home to final grade.  Orders consist primarily of from one to 
three homes, although larger orders are accepted.
 	The Company does not have long-term agreements with any customer and 
does not have any single customer or large group of customers upon which a 
material part of its business depends.  Sales terms are flexible, varying 
from cash 15 days prior to delivery to a completely secured sale with a 
nominal down payment, in which the Company provides construction financing 
pending sale of the units and disbursement of financing by the permanent 
lender.  	The Company provides permanent financing in connection with a 
small number of sales. (See Note 3 of Item 7, Financial Statements)
	The Company does not have any material patents, licenses, franchises or 
concessions, has not made any material expenditures for research and 
development during the past three years and does not anticipate doing so.  
The Company employs approximately 31 persons on its administrative and 
office staff, 19 persons on its sales staff and 160 persons on its 
production and delivery staff.  None of its employees is represented by a 
labor union.  The Company's employment level has fluctuated, and will 
continue to fluctuate with the demand for code-complying manufactured 
housing.  Production employment levels have been stable for the last two 
years and are expected to remain stable with the new manufacturing facility 
in operation.
	Competition in the housing industry is intense.  The Company competes 
not only with local, regional and national producers of manufactured 
housing, including modular, panelized and mobile homes, but also with local, 
regional and national home builders as well.  Many of these competitors have 
financial resources and productive facilities which far exceed those of the 
Company.  Moreover, five manufactured housing firms have plants located in 
or near Rocky Mount, Virginia, and the Company must accordingly compete with 
these firms for labor as well as sales.
	To the extent weather conditions affect the construction or erection of 
houses, the business of the Company can be seasonal, with a larger portion 
of sales and shipments of its units occurring in the warmer months of the 
year, generally from May through November, than during the winter months.
	To the best of its knowledge, the Company is in compliance with all 
applicable regulations and does not currently foresee that material capital 
expenditures will be necessary to maintain such compliance or that future 
compliance will significantly affect the earnings or competitive position of 
the Company.
	The marketing direction of the Company has recently developed two 
thrusts.  While the overall trend has been towards larger structures, the 
Company has developed a series of smaller, lower-cost units to enable it to 
compete for entry-level housing and governmental loan programs.  
Improvements made in manufacturing facilities have put the Company in the 
position to produce both large and smaller units efficiently.

	The products of the Company are manufactured at two facilities in Rocky 
Mount, Virginia.  See Item 2, below.  The original plant has a production 
capacity of 5 units per week and the new facility has a production capacity 
of 15 units per week.

Item 2.	Description of Property.
        -----------------------

	The Company's production and transportation office and original 
manufacturing plant are located in a one-story steel building, approximately
35 years old, on State Highway 40, one mile east of Rocky Mount, Virginia.
The building is insulated and heated with a concrete floor and totals 20,000
square feet.  Production and transportation offices, located within the 
plant facility, are air conditioned and contains approximately 1,000 square
feet of floor space.  In 1982 there was a one story metal and wood 
plumbing and electrical storage addition with 700 square feet and a one 
story metal and wood breakroom addition, heated and air conditioned, with
700 square feet completed. In 1984 construction was completed on a 7,200
square foot addition to the plant.  In 1988 a one story metal and wood
addition containing a supply room and a "Binks" paint booth was completed
containing 1,600 square feet.  In 1993 a one story metal building that was
built in 1984 which has a concrete floor and 16' overhead doors and has 
3,600 square feet was converted to a component manufacturing area.  A 
small portion of the plant is used for storage of materials which will not
withstand exposure to the elements.  
Total manufacturing area contains approximately 33,800 square feet of space.
	Four enclosed storage buildings on the property adjacent to the 
manufacturing plant are used to store materials.  These buildings are wood 
and metal construction with concrete floors and either three or four walls 
enclosed.  Total enclosed storage is 17,370 square feet.
	The corporate headquarters building, including the engineering office, 
which is located adjacent to the Rocky Mount plant, was completed and 
occupied in December 1973 and contains over 7,800 square feet of office 
space.  The building was constructed in the Rocky Mount plant from seven 
single modules completed in the plant with plant installation of wiring, 
lighting, plumbing, carpet, vinyl, and rest rooms with ceramic walls and 
floors.
    The property is served by a rail siding.  The property includes 
approximately seven acres of land that provides for, in addition to the 
plant buildings, storage buildings and corporate headquarters building, room 
for employee and visitor parking, storage of completed sections pending 
shipment and two sales models.
	In October 1977, the Company purchased a 10-acre parcel adjacent to its 
Rocky Mount facilities for possible future expansion.  In March 1993, an 
additional 16.92 acres were purchased adjacent to the 10 acre parcel.  In 
October 1994 the Company exchanged, at no cost, 20.229 acres of the total 
26.92 acres for 17.983 acres in the Franklin County/Town of Rocky Mount, 
Virginia Industrial Park.  After the exchange, there are remaining 6.691 
acres owned by the Company adjacent to its Rocky Mount facilities. 

	The 7 acre parcel that contains the manufacturing, storage and office 
buildings are separated from the 6.691 acre parcel referred to above by a 
rail line.
	The Company's second manufacturing facility is located on 17.983 acres 
in the Franklin County/Town of Rocky Mount, Virginia Industrial Park.  The 
facility is a steel building, insulated with a standing rib roof.  The 
104,325 square foot building has a 32'6" eave height and has a sprinkler 
system throughout.  There is 6,680 square feet of mezzanine for additional 
storage and 800 square feet of office space inside the building.  The size 
of the building allows for storage of all materials for the construction of 
the units, reducing damage to inventory due to movement and weather.  The 
entire floor area is covered by 6" of finished concrete.  There are 10 large 
doors of which 8 are designed for "drive" through and 2 are "dock" doors for 
receiving materials.  There are five 4 ton bridge cranes installed to assist 
in the "off-line" production of various components such as floor systems, 
walls, and roof systems.  The entire building is heated by propane with an 
air rotation system.  To allow for future expansion of the building, an 
additional 8,750 square feet of finished floor and grade beams have been 
added to the building.  Three storm water run-off retention ponds are 
located on the property.  All roof drains on the building have been "piped" 
to those ponds.  The remainder of the finished lot is covered by a 6" 
compacted surface with approximately 42,000 square yards of high traffic 
area underlaid with a surface retention fabric.  The property is fenced for 
security purposes.  The IDA of Franklin County, VA issued bonds in the amount
of $3,000,000 to finance the construction of this manufacturing facility.  
The Series 1995 Variable Rate Demand Industrial Revenue Bonds are secured
by the Company's Irrevocable Letter of Credit with Crestar Bank. 
	The Company's transportation and delivery fleet consists of ten tractor 
cabs and 57 trailers, all of which are owned by the Company.  Four of the 
tractor cabs were purchased in 1996 and these transporters were placed in
service during the first quarter of 1997.  To plan for our increased 
production and more demanding state transportation regulations, the 
Company ordered four additional modular transporters in 1996 and placed 
them in service in 1997.
	The Company considers its properties and equipment generally to be well 
maintained and in good condition, and adequate for the needs of its 
business.  All properties are considered to be adequately insured by the
Company.

