<PAGE>   1


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

         [X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934

                  For the Fiscal Year Ended December 31, 1997

                                       OR

         [ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934

                          Commission File Number 0-1748

                            MAJOR REALTY CORPORATION
                 (Name of Small Business Issuer in Its Charter)

            DELAWARE                                                  59-0898509
 (State or other jurisdiction of                                (I.R.S. Employer
  incorporation or organization)                             Identification No.)

5728 MAJOR BOULEVARD, SUITE 306, ORLANDO, FLORIDA                          32819
(Address of principal executive offices)                              (Zip Code)

        Registrant's Telephone Number, Including Area Code: 407/351-1111

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

         Securities registered under Section 12(g) of the Exchange Act:
                     COMMON STOCK, $0.01 PAR VALUE PER SHARE

         Check whether the issuer (1) filed all reports required 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 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
or any amendment to this Form 10-KSB. [ X ]

         The Issuer's revenues for its most recent fiscal year, ended December
31, 1997, were $1,291,000.00.

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant (3,432,267 shares) on March 17, 1998, was $4,084,398. The
aggregate market value was computed by reference to the closing price per share
on the Nasdaq SmallCap Market on that date.

         The number of shares of Common Stock, par value $.01 per share, of the
Registrant outstanding as of March 17, 1998, was 6,893,378.


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                            MAJOR REALTY CORPORATION
                             INDEX TO ANNUAL REPORT
                                 ON FORM 10-KSB


<TABLE>
<CAPTION>
Part I                                                                           Page
<S>             <C>                                                              <C>
     Item 1. -  Description of Business.........................................   4
     Item 2. -  Description of Property.........................................  13
     Item 3. -  Legal Proceedings...............................................  14
     Item 4. -  Submission of Matters to a Vote of Security Holders.............  15

Part II

     Item 5. -  Market for Common Equity and Related Stockholder Matters........  15
     Item 6. -  Management's Discussion and Analysis of Financial Condition
                and Results of Operations.......................................  15
     Item 7. -  Financial Statements............................................  19
     Item 8. -  Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure.............................  40

Part III

     Item 9. -  Directors, Executive Officers; Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act...............  40
     Item 10.-  Executive Compensation..........................................  41
     Item 11.-  Security Ownership of Certain Beneficial Owners and Management..  44
     Item 12.-  Certain Relationships and Related Transactions..................  47

Part IV

     Item 13.-  Exhibits and Reports on Form 8-K................................  49
</TABLE>




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<PAGE>   4


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

INTRODUCTION

         Major Realty Corporation (together with its subsidiaries referred to
herein as "Major Realty" or the "Company") is a Delaware corporation qualified
to do business in the State of Florida. At December 31, 1997, the Company owned
approximately 161 gross acres of real property in the City of Orlando, Florida,
in an area known as "Florida Center," a 2,700 acre planned community which
contains the Universal Studios Florida studio complex and tourist attraction and
is located close to downtown Orlando and such attractions as Walt Disney World's
Magic Kingdom, Epcot Center and Sea World.

         The Company's properties, the majority of which were acquired prior to
1969, are located in areas where extensive development activity has been
occurring, and, for the most part, are believed to provide desirable locations
for the development of residential, commercial or tourist attraction projects.

         The Company, historically, has attempted to realize the value in its
properties through a combination of land sales, joint ventures, land leases and
other transactions. However, the combination of adverse market conditions,
equity requirements for development projects and the Company's financial status
made transactions other than land sales difficult to accomplish. Due both to
financial need and the ability to achieve value by property sales rather than
development activity, the Company's primary source of revenues during the past
three fiscal years has been the sale of land.

         In October 1995, the Company announced that its Board of Directors had
determined that it was in the best interests of the stockholders to seek a
merger partner or otherwise seek a transaction for the sale of the Company.
Capital constraints limiting the feasibility of independently developing the
Company's existing properties were cited as a primary factor in the Board's
decision to seek a merger or sale transaction. On February 11, 1998, the Company
signed an Agreement in Principle with Pembroke Acquisition, Inc. concerning a
proposed acquisition of the Company. On March 5, the Company entered into an
agreement and plan of merger with PBD Holdings, L.P., an affiliate of Pembroke
Companies, Inc. and Blackacre Capital Group, L.P., pursuant to which a
subsidiary of PBD Holdings will be merged into the Company, and all of the
outstanding shares of common stock of the Company ("Common Stock") will be
converted into the right to receive $1.25 per share in cash (the "Merger
Transaction"). The Merger Transaction has been approved by stockholders holding
a majority of the outstanding shares of Common Stock, and the Company is
currently preparing an Information Statement to be distributed in early April
1998 to all stockholders describing their rights with respect to the Merger
Transaction. See "Recent Developments."

         The Company was incorporated in Delaware in 1959. Its principal
executive offices are located at 5728 Major Boulevard, Suite 306, Orlando,
Florida 32819, and its telephone number is (407) 351-1111. The Company's Common
Stock is traded on the Nasdaq SmallCap Market.



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<PAGE>   5

SALE AND DISPOSITION OF CERTAIN PROPERTY

         During the three year period ended December 31, 1997, the Company sold
a number of parcels of real property, as described below. All of the Company's
property is secured by a mortgage in favor of its lender which contains partial
paydown and release provisions. Accordingly, a portion of the proceeds from each
of these land sales was used to retire debt and the remainder was used or
available for general operations and working capital purposes.

Recent Land Transactions:

         In March 1998, the Company signed a contract for the sale of 42.03
acres gross (15 acres net) of multi-family land located on Conroy Road in
Orlando, Florida for $1,500,000. The buyer made a $10,000 deposit and has a
90-day no risk inspection period to look at the property to determine if it
wishes to proceed with the contract. If the buyer proceeds with the contract, an
additional $90,000 deposit will be required and the closing would occur in
September 1998.

         In March 1998, the Company signed a contract for the sale of 6.36 acres
of commercial land located at the northeast intersection of Interstate 4 and
Kirkman Road in Orlando, Florida for $4,770,000. The buyer has made a $50,000
deposit and has a 60-day no risk inspection period to look at the property to
determine if it wishes to proceed with the contract. If the buyer proceeds with
the contract, an additional $50,000 deposit will be required and the closing
would occur in August 1998.

         In February 1998, the Company signed a contract for the sale of 1.74
acres of commercial land located on the west side of Major Boulevard in Orlando,
Florida for $665,000. The buyer has made a $10,000 deposit and has a 60-day no
risk inspection period to look at the property to determine if it wishes to
proceed with the contract. If the buyer proceeds with the contract, an
additional $40,000 deposit will be required and the closing would occur in July
1998.

         In February 1998, the Company signed a contract for the sale of 55
acres gross (16.42 acres net) of multi-family land in the southwestern sector of
Orlando, Florida for $2,040,000. The buyer has made a $10,000 deposit and has a
90-day no risk inspection period to look at the property to determine if it
wishes to proceed with the contract. If the buyer proceeds with the contract, an
additional $90,000 deposit will be required and the closing would occur in
August 1998.

         In February 1998, the Company signed a contract for the sale of 2.63
acres of commercial land located on the northeast corner of Republic Drive and
Carrier Drive located in Orlando, Florida for $750,000. The buyer has made a
$10,000 deposit and has a 60-day no risk inspection period to look at the
property to determine if it wishes to proceed with the contract. If the buyer
proceeds with the contract, an additional $40,000 deposit will be required and
the closing would occur in July 1998.

         In January 1998, the Company signed a contract for the sale of 3 acres
of commercial land located on the west side of Major Boulevard in Orlando,
Florida for $1,200,000. The buyer has made a $10,000 deposit and has a 90-day no
risk inspection period to look at the property to determine if it wishes to
proceed with the contract. If the buyer proceeds with the contract, an
additional $50,000 deposit will be required and the closing would occur in
September 1998.



                                      -5-
<PAGE>   6

Land Transactions During 1997

         In November 1997, the Company signed a contract for $700,000, for 2
acres of commercial land located on the east side of Major Boulevard in Orlando,
Florida. The buyer made a $10,000 deposit and had a 60-day risk free inspection
period to look at the property to determine if it wished to proceed with the
contract. During January, 1998, the Buyer made an additional $50,000 deposit and
the inspection period was extended until February 5, 1998. The full $60,000
deposit is now non-refundable. On February 5, 1998 the contract was amended to
reduce the sales price to $675,000. Closing is scheduled for May 1998.

          In November 1997, the Company signed a contract for $800,000, for 3
acres of commercial land located on the east side of Major Boulevard in Orlando,
Florida. The buyer made a $10,000 deposit and had a 45-day risk free inspection
period to look at the property to determine if it wished to proceed with the
contract. During December, 1997, the Buyer made an additional $20,000 deposit.
The full $30,000 deposit became non-refundable at that time. Closing is
scheduled for April 1998.

          In November 1997, the Company signed a contract for $700,000, for 2
acres of commercial land located on the east side of Major Boulevard in Orlando,
Florida. The buyer made a $10,000 deposit and had a 45-day risk free inspection
period to look at the property to determine if it wished to proceed with the
contract. During December, 1997, the Buyer made an additional $50,000 deposit.
The full $60,000 deposit became non-refundable at that time. Closing is
scheduled for April 1998.

         In October 1997, the Company signed a contract for $700,000, for 1.75
acres of commercial land located on the west side of Major Boulevard in Orlando,
Florida. The buyer made a $10,000 deposit and had a 60-day risk free inspection
period to look at the property to determine if it wished to proceed with the
contract. In December, 1997, the Buyer notified the Company of its wish to
terminate the contract. The deposit was refunded to the Buyer.

         In May 1997, the Company signed a contract for $850,000 for the sale of
10.09 acres of multi-family land located on Cason Cove Drive in Orlando,
Florida. The sale closed in August 1997. The sale price was paid in cash at
closing.

Land Transactions During 1996

         In September 1996, the Company signed two contracts for the sale of
multi-family land in the southwestern sector of Orlando, Florida. One contract
was for approximately 55 acres gross (17 acres net) in the amount of $1,800,000.
The other contract was for approximately 43 acres gross (15 acres net) in the
amount of $1,350,000. The buyer placed a $10,000 deposit on each parcel and had
a 60 day inspection period during which it could cancel one or both of the
contracts. On November 13, 1996, the Company received notice from the buyer that
it was canceling the contracts. The deposits were refunded to the buyer.

         In August 1996, the Company signed a contract for approximately
$1,050,000, for the sale of approximately 2.5 acres of commercial property
located on the west side of Major Boulevard in Orlando, Florida. The buyer made
a $40,000 deposit and had a 90 day inspection period to determine if



                                      -6-
<PAGE>   7

it wished to proceed with the contract. On October 15, 1996, the Company
received notice from the buyer that it was canceling the contract. The deposit
was refunded to the buyer.

         In February 1996, the Company signed a contract for approximately
$411,000 for approximately 2.34 acres of commercial property located at the
northwest corner of the intersection of Conroy Road and Vineland Road in
Orlando, Florida. The sale closed in September 1996. The sales price was paid in
cash at closing.

Land Transactions During 1995

         In September 1995, the Company sold 1.06 acres of vacant commercial
land located at the southeast corner of Vineland Road and Major Boulevard,
Orlando, Florida, to Orlando Foods, Ltd. for the construction of a Wendy's fast
food restaurant for $350,000. The sales price was paid in cash at closing.

         In September 1995, the Company sold 1.38 acres of vacant commercial
land located at the northwest corner of the intersection of Conroy Road and
Vineland Road in Orlando, Florida for $750,000 to San Alto Construction for the
construction of a 7-11 convenience store. The sales price was paid in cash at
closing.

         In September 1995, the Company sold 10.36 acres of vacant commercial
land located at the northeast intersection of Interstate 4 and Kirkman Road in
Orlando, Florida to Cracker Barrel Old Country Store, Inc. ("Cracker Barrel")
for $6,280,000. The Company received $2,700,000 in cash at closing plus a
$3,580,000 non-interest bearing promissory note, secured by a mortgage on the
property, which was due in two equal payments, one in April 1996 and the other
in April 1997. On March 27, 1996, Cracker Barrel formally notified the Company
of its intent to default on the note and reconvey the property to the Company.
Consequently, the Company recorded the sale of only 4.0 acres of land for
$2,700,000 in 1995 and included the remaining 6.36 acres of land subject to the
sale as "Land held for sale or development" at December 31, 1995.

         In August 1995, the Company sold 12.95 acres of vacant land located at
the northeast corner of Cason Cove Road and Mission Road in Orlando, Florida for
$1,000,000 to National HealthCare, L.P. The sales price was paid in cash at
closing.

         In May 1995, the Company sold 6.12 acres of vacant land at the
northwest intersection of Major Boulevard and Vineland Road in Orlando, Florida
to Bara Vineland, Inc. for $2,010,000. The Company received a deposit of $50,000
and an additional $650,000 at closing. The balance of the purchase price,
$1,310,000, was represented by a promissory note originally due in May 1996. The
note was satisfied at a discount on October 18, 1995 for $1,234,000.

PROPERTY DESCRIPTIONS

         All of the Company's properties are located in Orlando, Florida, in the
area known as Florida Center. The summaries below describing the Company's
properties are categorized based upon the location and current zoning or use of
the properties.



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<PAGE>   8

         The following table sets forth information with respect to the real
property in Florida Center owned by the Company as of December 31, 1997:


<TABLE>
<CAPTION>
                                                           Land Zoning or Use (in acres)
                                                           -----------------------------
                                                          Multi-family             Lakes and
                                         Commercial        Residential            Conservation        Total
                                         ----------       ------------            ------------        -----
<S>                                      <C>              <C>                     <C>                 <C>
Held primarily for development              38.2                32                   70.2             140.4
or sale

Property leased to third parties*            -0-                20.3                  -0-              20.3
                                        --------------------------------------------------------------------

                                            38.2                52.3                 70.2             160.7
</TABLE>

*        See "Item 1. Description of Business -- Property Descriptions - 4.
         Turkey Lake/Windhover Area" for a description of the terms of the
         lease.

         Florida Center is a 2,700 acre planned community located within the
city limits of Orlando in the southwest quadrant around the intersection of the
Florida Turnpike and Interstate 4. It lies approximately seven miles south of
downtown Orlando, seven miles north of the Walt Disney World complex and seven
miles west of the Orlando International Airport.

         There has been a significant amount of development on properties owned
by others within Florida Center, beginning as early as 1969. Currently, the
developed properties within the original 2,700 acres known as Florida Center
include hotels and motels, light industrial and office projects, apartment and
condominium buildings, restaurants and retail shopping, a championship golf
course, and major tourist attractions, including Universal Studios Florida and
Wet `n Wild.

         Universal Studios Florida, located in the heart of Florida Center,
contains a full scale operating motion picture and television studio and an
entertainment-theme park attraction. The facility employs over 6,400 people
during peak periods and is designed to accommodate over six million visitors a
year. Universal Studios opened in October 1988, and the theme park attraction
opened in June 1990. Universal Studios Florida is undergoing a major expansion
phase, with a new nighttime entertainment district, CityWalk, scheduled to open
later in 1998, and a new theme park, Islands of Adventure, scheduled to open in
1999. Both CityWalk and Islands of Adventure are adjacent to Universal Studios
Florida

         1.       CORE AREA COMMERCIAL

         The core area of Florida Center (the "Core Area") is bordered by the
Florida Turnpike, Interstate 4 and Kirkman Road, all of which thoroughfares
provide easy access to and from the Company's properties in this area. The Core
Area is located directly across Kirkman Road from the Kirkman Road entrance to
Universal Studios Florida. Existing developments in the Core Area on property
owned by



                                      -8-
<PAGE>   9

others include the Mystery Funhouse, a number of hotels, office buildings and
other support facilities. In the Core Area, the Company owns 25 vacant acres in
various platted parcels.

         All roads and utilities are in place on the Core Area properties. These
properties are zoned to permit high density development of hotels, office
buildings, commercial retail and tourist attraction facilities.

         2.       REPUBLIC DRIVE AREA

         In the Republic Drive Area of Florida Center, the Company owns a vacant
7.6 acre parcel platted for commercial use. The Florida Department of
Environmental Protection ("DEP") and the U.S. Army Corps of Engineers made a
determination that the entire parcel is environmentally sensitive and within its
jurisdiction and, accordingly, could not be developed in its present state
without offsite mitigation. The Company has obtained permits from the DEP, the
U.S. Army Corps of Engineers and the South Florida Water Management District to
develop approximately 2.6 acres of the site. In accordance with the requirements
of the permits for off-site mitigation, the Company acquired approximately 27
acres of off-site wetlands in February 1995, which will be deeded to an
appropriate governmental agency.

         The Republic Drive area is located approximately two miles north of the
1,500,000 square foot Orange County Convention Center, Sea World Orlando and the
Harcourt Brace Jovanovich, Inc. corporate complex. Already developed by others
in this area are a large number of hotels and motels, restaurants, retail and
gift shops, tourist attractions, banks and other service facilities. Also in
this area, close to the Company's property, are a Martin-Marietta facility and
several office/warehouse facilities.

         3.       THE LAKES AND CYPRESS CREEK AREA

         The Company owns two tracts of vacant land in the Lakes and Cypress
Creek area north of the Florida Turnpike and west of Interstate 4.

         The first tract of land, referred to as the "Lakes" property, currently
contains 25.5 acres, which acreage is platted into a 10.5 acre commercial lot
and 15 acres for multi-family residential use. An additional 95.2 acres
represent existing conservation and lake areas. All roads and utilities are in
place.

         The second tract contains 55.4 acres, approximately 17.0 of which may
be developed, and lies between Cypress Creek Golf Course, a championship golf
course, and Florida's Turnpike and is near a number of condominium and apartment
complexes.