Item 3.  	Legal Proceedings.
          ------------------
      	None

Item 4.   Submission of Matters to a Vote of Security Holders.
          ---------------------------------------------------

       None

Item 5.	Market for Common Equity and Related Stockholder Matters.
          --------------------------------------------------------


	The Corporation's common stock is traded in the over-the-counter
market.  The number of shareholders as of February 12, 1999 was 384.  The
range of bid and ask quotations and dividends declared for the last two
calendar years are listed below.
	
	QUOTATIONS ON COMMON STOCK
				
	               1998                          1997           Dividends
            BID            ASK            BID            ASK       Declared  
     	 High    Low    High    Low    High   Low    High    Low     1998  1997 

First  6        --    7 1/2    --    7      4 7/8  10      5 3/4  $0.03 $0.03 
Second 5 7/8    --    7 1/2    --    7 1/2  7      10      9      $0.03 $0.03
Third  5 7/8    --    7 1/2    --    7 1/2  7 1/2  9 1/2   8 1/2  $0.03 $0.03
Fourth 5 7/8  5 3/4   8       7 1/2  7 1/2  5 7/8  9 1/2   7 1/2  $0.03 $0.03


Source:  Wheat First Union & Koonce Securities, Inc.	

For the past 85 consecutive quarters a quarterly dividend of $0.03 per share
of common stock has been declared.  The Company presently expects to pay
dividends in the future as earnings permit.  The quotations herein reflect
inter-dealer prices, without mark-up, mark-down or commission, and may not
represent actual transactions.


Item 6.	Management's Discussion and Analysis of Financial Condition and
            Results of Operations.
          ----------------------------------------------------------

	Net Sales for 1998 of $15,586,511 decreased 3.08% over 1997 net sales of 
$16,072,448.  This decrease in revenues is the result of a 10% decrease in
the number of modular units sold due to the wet weather and sluggish demand
the first part of the year and a lack of production capacity the last part 
of the year with only one plant running.
	Finished goods inventory has been reduced to normal operating levels
as of the end of the year.  This is in contrast to the unusually high 
inventory we were carrying at the end of 1997 due to the wet weather.
The first quarter of 1998 was also affected by the extreme weather 
conditions.  Inventory remained high while depressing sales volume.
It was not until the middle of the second quarter that we were able 
to resume a normal delivery schedule.  These factors in addition to 
some unfavorable manufacturing variances we expericened during the 
year reduced sales revenue and net income to levels below those of
1997.
	Gross Profit percentage increased in 1998 to 22.13% from 21.52% in
1997. The manufacturing process in our new facility is beginning to show
improvement after the initial decline its first full year of operation.
Additional improvement is planned for the upcoming year to return the 
process to past operating levels.
	Our Selling, General and Administrative Expense has remained stable with
prior year.  Actual dollars spent increased only 0.60% for the year.  The
percentage to net sales increased only slightly for 1998 to 19.90% from 
19.18% in 1997.
	We are reporting a Non-operating expense for the year as opposed to 
Non-operating income in prior years due to a increase in bond expense and 
a reduction of interest income.  Our cash flow the first quarter of 1998 
was negative requiring us to utilize a line of credit temporarily until 
the weather broke.  This reduced the cash available for investment to zero
until the middle of the third quarter.
	Management believes that the market for its modular housing is likely to 
remain strong for the foreseeable future.  The Company intends to capitalize
on this anticipated demand by improving its production capaciities and 
efficiency, resulting in improved revenues and gross profit margins.  The 
Company's success in realizing these goals will be affected by weather 
conditions in its market and its ability to effectively control 
manufacturing costs, both of which may negatively impact performance. 
Demand for the Company's products also is sensitive to general economic 
conditions in its market and would be negatively affected by any economic
downturn.

	The year 2000 assessment of our internal computer systems has been 
completed.  Our computer systems and software are year 2000 compliant.
Certain key vendors have informed us that they do not expect disruptions of
services relating to the year 2000 problem, but plans have been made to
survey our remaing key vendors by mid-year 1999.  We do not foresee a 
significant impact on our financial position as a result of this issue.       
	On December 18, 1997, management of the Company determined to temporarily
suspend production at its Highway 40 facility.  The suspension
was required by adverse weather conditions that delayed the Company in
delivering new units.  Production at that facility remained idle throughout
all of 1998.  The new production faciltiy was sufficient to meet our
production needs up until the fourth quarter of the year.  Demand was
approaching a level necessitating either re-opening the old plant or risk
losing sales due to the production backlog of houses waiting to go into the
new plant.  Preparations were begun in December to retool and restock the
old plant.  Production resumed in the Highway 40 facility on January 4, 1999
and is expected to remain operating for the foreseeable future.

Capital Resources and Liquidity

      Total funds generated were sufficient to meet the requirements for
plant and equipment, debt retirement and dividends.  By virtue of the cash
and accounts receivable levels, the company feels that it has adequate
liquidity for continued successful operations.
      The Company completed and put into operation our new manufacturing
facility in August 1996.  The cost of the 104,000 sq. ft. facility,
including improvements and equipment was approximately $2,800,000 which
was financed by an Industrial Development Bond Issue.  The debt associated
with this issue has a remaining life of 17 1/2 years and bears interest at
a variable rate based on variable, tax exempt bonds.  At December 31, 1998,
the actual interest rate was 4.15%.
     The Company believes that the effect of inflation on the results for
the periods presented is not material.  To the extent permitted by 
competition, the Company passes increased cost on to its customers by 
increasing sales prices from time to time.


Item 7.	Financial Statements.
          ---------------------

                  MOD-U-KRAF HOMES, INC. AND SUBSIDIARY
                       CONSOLIDATED FINANCIAL REPORT
                             December 31, 1998

                              C O N T E N T S

                    INDEPENDENT AUDITOR'S REPORT ON                        
                       THE FINANCIAL STATEMENTS

                    FINANCIAL STATEMENTS
                      Consolidated Balance Sheets  
                      Consolidated Statements of Income
                      Consolidated Statements of Stockholders' Equity
                      Consolidated Statements of Cash Flows
                      Notes to Consolidated Financial Statements 

<PAGE>                        * * *

	INDEPENDENT AUDITOR'S REPORT



To the Board of Directors and Stockholders of
Mod-U-Kraf Homes, Inc. and Subsidiary
Rocky Mount, Virginia


   We have audited the accompanying consolidated balance sheets of Mod-U-Kraf
Homes, Inc. and Subsidiary as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash 
flows for the years ended December 31, 1998, 1997, and 1996.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based
on our audits.

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

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mod-U-Kraf
Homes, Inc. and Subsidiary as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for the years ended December 31,
1998, 1997 and 1996 in conformity with generally accepted accounting
principles.


                                    Brown, Edwards & Company, L.L.P.

                                    CERTIFIED PUBLIC ACCOUNTANTS

Roanoke, Virginia
January 25, 1999



<PAGE>                        * * *

                  MOD-U-KRAF HOMES, INC. AND SUBSIDIARY

                       CONSOLIDATED BALANCE SHEETS
                       December 31, 1998 and 1997 

            ASSETS                          1998            1997 
CURRENT ASSETS
  Cash and cash equivalents            $  1,653,742        589,992
  Trade and other receivables               351,972        145,444
  Inventories (Note 2)                    1,618,016      2,253,063
  Notes receivable(Note 3)                  645,962        661,762
  Income taxes receivable (Note 7)           76,900            -
  Prepaid expenses                           34,627         44,886
                                          ---------      ---------
            Total current assets          4,381,219      3,695,147

NOTES RECEIVABLE (Note 3)                     7,663        176,168

PROPERTY AND EQUIPMENT(Note 4)            3,574,488      4,022,354
OTHER ASSETS 
  Deferred taxes (Note 7)                   416,381        464,273
  Cash surrender value of officers' life 
  insurance                                 157,732        137,878
  Reimbursement account (Note 6)            155,160        160,242
  Earnings on unused bond proceeds (Note 6)     -          113,612
  Debt issue costs                           65,390         69,350
  Model Homes                               477,257        236,017
                                           ---------      ---------

                                         $9,235,290     $9,075,041
                                          =========      =========
                  LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Current maturities of long-term debt 
    (Note 6)                           $    150,000     $  150,000
  Postretirement benefits (Note 5)           78,279         71,933
  Accounts payable, trade and other 
    liabilities                             545,378        366,310
  Accrued compensation                      220,408        161,512
  Customer deposits                         157,200         83,727
  Income taxes payable (Note 7)                 -            5,847
                                          ---------      ---------
            Total current liabilities     1,151,265        839,329
POSTRETIREMENT BENEFITS(Note 5)             925,123      1,003,374
LONG-TERM DEBT (Note 6)                   2,400,000      2,489,755
COMMITMENTS AND CONTINGENCIES (Notes 6 
 and 11)                                        -                -
                                          ---------      ---------
            Total liabilities             4,476,388      4,332,458
                                          ---------      ---------
STOCKHOLDERS' EQUITY 
  Common stock, $1 par value, 
   2,000,000 shares authorized; 825,649
   shares issued and outstanding       $    825,649     $  825,649
  Additional paid-in capital                459,671        459,671
  Retained earnings                       3,473,582      3,457,263
                                          ---------      ---------
                                          4,758,902      4,742,583
                                          ---------      ---------
                                       $  9,235,290     $9,075,041
                                          =========      =========

The Notes to Consolidated Financial Statements 
  are an integral part of these statements.

<PAGE>                        * * *

                    MOD-U-KRAF HOMES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF INCOME
                Years Ended December 31, 1998, 1997, and 1996    

                                 1998         1997          1996
                              ----------   ---------     ---------
Net sales                    $15,586,511 $16,072,448   $11,372,471

Cost of goods sold (Note 12)  12,137,023  12,613,342     8,625,822
                              ----------   ---------     ---------
         Gross profit          3,449,488   3,459,106     2,746,649

Selling, general and 
  administrative expenses      3,101,123   3,082,660     2,423,006
                              ----------   ---------     ---------
         Operating income        348,365     376,446       323,643 

Postretirements benefits 
  expense (Note 5)                88,666      89,132       101,877

Non-operating income(expense),
 net (Note 10)                   (83,863)        346        68,365
                              ----------   ---------     ---------

  Income before income taxes     175,836     287,663       290,131

Federal and state income tax
  expense (Note 7)                60,439     106,978       112,468 
                              ----------   ---------     ---------

            Net income       $   115,397   $ 180,685    $  177,663 
                              ==========   =========     =========

Earnings per share           $     .14    $      .22     $     .22 
                              ========     =========      ========

The Notes to Consolidated Financial Statements 
  are an integral part of these statements.



                     MOD-U-KRAF HOMES, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                 Years Ended December 31, 1998, 1997, and 1996


                        
                                    1998     1997        1996
                                ---------- ---------- -----------   
 
 Balance, beginning              3,457,263  3,375,656   3,297,071

  Net income                       115,397    180,685     177,663

  Dividends paid 
  ($.12 per share)                 (99,078)   (99,078)    (99,078)

                                  -------   ---------   ---------
Balance, ending                $ 3,473,582 $3,457,263  $3,375,656

  

The Notes to Consolidated Financial Statements
  are an integral part of these statements.

<PAGE>                        * * *

                   MOD-U-KRAF HOMES, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
               Years Ended December 31, 1998, 1997, and 1996


                                   1998         1997        1996
                                ---------    ---------   ---------
OPERATING ACTIVITIES
  Net income                   $  115,397      180,685   $  177,663
  Adjustments to reconcile 
    net income to net cash 
    provided by operating  
    activities:
    Depreciation and 
      amortization                517,421      487,496      286,333     
    Deferred taxes                 47,892       21,866       22,100   
    Loss (gain) on sale 
      of equipment                 21,807    (   4,706)         170      
    Increase in cash value of 
      life insurance            (  19,854)   (  21,651)   (  20,787)  
    Adjustment to post-
     retirement benefits        (  71,905)   (  71,879)   (  59,002)  
    Change in certain current 
     assets and liabilities:
       (Increase) decrease in:
         Trade and other 
           receivables          ( 206,528)   (  92,516)      10,938      
         Inventories              635,047       36,633    ( 989,580)  
         Income tax receivable  (  76,900)      46,123    (  46,123)   
         Prepaid expenses          10,259    (   1,496)       1,566     
         Model homes            ( 264,755)   ( 158,067)         -
       (Decrease) increase in:
         Accounts payable, 
           trade and other 
           liabilities            179,068    ( 158,918)     168,522   
         Accrued compensation      58,896    (  39,609)   (  30,905)  
         Customer deposits         73,473    ( 209,928)     270,340   
         Income taxes payable   (   5,847)       5,847    (  60,364)     
                                ---------    ---------   ---------
            Net cash provided 
             by operating 
             activities         1,013,471       19,880    ( 269,129)    
                                ---------    ---------   ---------
INVESTING ACTIVITIES
  Proceeds from sale of
    equipment                      45,003        8,200         -        
  Purchase of property and 
   equipment, net of debt
   incurred 1998 $60,245:
   1997 $-0-; 1996 $1,554,961   (  48,645)   ( 602,303)  ( 379,746)  
  Principal received on notes 
  receivable                      299,486      852,984     820,271   
  Notes receivable arising 
    from sales                 (  115,181)  (  701,287) (  706,246) 
  Decrease (increase) in 
    certificates of deposit           -        200,000     489,000  
                                ----------    ---------   ---------
     Net cash provided by
      (used in) investing 
      activities                  180,663   (  242,406)    223,279     
                                ----------    ---------   ---------
FINANCING ACTIVITIES
  Payments on long-term debt    ( 150,000)   ( 150,000)  ( 150,000)
  Cash dividends paid           (  99,078)   (  99,078)  (  99,078)
  Funding of reimbursement 
    account                         5,082    (   7,536)  (   7,190)  
  Earnings on unused 
    bond proceeds                 113,612    (   8,138)  (  47,350)  
                               ----------    ---------   --------- 
      Net cash used in 
       financing activities     ( 130,384)   ( 264,752)  ( 303,618)  
                               ----------    ---------   ---------
      Increase in cash and
       cash equivalents         1,063,750    ( 487,278)  ( 349,468)     