         4.       TURKEY LAKE/WINDHOVER AREA

         The Company owns 20.3 acres within the Turkey Lake/Windhover area,
which is located west of Kirkman Road and south of the Florida Turnpike. The
land is leased, pursuant to a ground lease (the "Ground Lease") entered into in
June 1983, to the Kirkman-Oxford Associates Limited Partnership
("Kirkman-Oxford"), which has developed on the property a 272-unit apartment
complex known as West Winds.



                                      -9-
<PAGE>   10

         The Ground Lease had an initial lease term of 12 years, and,
thereafter, the Ground Lease is automatically renewed for successive six month
periods, unless the lessee gives a 30-day notice of termination to the Company.
The maximum lease term, including all extensions, may not extend beyond June
2003. The base rent payable under the Ground Lease is $130,560 per year.

         If the apartment complex is sold by the lessee, the Company is required
by the terms of the Ground Lease to sell the property subject to the ground
lease for a price which provides (i) a guaranteed minimum payment of
approximately $1 million, and (ii) a 9% equity participation in the amount by
which the proceeds from the sale exceeds approximately $12 million. The lessee
also has an option to purchase the property from the Company at any time at a
price to be negotiated based upon independent real estate appraisals.

         The Company's fee interest in the property that is the subject of the
Ground Lease is subordinated to a mortgage with an original principal amount of
$7,700,000 in favor of Cardinal Federal Savings Bank.

ENVIRONMENTAL AND OTHER REGULATION

         All real estate development in Florida is subject to extensive
governmental regulation, with increasing emphasis on regulation relating to
environmental considerations. It is likely that increasingly stringent
requirements will be imposed on real estate developers in the future. The costs
of such increased environmental regulation may materially add to the cost of the
Company's operations. However, such additional costs, if any, should not apply
more stringently to the Company's properties and operations than to the
properties and operations of others engaged in similar activities in the areas
in which properties of the Company are located. To the best of management's
knowledge, the Company has complied with all governmental and environmental
regulations material to its business.

         In 1985, the State of Florida enacted the Growth Management Act which
requires that all local governments adopt regulations to ensure that public
facilities are available to serve new development when that development occurs.
Roadway capacity is normally the most critical element of the Growth Management
Plan. The City of Orlando Growth Management Plan and Concurrency Management
System became effective on January 1, 1992. The Company negotiated a settlement
agreement with the City of Orlando on April 15, 1993, resolving certain disputed
issues regarding the Company's vested rights and providing for the allocation of
a specified transportation capacity to the Company. Management believes that,
under the terms of the settlement agreement, the Company, or any purchaser of
any of the Company's Florida Center properties, will have the right to develop
such properties, generally without concern for roadway capacity.

EMPLOYEES AND ADVISORS

         The Company's management is provided by David L. Treadwell, Chairman of
the Board and Chief Executive Officer, pursuant to an employee lease agreement
with Prechter Holdings, Inc., Mr. Treadwell's employer. See "Item 10. Executive
Compensation."

         Gary E. Jahraus served as Vice President of the Company until April 1,
1994, at which time he entered into a one year agreement for the performance of
consulting services to the Company. Under the consulting agreement, Mr. Jahraus
is paid a monthly fee of $5,000 and will earn a success fee of .5%



                                      -10-
<PAGE>   11

with respect to transactions consummated during the term of the consulting
agreement and transactions contracted for which are closed within a specified
period of time after termination of the consulting agreement with a minimum
success fee of $5,000 per transaction. Mr. Jahraus has the use of the Company's
offices but pays for expenses directly related to his outside business
activities. The consulting services agreement with Mr. Jahraus has been renewed
through December 31, 1998.

         The Company has two additional employees.

COMPETITION

         The real estate operations of the Company, including the value of its
real estate holdings, may be affected by many factors over which the Company has
limited control, among them, changes in general and local economic conditions,
interest rate levels, availability and terms of financing, changes in tax laws
and fluctuations in development and operating costs. The Company conducts its
real estate operations in the active and highly competitive Florida real estate
market, where it competes with many other owners of commercial property suitable
for development in seeking to attract investors for real estate investment and
development opportunities. This competition is primarily based on property
location and permitted uses.

         The development and construction of properties are subject to various
risks, including, among others, the continued availability of suitable
undeveloped land at reasonable prices, adverse local and national real estate
market conditions, changing environmental and other governmental regulations,
the level of real estate taxes, the cost of materials and labor, and the
availability of construction and long-term financing.

         The development of real estate is subject to extensive governmental
regulations, including those relating to zoning, environmental, water, sewage
and other similar matters. Such governmental regulations should not have a
materially different impact on the properties or operations of the Company than
on those of its competitors. Real estate business operations are subject to
competition from similar types of properties operated or located in the general
vicinity.

RECENT DEVELOPMENTS

                  On February 11, 1998, the Company signed an Agreement in
Principle with Pembroke Acquisition, Inc. concerning a proposed acquisition of
the Company. On March 5, the Company entered into an agreement and plan of
merger with PBD Holdings, L.P., an affiliate of Pembroke Companies, Inc. and
Blackacre Capital Group, L.P., pursuant to which a subsidiary of PBD Holdings
will be merged into Major, and all of the outstanding shares of Common Stock
will be converted into the right to receive $1.25 per share in cash (the "Merger
Transaction"). The Merger Transaction has been approved by stockholders holding
a majority of the outstanding shares of Common Stock, and the Company is
currently preparing an Information Statement to be distributed in early April
1998 to all stockholders describing their rights with respect to the Merger
Transaction.

         The following is a summary of the other material terms of the Merger
Agreement. This summary is not a complete description of the terms and
conditions of the Merger Agreement and is qualified in its entirety by reference
to the full text thereof, which is filed as an Exhibit to this



                                      -11-
<PAGE>   12

Report. Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Merger Agreement.

         Conditions to Each Party's Obligation to Effect the Merger. The Merger
Agreement provides that the respective obligations of each party to effect the
Merger are subject to the satisfaction or waiver on or prior to the Merger
becoming effective (the "Effective Time") of the following conditions: (i) no
provision of any applicable law or regulation and no judgment, injunction, order
or decree shall prohibit the consummation of the Merger or impose material
limitations on the ability of Holdings to exercise full rights of ownership of
the Company's assets or business; and (ii) the performance by the parties in all
material respects of their respective obligations under the Merger Agreement
prior to the Effective Time and the truth in all material respects of the
parties' representations and warranties at the Effective Time.

         In addition, the obligations of Holdings and Merger Sub to effect the
Merger are subject to the satisfaction or waiver of the further following
conditions: (i) no action or proceeding shall have been instituted by any
government or governmental authority or agency, domestic or foreign, or by any
other person, domestic or foreign, before any court or governmental authority or
agency, domestic or foreign, (a) challenging or seeking to make illegal, to
delay materially or otherwise directly or indirectly to restrain or prohibit the
consummation of the Merger, seeking to obtain material damages or otherwise
directly or indirectly relating to the transactions contemplated by the Merger,
(b) seeking to restrain or prohibit Holding's ownership or operation (or that of
its affiliates) of all or any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of Holdings and its
affiliates, taken as a whole, or to compel Holdings or any of its affiliates to
dispose of or hold separate all or any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or of Holdings and
its affiliates, taken as a whole or (c) that otherwise is likely to materially
adversely affect the Company and its subsidiaries, taken as a whole, or Holdings
and its affiliates, taken as a whole; (ii) no action shall have been taken, or
any statute, rule, regulation, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the Merger, by any court,
government or governmental authority or agency, domestic or foreign, that is
likely, directly or indirectly, to result in any of the consequences referred to
in clauses (a) through (c) of paragraph (i) above; (iii) Holdings shall have
received the resignation of the officers and directors of the Company; (iv) at
any time after the date of the Merger Agreement, there shall not have occurred
any event or series of events having a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Company and its subsidiaries taken as a whole; and (v) holders of more than 15%
of the outstanding Shares shall not have delivered to the Company, within 20
days after the date on which the Information Statement is mailed to the
stockholders of the Company, written notice of their intent to seek, or demand
for, appraisal of their shares under Section 262 of the Delaware General
Corporation Law.

         Termination of the Merger Agreement. The Merger Agreement may be
terminated and the Merger contemplated thereby may be abandoned at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company, (i) by mutual written consent of the Company and
Holdings; (ii) by either the Company or Holdings, if (a) the other party hereto
commits a material breach of the Merger Agreement which is not cured within 10
days after notice thereof is given to the breaching party or (b) the Merger has
not been consummated by May 15, 1998 (the "Termination Date"); provided that the
right to terminate the Agreement pursuant to this



                                      -12-
<PAGE>   13


clause (ii) is not available to any party whose breach of any provision of the
Merger Agreement results in the failure of the Merger to be consummated by the
Termination Date, and provided further that in the event that the Securities and
Exchange Commission (the "Commission") reviews the Information Statement, the
Termination Date shall be extended by a number of days equal to the number of
days between the date that the Commission informs the Company that it intends to
review the Information Statement and the date on which the Commission informs
the Company that it has no further comments on the Information Statement; or
(iii) by either the Company or Holdings, if there shall be any law or regulation
that makes consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining Holdings or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable.