CASH AND CASH EQUIVALENTS 
  Beginning                       589,992    1,077,270   1,426,738    
                                ---------   ---------    ---------
  Ending                       $1,653,742   $  589,992  $1,077,270   
                                =========   =========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW 
  INFORMATION
  Cash payments for:
    Income taxes, net of
      refunds received         $   95,294  $    3,142  $  218,955
                                =========   =========    =========
    Interest                   $  101,521  $  104,746  $   54,707
                                =========   =========    =========

The Notes to Consolidated Financial Statements 
  are an integral part of these statements.

<PAGE>                        * * *

                   MOD-U-KRAF HOMES, INC. AND SUBSIDIARY

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              December 31, 1998


Note 1.  Nature of Business and Significant Accounting Policies

         Nature of Business:
         ------------------
         The Company is engaged in the business of manufacturing
         and selling sectionalized building units of its own
         design.  The Company also customizes a commercial line of
         products consisting of multi-family and diversified
         specialty structures.  The units are sold primarily to
         home builders, land developers and realtors in Virginia,
         Maryland, West Virginia and North Carolina.

        

         Principles of Consolidation:
         ---------------------------
         The consolidated financial statements include the accounts
         of the Company's wholly-owned subsidiary, Mountain Resort
         Building Systems, Inc.  All significant intercompany
         accounts and transactions have been eliminated.

         Concentrations of credit risk:
         -------------------------------
         In some cases, the Company provides short-term construction
         financing which is generally limited to 75 to 80 percent of
         the estimated fair market value of the completed property.
         The Company retains a security interest in the property
         until the contract is paid.  The Company's exposure to loss
         on these contracts is limited to the difference between the
         receivable and the value of the collateral.  The Company
         has not experienced any significant loss on the previous
         sales of repossessed collateral.

         Cash and Cash Equivalents:
         -------------------------
         For purposes of reporting cash flows, the Company
         considers most highly liquid investments with an original
         maturity of three months or less to be cash equivalents.
         Certificates of deposit, regardless of maturity, are not
         considered cash equivalents.

         The Company maintains its cash accounts in commercial
         banks located in Virginia.  Accounts in each bank are
         guaranteed by the Federal Deposit Insurance Corporation
         (FDIC) up to $100,000 per bank.  A portion of the
         Company's cash balance is uninsured at year end.

         Valuation of Trade Receivables:
         ------------------------------
         Trade and notes receivable are stated at face amount with no
         allowance for doubtful accounts because probable
         uncollectible accounts are immaterial.

         Inventories:
         -----------
         Raw materials are stated at the lower of cost (determined
         on a first-in, first-out basis) or market.  Work in
         progress and finished goods are stated at the lower of
         average cost determined on a standard cost basis) or
         market.  Land and units held for sale are stated at the
         lower of cost (determined on a specific property basis) or
         market.

         Depreciation:
         ------------
         Depreciation is provided principally on the straight-line
         method over the estimated useful lives of the depreciable
         assets for financial reporting purposes. Statutory methods
         and lives are used for income tax purposes.

         Model Homes:
         -----------
         Model homes consist of manufactured units at cost plus site
         preparation and completion costs.  All costs except the 
         manufactured unit are amortized over the estimated useful
         life of the model, typically five years.  The manufactured
         units are transferred to inventory and sold at the conclusion
         of their useful life.

         Income Taxes:
         ------------
         Income taxes are provided for the tax effects of
         transactions reported in the financial statements and
         consist of taxes currently due plus deferred taxes related
         primarily to differences from current recognition of
         deferred compensation for financial reporting purposes and
         deferred recognition for income tax purposes.  The deferred
         taxes represent the future tax return consequences of those
         differences, which will either be taxable or deductible when
         the assets and liabilities are recovered or settled.

         Recognition of Income:
         ---------------------
         Revenue is recognized for cash-in-advance sales when
         production of the unit is complete.  Revenue is recognized
         for sales on account when the unit is delivered.

<PAGE>                        * * *

         Estimates:
         ---------
         Management uses estimates and assumptions in preparing
         financial statements.  Those estimates and assumptions
         affect the reported amounts of assets and liabilities, the
         disclosure of contingent liabilities and the reported
         revenues and expenses.

         Earnings Per Share:
         ------------------
         Primary and fully diluted earnings per common share are
         based on the weighted average number of shares of common
         stock outstanding and common stock equivalents of dilutive
         stock options.  The weighted average number of actual
         shares outstanding was 825,649 for 1998, 1997 and 1996.

         Advertising costs:
         -----------------
         Advertising costs, which consist primarily of newspaper and
         yellow page advertisements, brochures and signage are 
         expensed as incurred

         Reclassification:
         ----------------
         The amounts presented for 1997 and 1996 have been 
         reclassified, where appropriate, to conform to
         the presentation used for 1998.

Note 2.  Inventories

         The components of inventories are as follows:

                                          1998            1997
                                      -----------     -----------
            Raw materials            $    761,513    $    779,048 
                                                  
            Work-in-process               203,636         227,072 
                                                                  
            Finished goods                360,451         847,411
   
            Land and units held 
              for sale                    292,416         399,532 
                                      -----------     ----------- 
                                     $  1,618,016    $  2,253,063     
                                      ===========     ===========

         Total general and administrative costs incurred and the
         portion of those costs remaining in inventory are as
         follows:
                                1998         1997         1996  
                              --------     --------     -------- 
         
           Incurred          $ 975,754    $ 983,821    $ 865,408
                              ========     ========     ========
           Remaining in 
            inventory        $  43,401    $  60,997    $  49,853
                              ========     ========     ========
Note 3.  Notes Receivable

         Notes receivable consist of the following:        

                                                1998        1997 
                                               --------    --------
        Mortgage notes receivable,              
        interest ranging from 8% to 10%, 
        payable in various monthly install-
        ments and balloon payments due at 
        various dates through August 1999.  
        Secured by deeds of trust on 
        certain real estate.                 $  157,718  $  164,172

        Credit line deed of trust notes 
        receivable, interest ranging from 
        0% to 10.5%, payable at various 
        dates through 1999.  Secured by
        deeds of trust on certain real estate.  478,862     647,370

        Note receivable from the President, pay-
        able in annual principal installments of
        $5,625 plus interest at 5.03%, secured
        by common stock of the Company.          11,250      16,875
        
     	  Other notes                               5,795       9,513
     	                                        ---------   ---------
                                                653,625     837,930
                Less current portion           (645,962)   (661,762)
                                              ---------   ---------
                                             $    7,663  $  176,168
                                             ==========  ==========

<PAGE>                        * * * 

Note 4.  Property and Equipment

         Major classes of property and equipment are as follows:

                                               1998         1997  
                                            ---------     --------
            Land and improvements          $  775,724   $  774,774
            Buildings                       2,918,912    2,948,351
            Manufacturing equipment         2,150,733    2,055,831
            Other furniture, fixtures 
              and equipment                   660,203      716,198
                                            ---------    ---------
                                            6,505,572    6,495,154
           Less accumulated depreciation   (2,931,084)  (2,518,808)
                                            ---------    ---------
                                            3,574,488    3,976,346
                                   
           Construction in process                -         46,008
                                            ---------    ---------
                                           $3,574,488   $4,022,354
                                            =========    =========
           Maintenance and repairs expense incurred amounted to
           $169,324, $219,212 and $173,605 for 1998, 1997, and
           1996, respectively.

Note 5.  Postretirement Benefits

         The Company is obligated under postretirement benefits
         agreements with two former officers.  The present value of
	   these obligations, discounted at 8.5% are as follows:
           
                                               1998         1997
                                             ---------   ----------
         Deferred compensation benefits
         payable to the widow of O.Z. Oliver,
         former Treasurer and Chairman of
         the Board, at $6,311 monthly until
         the earlier of her death or 
         September 2006.                     $  428,786  $  466,315

         Deferred compensation benefits
         payable to Robert K. Fitts, former
         President and Chairman of the Board,
         at $5,560 monthly until his death
         after which the benefits are payable
         to his spouse, Mary L. Fitts until
         the earlier of her death or July
         2007.                                  475,793     500,903

         Postretirement benefits other than 
         pensions. Details are presented below. 126,125     133,199
                                              ---------   ---------
                                              1,003,402   1,075,307
                  Less current portion          (78,279)    (71,933)
                                              ---------   ---------
                                             $  925,123  $1,003,374
                                              =========   =========
         The Company is obligated to pay a fixed monthly amount
         for health care coverage to the above payees.  The
         Company is also obligated to pay up to $10,000 annually
         in premiums for a life insurance policy assigned to the
         former President.  

         The Company accounts for these obligations in a manner
         similar to that described in Statement of Financial Accounting
         Standards No. 106, "Employer's Accounting for Postretirement
         Benefits Other than Pensions" under which such costs are
         recognized as incurred rather that when paid.  The statement
         is not required to be applied to benefits payable to selected
         employees under terms of individual contracts.  However, it is
         management's opinion that adoption of the standard is preferable
         for financial reporting purposes.
         
<PAGE>                        * * * 

Note 6.  Debt

         On July 12, 1995, the IDA of Franklin County, VA issued
         bonds in the amount of $3,000,000 to finance the
         construction of a manufacturing facility.  The Series 1995
         Variable Rate Demand Industrial Revenue Bonds are secured
         by the Company's Irrevocable Letter of Credit with Crestar
         Bank.  The letter of credit agreement subjects the Company
         to certain financial and operating covenants, all of which
         the Company was in compliance with at year end.  Crestar
         Bank holds a first lien and security interest on the new
         facility.  The bonds are payable in equal annual principal
         amounts of $150,000 through 2015.  The interest rate was 4.15,
         4.25 and 4.10 percent at December 31, 1998, 1997 and 1996,
         respectively.

         The Company has entered an agreement of sale to purchase
         the facility from the IDA.  The Company's obligation under
         the Agreement of Sale is equal to the required principal
         and interest payments on the bonds and is payable in
         monthly installments currently estimated at $22,000.  The
         monthly payments are deposited into a Reimbursement
         Account with Crestar Bank and used to pay all principal,
         interest and fees related to the Bonds.  The Company also
         agreed to maintain an additional required deposit in the
         reimbursement account equal to 55 days of interest at 15.0
         percent on the bonds.  The Reimbursement Account balance
         was follows:

                                                 1998         1997
                                                 ----         ----
           Required prepaid interest deposit  $ 67,811    $  67,811
           Unused monthly principal deposits    75,000       75,000
           Earnings                             12,349       17,431
                                              --------     --------
                                              $155,160    $ 160,242
                                              ========     ========

         The Company's policy is to reflect the balance of the
         reimbursement account as an asset until the funds are used
         by the trustee for payment of bond obligations, at which
         time the Company reduces its obligations under the asset
         sale agreement.

         In July 1998, all of the remaining bond proceeds were drawn
         from the trustee. The Company's obligation under the asset
         sale agreement is reflected at the amount of bond proceeds
         that have been drawn less cumulative payments of $450,000.
         The unused proceeds and related earnings at July 1998 were
         used to complete additions to the new manufacturing facility
         and for bond related expenses.
         
         Debt issue costs will be amortized over the term of the
         debt, or 20 years.

	   Lines of Credit
	   ---------------
	   The Company has a $500,000 line of credit with Crestar Bank 
         bearing interest at LIBOR plus .75%.  The line is secured
         by a first lien and security interest on the new facility,
	   is payable on demand, and expires January 31, 2003.

	   The Company also has an unsecured $500,000 line of credit 
         with Bank of Ferrum bearing interest at LIBOR plus 2.00%,
         payable on demand, with no extablished expiration.
         