         Break-Up Fees. If the Merger Agreement is terminated by the Company due
to the material breach thereof by Holdings, Holdings is required promptly to pay
to the Company as liquidated damages a fee in cash in an amount equal to
$500,000, plus all out-of-pocket expenses incurred in connection with the
negotiation of the Merger by the Company, including, without limitation,
reasonable fees and expenses of legal counsel, accountants and other
professionals in connection with the negotiation and execution of the Agreement
in Principle, the Merger Agreement and all of the transactions contemplated
therein. Holdings has deposited $500,000 in cash with an escrow agent to
partially secure the obligation of Holdings to pay this fee.

         If the Merger Agreement is terminated by Holdings due to the material
breach thereof by the Company, the Company is required promptly to pay to
Holdings as liquidated damages a fee in cash in an amount equal to $500,000,
plus all out-of-pocket expenses incurred in connection with the negotiation of
the Merger by Holdings, including, without limitation, reasonable fees and
expenses of legal counsel, accountants and other professionals in connection
with the negotiation and execution of the Agreement in Principle, the Merger
Agreement and all of the transactions contemplated therein.

         Fees and Expenses. The Merger Agreement provides that all costs and
expenses in connection with the Merger Agreement and the transaction
contemplated by the Merger Agreement shall be paid by the party incurring such
cost or expense, whether or not the Merger is consummated, except as provided
above under "Break-Up Fees." None of the Company or any of the stockholders who
consented to the Merger is paying a fee to an investment banker, broker or other
entity in connection with the Merger.

         Conduct of Business by the Company. The Merger Agreement provides that
the Company and its subsidiaries will conduct their business in the ordinary
course consistent with past practice and use their best efforts to preserve
intact their business organizations and relationships with third parties and to
keep available the services of their officers and employees.

ITEM 2. DESCRIPTION OF PROPERTY.

         Information with respect to the properties of the Company is set forth
under "Item 1. Description of Business - Property Descriptions."



                                      -13-
<PAGE>   14

         All of the Company's properties, the majority of which were acquired
prior to 1969, are located in Orlando, Florida. The Company believes that they
provide desirable locations for the development of residential, commercial or
tourist attraction projects; however, development has been slowed in recent
years due to the lack of availability to the Company of construction and
long-term financing, increasing environmental and other government regulation.
See "Item 1. Description of Business - Environmental and Other Regulation" and
"- Competition."

         All of the Company's real property is encumbered by a mortgage to
Acceptance Insurance Companies Inc., the Company's largest shareholder. See
"Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Financial Condition and Liquidity" and "Item 12. Certain
Relationships and Related Transactions."

         The Company historically has not invested in real estate mortgages or
securities or other interests in entities primarily engaged in real estate
activities and does not anticipate doing so in the future. There are no specific
present plans for the construction of improvements on any unimproved property
which the Company now holds, although the Company continues to move forward to
obtain various approvals and determinations from the applicable regulatory
agencies and governmental bodies which are necessary to develop the Company's
properties. Unless the Company is able to implement one or more transactions
which will permit it to pursue a more diversified business plan, it is unlikely
to acquire new real estate assets in the near future.

         The Company maintains general liability insurance policies and, in the
opinion of management, such insurance coverage is adequate to protect the
Company and its properties.

         For 1997, the Company's real estate taxes for its properties were
approximately $230,000.

ITEM 3. LEGAL PROCEEDINGS.

         In the normal course of business, the Company, its subsidiaries and the
joint ventures in which the Company and its subsidiaries have or have had an
interest are involved in certain litigation. In the opinion of management, with
the possible exception of the matters described below, there are no pending
material legal proceedings to which the Company, its subsidiaries or the joint
ventures in which the Company and its subsidiaries have an interest, are a
party, or to which any of their respective properties are subject.

         Florida Department of Revenue/The Prudential Insurance Company of
America. In connection with its routine audit of documents recorded relating to
an agreement to extend a mortgage from The Prudential Insurance Company of
America ("Prudential") in 1992, the Florida Department of Revenue (the
"Department") issued an assessment for unpaid intangible and documentary stamp
taxes in February 1994. The amount assessed for documentary stamp tax was
$119,640 plus interest and penalties, and the amount assessed for intangible tax
was $12,774 plus interest and penalties, for a total amount due of $197,172
through April 24, 1994. Prudential, over objection from the Company, paid the
Department $43,562 in April 1994, and unsuccessfully sought to get the
Department to withdraw its assessment of the balance.

         Prudential, based on provisions of the loan documents with the Company,
has demanded that the Company indemnify it and hold it harmless for any taxes
paid or owing. While reserving its rights



                                      -14-
<PAGE>   15

to contest Prudential's claim for indemnification, the Company formally
requested a hearing before the Department and informally sought to resolve the
matter through negotiation with representatives of the Department. The
Department ultimately agreed to reduce its claim by an aggregate amount of
$149,004, and in July, 1995, in a closing agreement accepted the payments
previously made, plus additional interest in the amount of $668. Prudential,
through its counsel, has reserved its right to seek indemnification from the
Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's common stock is traded on the Nasdaq SmallCap Market
under the symbol MAJR.

         The high and low closing prices for the Company's stock as reported by
Nasdaq for the periods indicated and the approximate number of shareholders are
presented below:

<TABLE>
<CAPTION>
                                               For the Year Ended December 31,
                                              1996                          1997
                                              ----                          ----
                                       High          Low            High            Low
<C>                                    <C>          <C>            <C>             <C>
1st Quarter                            2-3/8        1-7/8          1-15/32         1-5/16
2nd Quarter                            2-1/8        1-11/16        1-5/8           1-1/16
3rd Quarter                            2-3/16       1-9/16         1-3/32          1-1/16
4th Quarter                            2            1-7/16         1-1/8           1

Approximate Number of
Shareholders                                  2,366                          2,294
</TABLE>


No dividends were paid during the years ended December 31, 1997 or 1996. The
Company's credit facility with Acceptance Insurance Companies Inc. contains a
covenant which expressly prohibits the payment of dividends.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         NET INCOME

         The Company recorded a net loss of $766,000 in 1997, as related to a
net loss of $579,000 in 1996. The loss in 1997 and 1996 was due primarily to the
fact that the Company was able to sell only



                                      -15-
<PAGE>   16

one parcel of land during each year for approximately $850,000 and $411,000,
respectively. See Note 2 to Consolidated Financial Statements detailing land
sales in 1997 and 1996.

         REVENUES

         The Company's revenues in 1997 and 1996 were derived from land sales,
interest income from a mortgage note receivable and payments under a ground
lease. See "Item 1. Sale and Disposition of Certain Property" and Note 2 to
Consolidated Financial Statements.

         COSTS AND EXPENSES

         The cost of real estate sold in 1997 was $813,000, as compared to
$198,000 in 1996, reflecting the difference in acquisition cost of the various
parcels sold.

         Selling, general and administrative costs in 1997 were $621,000 as
compared to $674,000 in 1996. The reduction in selling, general and
administrative costs primarily was attributed to the generally reduced scope of
the Company's operations.

         Interest cost for 1997 was $623,000, as compared to interest cost of
$546,000 for 1996. The increase was due to the increased interest rate of the
loan restructure agreement with Acceptance on April 1, 1997. See "Financial
Condition and Liquidity" below. The Company did not capitalize interest in 1997
or 1996.

FINANCIAL CONDITION AND LIQUIDITY

         The Company relies on internal sources of capital to meet its operating
and debt service requirements. Current internal sources of funds are cash on
hand, proceeds from land sales and lease payments. Due to the lack of
availability to the Company of construction and long-term financing, development
activities with respect to the Company's properties have been significantly
reduced, with none of the Company's properties currently designated for any
significant above-ground development activity.

         At December 31, 1996, the Company was indebted to Acceptance pursuant
to a loan restructure arrangement entered into on October 18, 1995, in the
principal amount of $5,064,144, comprised of $747,313 due to Acceptance under
the terms of a February 1995 restructuring and $4,316,881 previously owed to
Citizens Fidelity Bank and Trust Company, now known as PNC Bank, Kentucky, Inc.
("PNC"), which indebtedness was acquired by Acceptance immediately prior to the
restructuring. The aggregate indebtedness of the restructured loan was
represented by a single promissory note, due May 1, 1998, unless there was a
change in control of the Company prior to such time, in which event the maturity
of the loan will be accelerated. The interest rate on the restructured loan was
prime plus 1.5%, with interest payable quarterly in arrears. In January 1996,
the Company made a payment of $106,000 for interest relating to the fourth
quarter of 1995. The Company obtained permission to defer the remaining
quarterly interest payments due in 1996 and 1997 to Acceptance on its $5.1
million mortgage note in the event the Company's cash flow was insufficient to
make such payments, pending the receipt of funds from the sale of additional
properties or other sources. Accordingly, the Company did not make the $126,000
quarterly interest payments due on April 1, July 1, or October 1, 1996, and
January 1 and April 1, 1997. In September 1996, the Company made a payment to
Acceptance in the



                                      -16-
<PAGE>   17

amount of $240,000 which was applied to the deferred interest due from the first
two quarters of 1996. The balance of the deferred interest as of December 31,
1996, was approximately $263,000.