Note 7.  Income Taxes

         The provision for income taxes consists of the following
         components:
                                 1998       1997        1996 
                              ---------   --------    -------- 
          Current              $ 12,547   $ 85,112    $ 90,368
 
          Deferred               47,892     21,866      22,100
                                -------    -------     ------- 
                               $ 60,439   $106,978    $112,468 
                               ========   ========    ======== 

Deferred taxes results from temporary  differences in the
recognition of revenue and expense for tax and financial
reporting purposes.  The sources of the differences and the tax
effect of each are as follows:
      
                                      1998       1997      1996
                                    --------  --------  ---------
     Differing cost basis of 
       property and equipment      $  15,278 $   4,394  $   8,067
                               
     Amounts expensed when
       incurred, deducted when paid:
       Deferred Compensation          26,782    27,314     21,959
       Warranty & accrued vacation     1,058  (  8,675)  (  4,658)
       Other, net                      4,774  (  1,167)  (  3,268)
                                    --------   -------   --------
                                   $  47,892 $  21,866   $ 22,100
                                    ========   =======   ========

<PAGE>                        * * * 

The provision for income taxes differs from amounts computed by
applying the statutory Federal income tax rate to income before taxes
for the following reasons:

                       1998             1997             1996     
                   ---------------  ---------------  --------------   
                          Percent          Percent          Percent
                             of               of               of
                           Pretax           Pretax           Pretax
                   Amount  Income   Amount  Income   Amount  Income
                  -------- ------  -------- ------  -------- ------
Tax expense at
  federal rate    $ 59,784  34.0%  $ 97,805  34.0%  $ 98,645  34.0%
Increase (decrease)
 in taxes from:
 State taxes, net
 of federal tax          
 effect              7,033   4.0%    11,507   4.0%    11,605   4.0%
 Other, net        ( 6,378) (3.6%)   (2,334) (0.8%)    2,218   1.0%
                   --------  -----  --------  -----  --------  ----
                  $ 60,439  34.4%  $106,978  37.2%  $112,468  39.0%
                  ========  =====  ========  =====  ========  =====

Note 8.  Fair Value of Financial Instruments 

         The methods used to estimate the fair value of each
         material class of financial instruments are as follows:

         Cash and cash equivalents, trade receivables and payables
         and customer deposits:
         ---------------------------------------------------
         The carrying amount is a reasonable estimate of the fair
         value because of the short maturity of these instruments.

         Notes Receivable:
         ----------------
         Fair values are estimated by discounting the future cash
         flows using the current rates at which similar loans would
         be made with similar credit ratings and for the same
         remaining maturities. Carrying values approximate fair values.

         Debt:
         ----
         The interest rate on the long-term debt is reset weekly to
         reflect current market rates.  Consequently, the carrying
         value of debt approximates fair value.


 Note 9. Profit Sharing Plan and Trust

         The Company has a contributory profit-sharing plan
         complying under Section 401(k) and certain other

         provisions of the Internal Revenue Code.  The plan covers
         a majority of all employees meeting minimum eligibility
         requirements.  Participants may elect to have before-tax
         (salary reduction) contributions to be made to the plan on
         their behalf.  The Company matches such before-tax
         contributions in the proportion determined by the Board of
         Directors at its discretion on an annual basis.
         Additionally, the Company may at the Board's
         discretion make an additional contribution based on the
         Company's pre-tax earnings.  The Company's total
         contributions to the plan were $27,815, $46,134, and
         $40,142 for 1998, 1997 and 1996, respectively.

<PAGE>                        * * * 

Note 10. Non-operating Income(Expense) 

         Non-operating income(expense)consists of the following:

                                  1998        1997        1996    
                                --------    --------    --------
         Interest income       $  79,063   $ 108,421   $ 130,119
         Interest expense      ( 101,668)   (102,290)    (64,603)
         Bond service fees         7,877     (13,260)        -
         Other, net              (69,135)      7,478       2,849
                                --------    --------    --------
                               $ (83,863)  $     349   $  68,365
                                ========    ========    ========

Note 11. Commitments and Contingencies

         Employment Contracts:
         --------------------
         The Company is obligated under employment contracts with
         the President and Vice President.  Combined base annual
         compensation under the contracts is approximately
         $140,000.  The contracts provide for payment of incentive
         compensation based on certain percentages of pretax income
         of the Company, exclusive of any extraordinary items.

         Death Benefit:
         -------------
         The Company is obligated to provide a death benefit to the
         estate of the Vice President in the amount of $35,000. The
         Company has recognized a liability in the amount of
         $18,223, the estimated present value of this obligation
         discounted at 8.50 percent.  The Company is carrying a
         term life insurance policy in the amount of $35,000, the
         purpose of which is to fund the death benefit.

         Sales and Service Tax Audit:
         ---------------------------
         The Company has undergone an audit of its West Virginia
         sales and service tax returns.  The West Virginia
         Department of Revenue has assessed the Company an
         additional tax of $117,999 and related interest.  The
         Company's attorneys have filed a Petition for Reassessment
         with the State.  In 1998, West Virginia passed a law 
         exempting modular home sales from these additional taxes
         but the law is not explicitly retroactive. In the opinion
         of the Company's legal counsel, the Company's chances of
         success on the current assessments are favorable.

Note 13. Related Party Transactions

         In the normal course of business, the Company makes
         purchases from a supplier owned by a director of the
         Company.  Purchases from this supplier totaled $643,094,
         $760,598 and $662,539 for 1998, 1997 and 1996,
         respectively.

         The Company has a note receivable from the President (Note 3)
         and is obligated under deferred compensation agreements to
         two former employees (Note 5).

<PAGE>                        * * *


<end of report>

Item 8.	Changes In and Disagreements With Accountants on Accounting
          and Financial Disclosure.
          ---------------------------------------------------------------
	None

Item 9.	Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act.
          -------------------------------------------------------------

          The Company's Board of Directors is composed of the following     
         five members.

             Name                    Age        Director Since
            ------                  -----      ----------------
   Edwin J. Campbell  . . . . . . . . 69             1978
   Dale H. Powell   . . . . . . . . . 65             1980
   W. Curtis Carter   . . . . . . . . 80             1991
   Bobbie L. Oliver . . . . . . . . . 66             1994
   Mary L. Fitts  . . . . . . . . . . 59             1994


    EDWIN J. CAMPBELL was Vice President of Sales and Marketing of the 
Company from 1977 until 1990, and has been Corporate Secretary since March, 
1990.  He has been Vice President since October, 1990.

    DALE H. POWELL was Vice President-Operations of the Company from 1980 to 
March 1990, when he became President and Chairman of the Board.  Mr. Powell 
was Secretary of the Company from March 1988 until March 1990.  

    W. CURTIS CARTER, presently retired, was an Officer and Director of 
Stuart Lumber Corporation in Stuart, Virginia for 24 years until the company 
was sold to the Masonite Corporation in 1977.  He remained with Masonite in 
accounting and other capacities until his retirement in 1988.

	BOBBIE L. OLIVER is the wife of the late O. Z. Oliver, Co-founder and 
former Board Chairman of Mod-U-Kraf Homes, Inc.  She is the largest 
shareholder of the Company and is managing real estate and rental properties 
in Southwest Virginia.  She is the Sister-In-Law of Dale H. Powell and the 
Sister of Mary L. Fitts.