         The Company's obligation to pay the foregoing amount, as well as
additional interest of $123,614 accrued from January 1 through March 31, 1997,
was restructured in April 1997, and such aggregate accrued interest and the $5.1
million principal amount due to Acceptance have been consolidated into a new
promissory note due May 31, 1998, unless there is a change in control of the
Company prior to such time, in which event the maturity of the loan will be
accelerated. The interest rate on the restructured loan is prime plus 2.5%, with
interest accruing and added to principal on a quarterly basis in arrears.
Subject to the Company's right to prepay the note, the outstanding principal
amount of the note (or any portion thereof), plus accrued but unpaid interest,
is convertible into common stock of the Company at the option of Acceptance at
any time upon 20 days prior notice, based upon a price per share equal to the
average closing price of the common stock during the 30-day period immediately
preceding the date of Acceptance's notice of its election to convert. The
Company's indebtedness to Acceptance is secured by a first mortgage on
substantially all of the Company's property, including the certain notes and
mortgages payable to the Company from third parties.

         In April 1997, Acceptance provided the Company a $500,000 line of
credit. Under this revolving credit facility, the Company may borrow and
reborrow up to $500,000. All borrowings are due May 31, 1998, unless there is a
change in control of the Company prior to such time, in which event the maturity
of the loan will be accelerated. The interest rate on the line of credit is
prime plus 2.5%, with interest accruing and added to principal on a monthly
basis in arrears. The Company is required to pay a fee to Acceptance on December
31, 1997, and on the maturity date of the note, equal to 0.5% of the average
unused portion of the line of credit during each period. The Company paid
Acceptance a fee of $15,000 in connection with the restructuring of the $5.1
million mortgage loan and the establishment of the line of credit.

         Acceptance has agreed to extend the terms of the original promissory
note and the line of credit promissory note until May 31, 1999, in the event the
Merger Transaction with PBD Holdings, described below, is not consummated.

         Under an amendment to the employee lease agreement with Prechter
Holdings, Inc. (formerly, Heritage Network, Incorporated) ("Prechter Holdings"),
effective April 1, 1996, pursuant to which David L. Treadwell provides services
to the Company as its Chairman of the Board and Chief Executive Officer, the fee
to Prechter Holdings was reduced to $25,000 per annum, payable monthly, plus a
success fee of .5% with respect to transactions consummated during the term of
the Agreement and transactions contracted for which are closed within a
specified period of time after termination of the Agreement. The employee lease
agreement is terminable by either party on thirty days notice. See "Item 10.
Executive Compensation" below and "Note 10 - Related Party Transactions" to
Notes to Consolidated Financial Statements.

         On March 5, 1998, the Company entered into an agreement and plan of
merger with PBD Holdings, L.P., an affiliate of Pembroke Companies, Inc. and
Blackacre Capital Group, L.P., pursuant to which a subsidiary of PBD Holdings
will be merged into the Company, and all of the outstanding shares of Common
Stock will be converted into the right to receive $1.25 per share in cash (the
"Merger Transaction"). The Merger Transaction has been approved by stockholders
holding a majority of the outstanding shares of Common Stock, and the Company is
currently



                                      -17-
<PAGE>   18

preparing an Information Statement to be distributed in early April 1998 to all
stockholders describing their rights with respect to the Merger Transaction. See
"Recent Developments."

         In the event that the Merger Transaction is not consummated, the
Company's future operations will be dependent upon its ability to generate
sufficient cash flow to meet its obligations and operating costs on a timely
basis. Management believes that, with reduced operations and the deferrals
previously described, the Company has sufficient capital to allow it to continue
to meet its obligations through May 31, 1999. Thereafter, operations will depend
upon the Company's ability to obtain additional capital through joint venture
arrangements, additional loans, sales of additional securities or additional
properties, or some combination of the foregoing. There can be no assurance that
the Company would be successful in any of such endeavors.

IMPACT OF INFLATION AND CHANGING PRICES

         The Company's revenues can be affected by inflation in a number of
ways. To the extent that general inflation in the economy has the effect of
increasing the general level of interest rates, the Company's revenues could be
adversely affected, inasmuch as prospective purchasers of land held for sale by
the Company may be unable to secure suitable financing for their purchases.
Also, higher interest rates could affect the ability of the Company to secure
suitable financing for development projects. Conversely, inflation which results
in higher real estate values could serve to enhance the Company's revenues
resulting from sales of property.

         Inflation had no material effect on the results of operations in 1997
and 1996.

OTHER

Income Taxes

         At December 31, 1997, the Company had net operating loss carryforwards
of approximately $6,908,000 million for income tax purposes that expire through
2012, and investment tax credit carryforwards of $172,000 that expire through
2000. These amounts are subject to annual limitations pursuant to provisions of
the Internal Revenue Code relating to cumulative changes in ownership. For
financial reporting purposes a valuation allowance has been recognized to offset
the portion of the deferred tax assets related to those carryforwards which are
dependent upon future events primarily related to the sale or development of
land. See Note 7 to the Consolidated Financial Statements included under Item 7
- Financial Statements.




                                      -18-
<PAGE>   19


ITEM 7.  FINANCIAL STATEMENTS.

         The Company's Financial Statements included herein, at December 31,
1997 and 1996 and for the years ended December 31, 1997 and 1996, consist of the
following:

<TABLE>
<CAPTION>
                                                            Page
<S>                                                         <C>
Report of Independent Accountants .....................      20
Consolidated Balance Sheets ...........................      21
Consolidated Statements of Operations .................      22
Consolidated Statements of Stockholders' Equity .......      23
Consolidated Statements of Cash Flows .................      24
Notes to Consolidated Financial Statements ............      25
</TABLE>




                                      -19-
<PAGE>   20



                            COOPERS & LYBRAND L.L.P.


REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders of Major Realty Corporation and Subsidiaries

We have audited the consolidated balance sheets of Major Realty Corporation and
subsidiaries (the Company) as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years then ended. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1997 and 1996, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.

                                    /s/ COOPERS & LYBRAND L.L.P.

Tampa, Florida
March 11, 1998, except as to the information in Note 6 for which the date is
March 25, 1998



                                      -20-


<PAGE>   21


                    MAJOR REALTY CORPORATION AND SUBSIDIARIES
             CONSOLIDATED BALANCE SHEETS, December 31, 1997 and 1996
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                             1997          1996
                                                                            -------       -------
<S>                                                                         <C>           <C>
                               ASSETS
Cash and cash equivalents                                                   $   242       $   320
Mortgage notes receivable                                                     2,750         2,750
Land held for sale or development                                             4,231         4,970
Land under lease                                                                171           171
Other assets                                                                  1,188           915
                                                                            -------       -------

                    Total assets                                            $ 8,582       $ 9,126
                                                                            =======       =======

               LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable - trade                                                    $    13       $    58
Accrued expenses                                                                705           790
Convertible mortgage notes payable due to related party                       5,416         5,064
Deferred income taxes                                                            26            26
                                                                            -------       -------

                    Total liabilities                                         6,160         5,938
                                                                            -------       -------

Commitments and contingencies (Notes 8, 10 and 11)

Stockholders' equity:
      Series A Junior participating preferred stock - $1.00 par value;
               authorized, 80,000 shares, none outstanding                       --            --
      Common stock - $.01 par value; authorized,
               12,000,000 shares; issued and outstanding,
               6,893,378 shares                                                  69            69
      Capital in excess of par value                                          7,822         7,822
      Accumulated deficit                                                    (5,469)       (4,703)
                                                                            -------       -------

                    Total stockholders' equity                                2,422         3,188
                                                                            -------       -------
                    Total liabilities and stockholders' equity              $ 8,582       $ 9,126
                                                                            =======       =======
</TABLE>


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




                                      -21-
<PAGE>   22


                    MAJOR REALTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 for the years ended December 31, 1997 and 1996
                      (in thousands except per share data)

<TABLE>
<CAPTION>
                                               1997          1996
                                             -------       -------
<S>                                          <C>           <C>
Revenues:
     Sales of real estate                    $   875       $   411
     Lease income 131                            131           131
     Interest and other income                   285           297
                                             -------       -------

         Total revenues                        1,291           839
                                             -------       -------


Costs and Expenses:
     Costs of real estate sold:
         Improved and unimproved land            783           174
         Commissions and other expenses           30            24
     Selling, general & administrative           621           674
     Interest cost                               623           546
                                             -------       -------

         Total costs and expenses              2,057         1,418
                                             -------       -------


Loss before provision for income taxes          (766)         (579)
Provision for income taxes                        --            --
                                             -------       -------