	MARY L. FITTS, Real Estate Investor, has been owner and operator of an 
apartment complex since 1983.  She is the wife of Robert K. Fitts, co-
founder of the Company.  She is the Sister-In-Law of Dale H. Powell and the 
Sister of Bobbie L. Oliver.

                   SECTION 16(A) BENEFICIAL OWNERSHIP
                           REPORTING COMPLIANCE

	The Company's directors, executive officers and owners of more than 10% 
Company's shares are required under the Securities Exchange Act of 1934 to 
file report of ownership and changes in ownership with the Securities 
Exchange Commission.  Copies of these reports must also be furnished to the 
Company.  Based solely on review of the copies of such reports furnished to 
the Company through the date hereof, or written representations that no 
reports were required; the Company believes that during 1998, all filing 
requirements applicable to its officers, directors and 10% shareholders were 
met.

Item 10.   Executive Compensation.
           ----------------------

     The following table presents information relating to total compensation 
of the Chief Executive Officer of the Company during the periods indicated.


                        SUMMARY COMPENSATION TABLE

                Annual Compensation                   
                                                           All
     Name and                                  (1)       Other (2)
Principal Position    Year       Salary       Bonus    Compensation
         
Dale H. Powell        1998      $75,000       $8,995      $14,532
 President and 
Chairman of the       1997      $75,000       $9,651      $14,511 
Board
                      1996      $75,000      $20,322      $15,278 

(1)  Bonus is calculated on the prior years' earnings in accordance with 
Mr. Powell's employment agreement.

(2)  Consists of $13,207 of premiums paid annually by the Company on a 
"split-dollar" insurance policy for 1998, 1997 and 1996, and $1,325, $1,304
and $2,071 of Company contributions to Mr. Powell's profit-sharing plan 
account for 1998, 1997 and 1996 respectively.  

Employment Agreement

    Under an Employment Agreement with the Company, effective January 1, 
1991, Dale H. Powell will be paid an annual base salary of $75,000, subject 
to annual review by the Board of Directors.  In addition to the base salary, 
Mr. Powell will be paid incentive compensation equal to 3% of the income of 
the Company before federal and state income taxes, and before the payment of 
any dividends or extraordinary non-recurring items or expenses.

    Under an Employment Agreement with the Company, effective January 1,
1991, Edwin J. Campbell will be paid an annual base salary of $65,000,
subject to annual review by the Board of Directors. In addition to the 
base salary, Mr. Campbell will be paid incentive compensation equal to 
2.5% of the income of the Company before federal and state income taxes, 
and before the payment of any dividends or extraordinary non-recurring 
items or expenses.  

Compensation of Directors

    Outside directors are paid a fee of $250.00 for each meeting of the 
Board of Directors attended.


Item 11.	Security Ownership of Certain Beneficial Owners and Management.
          ---------------------------------------------------------------
                    
    The Company's only authorized equity is common stock, $1 par value 
("Common Stock"), each share of which has one vote on all matters.  There 
were outstanding and entitled to vote 825,649 shares of Common Stock on the 
Record Date.

    The following table presents certain information as of the Record Date 
regarding beneficial ownership of Common Stock by the directors and nominees 
for directors, officers and directors as a group, and all owners of more 
than 5% of the Common Stock.

                               Amount and Nature
     Name of Beneficial         of Beneficial             Percent
         Owner                    Ownership                Owned
    ------------------        ---------------------       -------
    Edwin J. Campbell               33,892(1)               4.10%
    Dale H. Powell                  68,800                  8.33
    W. Curtis Carter                36,720                  4.45
    Bobbie L. Oliver               173,406                 21.00
    Mary L. Fitts                   66,000(2)               7.99
    All officers and directors
      as a group(8 persons)        379,730                 45.99

    Robert K. Fitts                 78,547(3)               9.51
     P.  O. Box 82       
     Boones Mill, VA  24065

    (1)   Includes shares held in various fiduciary capacities and owned by
          or with certain relatives.

    (2)   Includes 66,000 shares with respect to which voting and investment
          power is shared with Robert K. Fitts

    (3)   Includes 12,547 shares with respect to which Mr. Fitts has sole
          voting and investment power and 66,000 shares with respect to     
          which such power is shared with Mary L. Fitts.	


Item 12.	Certain Relationships and Related Transactions.
          -----------------------------------------------
     Pursuant to a settlement agreement between the Company and the Estate
of O. Z. Oliver, deferred compensation benefits of $75,726 were paid to 
Mr. Oliver's widow, Bobbie L. Oliver, during 1998.  In addition, $2,122 
was paid in 1998 to Mrs. Oliver for health insurance premiums.  Mrs. 
Oliver, a director, is the sister-in-law of Dale H. Powell, President and
Chairman of the Board of the Company and the sister of Mary L. Fitts.

   Pursuant to a settlement agreement between the Company and Robert K. 
Fitts, deferred compensation benefits of $66,724 and a sum of $10,000 in 
premiums for life insurance policies assigned to Mr. Fitts were paid to 
Mr. Fitts in 1998.  In addition, $6,000 was be paid in 1998 to Mr. Fitts 
for health insurance premiums for Mr. Fitts and Mary L. Fitts, his spouse.
Mr. Fitts' spouse, Mary L. Fitts, a director, is the sister of Bobbie L. 
Oliver and the sister-in-law of Dale H. Powell, President and Chairman of
the Board of the Company.

     In the normal course of business, the Company makes purchases from a 
supplier owned by the family of J. Dillard Powell, the recently deceased 
brother of Dale H. Powell.  The supplier was acquired by Mr. Powell in 1989.
Prior to that time, the supplier had been a long time vendor of the Company.
Purchases from this supplier totaled approximately $643,000 for 1998.



Item 13.	Exhibits, Lists And Reports on Form 8-K.
(a)  The following documents are filed as part of this report:

(3)  Exhibits:
	3.1(a)	Articles of Incorporation (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended December 31, 
1983 and incorporated herein by reference)

	3.1(b)	Amendment to Articles of Incorporation dated November 2, 1989 
(filed as an exhibit to Registrant's Form 10-K for the fiscal 
year ended December 31, 1989 and incorporated herein by 
reference)

	3.2(a)	By-Laws (filed as an exhibit to the Registrant's Form 10-K 
for the fiscal year ended December 31, 1990 and incorporated 
herein by reference)

	3.2(b)	Amendment to By-Laws dated January 19, 1994 (filed as an 
exhibit to the Registrant's Form 10-KSB for the fiscal year 
ended December 31, 1993 and incorporated herein by reference)

	3.2(c)	Amendment to By-Laws dated February 8, 1995

	3.2(d)	Amendment to By-Laws dated February 4, 1998

	10.3(a)	Settlement Agreement, dated as of March 24, 1990, between 
Registrant and Robert K. Fitts (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended Dec. 31, 
1989 and incorporated herein by reference)

	10.3(b)	Settlement Agreement, dated as of September 13, 1990, between 
Registrant and the Estate of O.Z. Oliver (filed as an exhibit 
to Registrant's Form 8-K filed Sept. 15, 1990 and 
incorporated herein by reference)

	10.4(a)	Employment Agreement, dated November 21, 1990, between 
Registrant and Dale H. Powell (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended Dec.31, 1990 
and incorporated herein by reference)

	10.4(b)	Employment Agreement, dated November 21, 1990, between 
Registrant and Edwin J. Campbell (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended Dec. 31, 
1990 and incorporated herein by reference)

	11    Computation of Per Share Earnings

	21   	Subsidiaries

	27 	Financial Data Schedule
 
(b)  Reports on Form 8-K   -   None.