         Net loss                            $  (766)      $  (579)
                                             =======       =======

Net loss per common share (basic)            $  (.11)      $  (.08)
                                             =======       =======

Average number of
     common and common equivalent
     shares outstanding (basic)                6,893         6,893
                                             =======       =======
</TABLE>


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



                                      -22-
<PAGE>   23


                    MAJOR REALTY CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 for the years ended December 31, 1997 and 1996
                                 (in thousands)

<TABLE>
<CAPTION>
                                  Common Stock    Capital in
                                ----------------   Excess of   Accumulated  Stockholders'
                                Shares    Amount   Par Value     Deficit       Equity
                                ------    ------   ---------   -----------  -------------
<S>                             <C>       <C>      <C>          <C>         <C>
Balance, December 31, 1995      6,893      $69      $7,822      $(4,124)       $3,767

       Net loss                                                    (579)         (579)
                                -----      ---      ------      -------        ------

Balance, December 31, 1996      6,893       69       7,822       (4,703)        3,188

       Net loss                                                    (766)         (766)
                                -----      ---      ------      -------        ------

Balance, December 31, 1997      6,893      $69      $7,822      $(5,469)       $2,422
                                =====      ===      ======      =======        ======
</TABLE>



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



                                      -23-
<PAGE>   24


                    MAJOR REALTY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 for the years ended December 31, 1997 and 1996
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                  1997          1996
                                                                -------       -------
<S>                                                             <C>           <C>
Cash flows from operating activities:
     Net loss                                                   $  (766)      $  (579)
                                                                -------       -------
     Adjustments to reconcile net loss to
             net cash used for operating activities:
         Depreciation and amortization of deferred changes           13            26
         Net gain on sales of real estate                           (63)         (235)
         Increase in other assets
             and other receivables                                 (286)         (266)
         (Decrease) increase in accounts payable
             and accrued expenses                                  (129)           61
         Decrease in income taxes payable                            --           (78)
                                                                -------       -------
             Total adjustments                                     (465)         (492)
                                                                -------       -------
         Net cash used for operating activities                  (1,231)       (1,071)
                                                                -------       -------

Cash flows from investing activities:
     Additions to land held for sale or development                 (43)          (23)
     Proceeds from the sale of land held for sale
         or development                                             846           409
     Additions to property and equipment                             (1)           (1)
                                                                -------       -------
         Net cash provided by
              investing activities                                  802           385
                                                                -------       -------

Cash flows from financing activities:
     Proceeds from convertible mortgage notes
         payable due to related party                               686            --
     Principal payments on mortgage notes
         payable to related party                                  (335)           --
                                                                -------       -------

         Net cash provided by
             financing activities                                   351            --
                                                                -------       -------

Net decrease in cash and cash equivalents                           (78)         (686)
Cash and cash equivalents at beginning of year                      320         1,006
                                                                -------       -------
Cash and cash equivalents at end of year                        $   242       $   320
                                                                =======       =======



Supplemental disclosure of cash flow information:
     Cash paid during the year for interest                     $   646       $   346
                                                                =======       =======
</TABLE>


See Notes 3, 6 and 10 for non-cash activities.
The accompanying notes are an integral part of the consolidated financial
statements.



                                      -24-
<PAGE>   25

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Summary of Significant Accounting Policies:

     Description of Operations - The Company operates within the State of
     Florida in the real estate industry. The Company is engaged in the
     ownership and development of real estate.

     In October, 1995, the Company announced that its Board of Directors had
     determined that it was in the best interests of the shareholders to seek a
     merger partner or otherwise seek a transaction for the sale of the Company.
     The Company, cited capital constraints limiting the feasibility of
     independently developing the Company's existing properties as a primary
     factor in the Board's decision to seek a merger or sale transaction. On
     March 5, 1998, the Company entered into an Agreement and Plan of Merger
     with PBD Holdings, Inc. and Pembroke Acquisition, Inc. (see Note 11).

     The Company's operations are dependent upon its ability to generate
     sufficient cash flow to meet its obligations and operating costs on a
     timely basis. Management believes the Company has sufficient capital to
     allow it to continue to meet its obligations through May 31, 1999.
     Thereafter, operations will depend upon the Company's ability to obtain
     additional capital through joint venture arrangements, additional loans,
     sales of additional securities or additional properties, merger partner,
     transaction for the sale of the Company or some combination of the
     foregoing. The Company's loan from Acceptance in the amount of
     approximately $5.4 million is due on May 31, 1998 (see Note 6 and Note 11).
     There can be no assurance that the Company will be able to secure
     sufficient funds to repay or refinance the loan.

     Recognition of Sales - Sales of real estate are generally recorded under
     the accrual method. Under this method, profit is not recognized until the
     collectibility of the sales price is reasonably assured and the earnings
     process is virtually complete. When the sale does not meet the requirements
     for recognition of income, profit is deferred until such requirements are
     met.

     Generally, collectibility of the sales price is considered assured for this
     purpose if there is a cash down payment of 20% or more. The earnings
     process generally is considered virtually complete when the sale has
     closed, the cash down payment has been received, the mortgage notes
     receivable are not subject to existing or future subordination and the
     Company has no continuing involvement in the property that results in the
     retention of substantial risks or rewards of ownership.

     Cost of Land Held for Sale or Development - Real estate is carried at the
     lower of cost or net realizable value. The cost of real estate includes
     capitalized interest, real estate taxes and development costs which are
     allocated to individual parcels and charged to cost of real estate sold on
     a basis approximating the relative sales value method. These costs were
     primarily incurred prior to fiscal 1993.


                                  (Continued)
                                      -25-
<PAGE>   26


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     Property and Equipment - Property and equipment is carried at cost, less
     accumulated depreciation. Depreciation is computed using the straight-line
     method over the estimated useful lives (3 to 10 years) of the assets.
     Additions and major replacements or betterments are added to the asset
     cost. Repairs and maintenance costs are charged to expense as incurred. The
     cost and related allowance for depreciation and amortization of assets sold
     or otherwise disposed of are removed from the related accounts and the
     resulting gains or losses are reflected in income.

     Deferred Debt Issuance Costs - Debt issuance costs are being amortized over
     the life of the related debt on a basis approximating the interest method.

     Computation of Loss Per Share - Effective December 31, 1997, the Company
     adopted Statement of Financial Accounting Standards No. 128, "Earnings per
     Share" ("FAS 128") which replaces the presentation of primary earnings per
     share with basic earnings per share and which requires dual presentation of
     basic and diluted earnings per share on the Consolidated Statements of
     Operations. FAS 128 requires restatement of all prior-period earnings per
     share data presented. Basic net earnings per share is computed by dividing
     net income by the weighted average number of shares of common stock
     outstanding during the period, and diluted net earnings per share includes
     the effect of unexercised stock options using the treasury stock method.
     The treasury stock method assumes that common stock was purchased at the
     average market price during the period. Because the assumed exercise of
     stock options would have an antidilutive effect on the net loss per share
     for the years ended December 31, 1997 and 1996, no exercise of stock
     options was assumed and no diluted net loss per share was presented.

     Cash Equivalents - Generally, for purposes of the consolidated statements
     of cash flows, the Company considers all short-term, highly liquid
     investments with a maturity of 3 months or less to be cash equivalents.

     Concentration of Credit Risk - The Company has no financial instruments
     which subject it to off-balance sheet risk. Financial instruments which
     potentially subject the Company to concentrations of credit risk consist
     principally of cash, cash equivalents and the mortgage notes receivable
     (see Note 2). The Company maintains its cash and cash equivalents with high
     credit quality financial institutions as determined by management.

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





                                      -26-
<PAGE>   27



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.   Mortgage Notes Receivable:

     Mortgage notes receivable as of December 31, 1997 and 1996 represents the
     principal balance due on an 8% non-recourse note with principal and
     interest due in April, 1998. The note was collateralized by a first
     mortgage on the property received in exchange for the note.

3.   Land Held for Sale or Development:

     As of December 31, 1997, the aggregate carrying cost of land held for sale
     or development which was under contract to be sold was approximately
     $562,000.

     During May 1997, the Company signed a contract for $850,000, for 10.09
     acres of multi-family land located on Cason Cove Drive in Orlando, Florida.
     The sale closed in August, 1997. The sale price was paid in cash at
     closing. Approximately $595,000 of the proceeds was used to repay company
     debt and the remainder will be used for company operations.

     During October, 1997, the Company signed a contract for $700,000, for 1.75
     acres of commercial land located on the west side of Major Boulevard in
     Orlando, Florida. The buyer made a $10,000 deposit and had a 60-day risk
     free inspection period to determine if it wished to proceed with the
     contract. In December, 1997, the Buyer notified the Company of its wish to
     terminate the contract. The deposit was refunded to the Buyer.

     During November 1997, the Company signed a contract for $700,000, for 2
     acres of commercial land located on the east side of Major Boulevard in
     Orlando, Florida. The buyer made a $10,000 deposit and had a 45-day risk
     free inspection period to look at the property to determine if it wished to
     proceed with the contract. During December, 1997, the Buyer made an
     additional $50,000 deposit. The full $60,000 deposit became non-refundable
     at that time. Closing is scheduled for April 1998.

     During November 1997, the Company signed a contract for $800,000, for 3
     acres of commercial land located on the east side of Major Boulevard in
     Orlando, Florida. The buyer made a $10,000 deposit and had a 45-day risk
     free inspection period to look at the property to determine if it wished to
     proceed with the contract. During December, 1997, the Buyer made an
     additional $20,000 deposit. The full $30,000 deposit became non-refundable
     at that time. Closing is scheduled for April 1998.

     During November 1997, the Company signed a contract for $700,000, for 2
     acres of commercial land located on the east side of Major Boulevard in
     Orlando, Florida. The buyer made a $10,000 deposit and had a 60-day risk
     free inspection period to look at the property to determine if it wished to
     proceed with the contract. During January, 1998, the Buyer made an
     additional



                                      -27-
<PAGE>   28


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     $50,000 deposit and the inspection period was extended until February 5,
     1998. The full $60,000 deposit is now non-refundable. On February 5, 1998
     the contract was amended to reduce the sales price to $675,000. The closing
     is scheduled for May 1998.

     During February, 1996, the Company signed a contract for approximately
     $411,000, for approximately 2.34 acres of commercial property located at
     the northwest corner of the intersection of Conroy Road and Vineland Road
     in Orlando, Florida. The sale closed in September, 1996. The sales price
     was paid in cash at closing. Approximately $240,000 of the net proceeds was
     used to repay company debt.

     During August, 1996, the Company signed a contract for approximately
     $1,050,000, for the sale of approximately 2.5 acres of commercial property
     located on the west side of Major Boulevard in Orlando, Florida. The Buyer
     made a $40,000 deposit and had a 90 day inspection period to determine if
     it wished to proceed with the contract. On October 15, 1996, the Company
     received notice from the Buyer it was canceling the contract. The deposit
     was refunded to the Buyer.

     During September, 1996, the Company signed two contracts for the sale of
     multi-family land in the southwestern sector of Orlando, Florida. One
     contract was for approximately 55 acres gross (17 acres net) in the amount
     of $1,800,000. The other contract was for approximately 43 acres gross (15
     acres net) in the amount of $1,350,000. The Buyer had placed a $10,000
     deposit on each parcel and had a 60 day inspection period during which it
     could cancel one or both of the contracts. On November 13, 1996, the
     Company received notice from the Buyer it was canceling the contracts. The
     deposits were refunded to the Buyer.

     During September, 1995, the Company sold 10.36 acres of commercial land
     located at the northeast intersection of Interstate 4 and Kirkman Road in
     Orlando, Florida to Cracker Barrel Old Country Store, Inc. for $6,280,000.
     The Company received $2,700,000 in cash at closing plus a $3,580,000
     non-interest bearing promissory note, secured by a mortgage on the
     property, which was due in two equal payments, one in April 1996 and the
     other in April 1997. On March 27, 1996, Cracker Barrel formally notified
     the Company of its intent to default on the note and reconvey the property
     to the Company. Consequently, the Company recorded the sale of only 4.0
     acres of land subject to the sale as "Land held for sale or development" at
     December 31, 1995. Approximately $2,000,000 of the net proceeds was used to
     repay company debt.

4.   Land Under Lease:

     The Company leases certain of its land under an operating lease. The ground
     lease provides for an initial lease term of 12 years which expired during
     1995 with options for automatic renewal for six (6) month increments,
     unless the lessee gives a 30-day notice of termination to the Company. The
     maximum lease term, including all extensions, may not extend beyond June



                                      -28-
<PAGE>   29

     2003. Revenues recognized under the operating lease approximated $131,000
     for both years ended December 31, 1997 and 1996. Land under lease is
     subordinated to the mortgages of the lessee.


5.   Other Assets:

     The components of other assets as of December 31, 1997 and 1996 are
     summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                   1997       1996
                                                  ------      ----
<S>                                               <C>         <C>
Accrued interest receivable                       $1,165      $904
Property and equipment, net of accumulated
         depreciation of $61 and $63 in
         1997 and 1996, respectively                   2         5
Deferred debt issuance costs, net of
         accumulated amortization of $10 and
         $20 in 1997 and 1996, respectively            5        --
Other                                                 16         6
                                                  ------      ----

                                                  $1,188      $915
                                                  ======      ====
</TABLE>

6.   Convertible Mortgage Notes Payable:

     Convertible Mortgage notes payable as of December 31, 1997 and 1996
     represents the mortgage note payable due Acceptance (See Note 10). During
     the years ended December 31, 1997 and 1996 the Company paid interest of
     $646,000 and $346,000, respectively.

     During February 1995, the Company entered into a loan arrangement with
     Acceptance Insurance Companies Inc. ("Acceptance") whereby Acceptance
     acquired the Company's promissory note and mortgage to Valassis
     Enterprises, L.P. of $282,000, including accrued interest, and provided
     additional funds which were used to repay two promissory notes in the
     aggregate amount of $103,000, including accrued interest, held by
     Acceptance, fund the interest reserve of $770,000 due in connection with
     the Company's indebtedness to PNC Bank, Kentucky, Inc. (the "PNC Bank
     Note"), pay real estate taxes in the amount of $327,000, pay loan closing
     and extension costs of $75,000 and provide working capital of approximately
     $43,000. The aggregate indebtedness to Acceptance in connection with these
     transactions was $1,600,000, represented by a single promissory note due in
     January 1996, which provided for interest, at the rate of twelve percent
     (12%) per annum, to accrue monthly and be paid at maturity.



                                      -29-
<PAGE>   30

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     During October 1995, Acceptance acquired the PNC Bank Note with an
     outstanding balance of approximately $4,317,000, executing a first mortgage
     securing the note and other associated loan documents. As a result, the
     Company entered into a debt restructuring agreement with Acceptance for the
     Company's $5,064,000 debt to Acceptance ($747,000 due from the February
     1995 loan plus the PNC Bank Note). The interest rate on the restructured
     loan was prime plus 1.5%, with interest payable quarterly in arrears. The
     maturity of the loan, which prior to the restructuring was January 31,
     1996, was extended to May 1, 1998, unless there was a change in control
     prior to such time, in which event the maturity of the loan would be
     accelerated. In April 1996, the Company received permission from Acceptance
     to defer the quarterly interest payments due to Acceptance in the event the
     Company's cash flow is insufficient to make such payments, pending the
     receipt of funds from the sale of additional properties or other sources.

     The Company's obligation to pay the foregoing amount, as well as additional
     interest of $124,000 accrued from January 1 through March 31, 1997, was
     restructured in April 1997, and such aggregate accrued interest and the
     $5.1 million principal amount due to Acceptance have been consolidated into
     a new promissory note due May 31, 1998, unless there is a change in control
     of the Company prior to such time, in which event the maturity of the loan
     will be accelerated. The interest rate on the restructured loan is prime
     plus 2.5%, with interest accruing and added to principal on a quarterly
     basis in arrears. The Company's indebtedness to Acceptance is secured by a
     first mortgage on substantially all of the Company's property, including
     certain notes and mortgages payable to the Company from third parties.
     Subject to the Company's right to repay the note, the outstanding principal
     amount of the note (or any portion thereof), plus accrued but unpaid
     interest, is convertible into Common Stock at the option of Acceptance at
     any time upon 20 days prior notice, based upon a price per share equal to
     the average closing price of the Common Stock during the 30-day period
     immediately preceding the date of Acceptance's notice of its election to
     convert. The accrued interest on the note at December 31, 1997 was
     $213,000.

     Acceptance has agreed to extend the terms of the original promissory note
     and the line of credit promissory note until May 31, 1999, in the event the
     Merger Transaction with PBD Holdings, Inc. is not consummated (see Note
     11).

     SFAS No. 107, "Disclosure About Fair Value of Financial Instruments,"
     requires that the Company disclose estimated fair values for its financial
     instruments. Fair value is defined as the price at which a financial
     instrument could be liquidated in an orderly manner over a reasonable time
     period under present market conditions. The Company's adjustable rate loans
     reprice frequently at current market rates. The rates of the Company's
     fixed obligations (also see Note 10) approximate those rates of the
     adjustable loans. Therefore, the fair value of these loans has been
     estimated to be approximately equal to their carrying value.



                                      -30-
<PAGE>   31
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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


7.   Income Taxes:

     A summary of the provision for income taxes for the years ended December
31, 1997 and 1996 follows:

<TABLE>
<CAPTION>
                                  1997   1996
                                  ----   ----
<S>                               <C>    <C>
Federal and state income taxes
             Current                0      0
             Deferred               0      0
                                    -      -
                                    0      0
</TABLE>

     During the year ended December 31, 1997 and 1996 the Company paid income
     taxes of $0 and $79,000, respectively.