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

						MOD-U-KRAF HOMES, INC.             
						(Registrant)

March 24, 1999 	            		By s/Dale H. Powell
                              -------------------------
                             	Dale H. Powell, President and
                                 Chairman of the Board

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

March 24, 1999             			s/Dale H. Powell                    
                              -------------------------
                              Dale H. Powell, President and                 
                                     Chairman of the Board (Principal       
                                           Executive officer)

March 24, 1999			            	s/Edwin J. Campbell
                              -------------------------
						                        Edwin J. Campbell, Vice President,           
                                      Corporate Secretary and Director

March 24, 1999	            			s/Steven T. Montgomery
                              -------------------------
                              Steven T. Montgomery, Controller              
                                     (Principal Financial and Accounting    
                                           Officer)

March 24, 1999				            s/W. Curtis Carter
                              -------------------------
                              W. Curtis Carter, Director


March 24, 1999	             		s/Bobbie L. Oliver
                              -------------------------
                        						Bobbie L. Oliver, Director

March 24, 1999                s/Mary L. Fitts
                              -------------------------
						                        Mary L. Fitts, Director


Mod-U-Kraf Homes, Inc.
Exhibit Index

Exhibit No.                       Description

     3.1(a)	Articles of Incorporation (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended December 31, 
1983 and incorporated herein by reference)

	3.1(b)	Amendment to Articles of Incorporation dated November 2, 1989 
(filed as an exhibit to Registrant's Form 10-K for the fiscal 
year ended December 31, 1989 and incorporated herein by 
reference)

	3.2(a)	By-Laws (filed as an exhibit to the Registrant's Form 10-K 
for the fiscal year ended December 31, 1990 and incorporated 
herein by reference)

	3.2(b)	Amendment to By-Laws dated January 19, 1994 (filed as an 
exhibit to the Registrant's Form 10-KSB for the fiscal year 
ended December 31, 1993 and incorporated herein by reference)

	3.2(c)	Amendment to By-Laws dated February 8, 1995

	3.2(d)	Amendment to By-Laws dated February 4, 1998

	10.1		1983 Mod-U-Kraf Homes, Inc. Incentive Stock Option Plan 
(filed as an exhibit to Registrant's Form 10-K for the fiscal 
year ended December 31, 1983 and incorporated herein by 
reference)

	10.3(a)	Settlement Agreement, dated as of March 24, 1990, between 
Registrant and Robert K. Fitts (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended Dec. 31, 
1989 and incorporated herein by reference)

	10.3(b)	Settlement Agreement, dated as of September 13, 1990, between 
Registrant and the Estate of O.Z. Oliver (filed as an exhibit 
to Registrant's Form 8-K filed Sept. 15, 1990 and 
incorporated herein by reference)

	10.4(a)	Employment Agreement, dated November 21, 1990, between 
Registrant and Dale H. Powell (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended Dec.31, 1990 
and incorporated herein by reference)

	10.4(b)	Employment Agreement, dated November 21, 1990, between 
Registrant and Edwin J. Campbell (filed as an exhibit to 
Registrant's Form 10-K for the fiscal year ended Dec. 31, 
1990 and incorporated herein by reference)

	11	Computation of Per Share Earnings

	21   	Subsidiaries

	27	Financial Data Schedule

	

Exhibit 3.2( c)

Mod-U-Kraf Homes, Inc.

Resolution Passed at Board of
Directors Meeting February 8, 1995


Resolved that the Board of Directors hereby finds it to be in the best 
interest of the corporation that its By-Laws be amended by deleting Article 
II, Section 1 and substituting therefore the following:

Article II

Board of Directors

Section 1. Election.  The Board of Directors shall be chosen at the annual 
meeting of the shareholders, to hold office until removed or until the next 
annual meeting of the shareholders and until their successors are elected. 
The number of directors shall be six (6).  Directors need not be 
stockholders.


Exhibit 3.2(d)

Mod-U-Kraf Homes, Inc.

Resolution Passed at Board of
Directors Meeting February 4


	      Resolved that the Board of Directors hereby finds it to be in the
        best interest of the Corporation that its By-Laws be amended by
        deleting Article II, Section I and substituting the following:

Article II

Board of Directors

        Section 1. Election.  The Board of Directors shall be chosen at the
        annual meetings of the stockholders, to hold office until removed
        or until the next annual meeting of the stockholders and until
        their successors are elected.  The number of Directors shall be no
        less than four (4) nor more than six (6).  Directors need not be
        stockholders.


Exhibit 11
                            Mod-U-Kraf Homes, Inc.
            Computation of Basic and Diluted Earnings Per Share
           for the years ended December 31, 1998, 1997 and 1996


                                  							1998       1997      1996
                                   						----      -----     -----
Net income applicable to common 
stock (1)                              $115,397   $180,685   $177,663
						                                 ========   ========   ========
Average number of shares of common
stock outstanding (2)                   825.649    825,649    825,649	
						                                 ========   ========   ========
Basic and diluted earnings per share      $0.14      $0.22      $0.22
                                       ========   ========   ========
Notes:

(1)	In the periods presented, the Company had only one class of Common 
      stock.

(2)	To determine the average number of shares of common stock, the 
      average numberof common shares outstanding during each month
     	were added together and the sum was then divided by 12.
 
                          


                                 Exhibit 21
                           Mod-U-Kraf Homes, Inc.
                                Subsidiaries

       Name of Subsidiary                     Jurisdiction of     
                                               Incorporation
- --------------------------------------     -----------------------
Mountain Resort Building Systems, Inc.            Virginia

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<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                         1653742
<SECURITIES>                                         0
<RECEIVABLES>                                   351972
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                                0
                                          0
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<OTHER-SE>                                     3933253
<TOTAL-LIABILITY-AND-EQUITY>                   9235290
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<OTHER-EXPENSES>                               (20370)
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<INCOME-PRETAX>                                 175836
<INCOME-TAX>                                     60439
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<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    115397
<EPS-PRIMARY>                                      .14
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