     At December 31, 1997, the Company had net operating loss carryforwards of
     approximately $6,908,000 for income tax purposes that expire through 2012,
     and investment tax credit carryforwards of $172,000 that expire through
     2000. Additionally, the Company had alternative minimum tax credits at
     December 31, 1997 of $824,000 available to offset future regular tax
     liabilities. These amounts are subject to annual limitations pursuant to
     provision of the Internal Revenue Code relating to cumulative changes in
     ownership. For financial reporting purposes, a valuation allowance has been
     recognized to offset the portion of the deferred tax assets related to
     those carryforwards which are dependent upon future events primarily
     related to the sale or development of land. The net change in the valuation
     allowance for the years ended December 31, 1997 and 1996 is ($289,000) and
     $219,000, respectively.

     Deferred income taxes primarily relate to basis differences between the
     amounts recorded for financial reporting purposes and the amounts recorded
     for income tax purposes. Significant components of the Company's deferred
     tax liabilities and assets as of December 31, 1997 and 1996 are as follows
     (all dollar amounts are in thousands):



                                      -31-
<PAGE>   32

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                           1997          1996
                                                          -------       -------
<S>                                                       <C>           <C>
Deferred tax liabilities:
    Book over tax basis of land held for development      $   211       $    96
                                                          -------       -------

Deferred tax assets:
    Net operating loss carryforwards                        2,600         2,412
    Investment tax credit carryforwards                       172           172
    Alternative minimum tax credit carryforwards              824           824
    Deferred compensation liability                            59            75
    Accrued litigation costs                                    0            (6)
    Deferred loan costs                                         3             6
    Valuation allowance                                    (3,895)       (3,605)
                                                          -------       -------
                                                          $  (237)      $  (122)
                                                          -------       -------

Net deferred tax liability                                $   (26)      $   (26)
                                                          =======       =======
</TABLE>

     The Company's effective tax rate differs from the statutory federal income
     tax rate for the following reasons:

<TABLE>
<CAPTION>
                                                               1997                      1996
                                                       -----------------          -----------------
                                                       Amount          %          Amount          %
                                                       ------        ---          ------       ----
         <S>                                           <C>           <C>          <C>          <C>
         Tax at statutory rate                         $(261)         34          $(198)         34
         State taxes, net of
              federal benefit                            (28)          4            (21)          4
         Change in valuation allowance                   289         (38)           219         (38)
                                                       -----         ---          -----        ----

                       Total                           $   0           0          $   0           0
                                                       =====         ===          =====        ====
</TABLE>

8.   Commitments and Contingencies:

     The Company's corporate offices are located in the Major Center Plaza
     office building. The lease expires in July, 1998. The estimated future
     minimum lease obligation for 1998 is $8,900.

     Rent expense for 1997 and 1996 was $15,000 and $14,000, respectively.

     The Company from time to time is involved in legal actions arising in the
     ordinary course of business. With respect to these matters, management
     believes that it has adequate legal defenses



                                      -32-
<PAGE>   33
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

     and/or has provided adequate accruals for related costs such that the
     ultimate outcome will not have a material adverse effect on the Company's
     future financial position.

9.   Capital Stock:

     During 1990, the Company adopted a Stock Option Plan (the "1990 Plan") to
     replace the 1983 Employee Incentive Stock Option Plan. The 1990 Plan
     provides for grants of both incentive stock options and non-qualified stock
     options to key employees. The 1990 Plan also provided for the grant of
     options to one of the Company's non-employee directors, who has since
     resigned.

     The purchase price of the common stock covered by each option granted shall
     not be less than the fair market value of the Company's common stock on the
     date the option is granted. No option granted may be exercised more than 10
     years after the date of grant.

     Options are exercisable at dates established by the Board of Directors.
     Under the 1990 Plan, an employee may not be granted incentive stock options
     first exercisable during any one calendar year for common stock with a fair
     market value (at date of grant) in excess of $100,000. Options expire upon
     termination of employment.

     The Company applies APB Opinion No.25, "Accounting for Stock Issued to
     Employees," and related interpretations in accounting for stock options.
     Accordingly, no compensation cost has been recognized in connection with
     the issuance of these options. In the opinion of management of the Company,
     had the Company's stock options been determined based on the fair value at
     the grant date for awards under the plan consistent with the method of SFAS
     Statement No. 123, "Accounting for Stock Based Compensation," there would
     be no effect to net income (loss) and income (loss) per share for the years
     ended December 31, 1997 and 1996.



                                      -33-
<PAGE>   34

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The following is a summary of changes in all options during the two years
ended December 31, 1997.

<TABLE>
<CAPTION>
                                                        Weighted Average
                                                         Exercise Price
                                           Shares           Per Share
                                           ------           ---------
<S>                                        <C>         <C>
Outstanding at December 31, 1995           150,000     $2.7679 - $12.50
Expired                                          0     $0
                                           -------

Outstanding at December 31, 1996           150,000     $2.7679 - $12.50
Expired                                     50,000     $12.50
                                           -------

Outstanding at December 31, 1997           100,000     $2.7679
                                           =======
</TABLE>

     At December 31, 1997 and 1996, exercisable options were 100,000 and
     150,000, respectively.

     During 1990, a non-employee member of the Board of Directors was granted
     options to purchase 50,000 shares of common stock. The options could be
     exercised at any time for a period not to exceed ten years, however, the
     options terminated at the discontinuance of his services as a director. The
     non-employee member of the Board of Directors tendered his resignation in
     February, 1997. During 1992, the Chairman of the Board (the "Chairman") was
     granted options to purchase 100,000 shares of common stock. Options to
     purchase 50,000 of these shares vested in March, 1993 and options to
     purchase the remaining 50,000 shares vested in March, 1994. The options
     expire upon termination of the agreement between the Company and Prechter
     Holdings, Inc. (see Note 10). During 1994, the Chairman was granted an
     option to purchase an additional 100,000 shares of common stock which were
     exercisable at any time until the earlier of the option expiration date of
     June 30, 1995, or the termination of the Chairman's relationship with the
     Company. The shares were not exercised and expired on June 30, 1995. No
     options were exercised during 1997 or 1996.

10.  Related Party Transactions:

     During February 1995, the Company entered into a loan arrangement with
     Acceptance Insurance Companies Inc. ("Acceptance") whereby Acceptance
     acquired the Company's promissory note and mortgage to Valassis
     Enterprises, L.P. of $282,000, including accrued interest, and provided
     additional funds which were used to repay two promissory notes in the
     aggregate amount of $103,000, including accrued interest, held by
     Acceptance, fund the interest reserve of $770,000 due in connection with
     the Company's indebtedness to PNC Bank, Kentucky, Inc. (the "PNC Bank
     Note"), pay real estate taxes in the amount of $327,000, pay loan closing
     and extension



                                      -34-
<PAGE>   35

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     costs of $75,000 and provide working capital of approximately $43,000. The
     aggregate indebtedness to Acceptance in connection with these transactions
     was $1,600,000, represented by a single promissory note due in January
     1996, which provided for interest, at the rate of twelve percent (12%) per
     annum, to accrue monthly and be paid at maturity.

     During October 1995, Acceptance acquired the PNC Bank Note with an
     outstanding balance of approximately $4,317,000, executing a first mortgage
     securing the note and other associated loan documents. As a result, the
     Company entered into a debt restructuring agreement with Acceptance for the
     Company's $5,064,000 debt to Acceptance ($747,000 due from the February
     1995 loan plus the PNC Bank Note).

     The interest rate on the restructured loan was prime plus 1.5%, with
     interest payable quarterly in arrears. The maturity of the loan which prior
     to the restructuring was January 31, 1996, was extended to May 1, 1998,
     unless there was a change in control prior to such time, in which event the
     maturity of the loan would be accelerated. In April 1996, the Company
     received permission from Acceptance to defer the quarterly interest
     payments due to Acceptance in the event the Company's cash flow is
     insufficient to make such payments, pending the receipt of funds from the
     sale of additional properties or other sources.

     The Company's obligation to pay the foregoing amount, as well as additional
     interest of $124,000 accrued from January 1 through March 31, 1997, was
     restructured in April 1997, and such aggregate accrued interest and the
     $5.1 million principal amount due to Acceptance have been consolidated into
     a new promissory note due May 31, 1998, unless there is a change in control
     of the Company prior to such time, in which event the maturity of the loan
     will be accelerated. The interest rate on the restructured loan is prime
     plus 2.5%, with interest accruing and added to principal on a quarterly
     basis in arrears. The Company's indebtedness to Acceptance is secured by a
     first mortgage on substantially all of the Company's property, including
     certain notes and mortgages payable to the Company from third parties.
     Subject to the Company's right to repay the note, the outstanding principal
     amount of the note (or any portion thereof), plus accrued but unpaid
     interest, is convertible into Common Stock at the option of Acceptance at
     any time upon 20 days prior notice, based upon a price per share equal to
     the average closing price of the Common Stock during the 30-day period
     immediately preceding the date of Acceptance's notice of its election to
     convert. The accrued interest on the note at December 31, 1997 was
     $213,000.

     In April 1997, Acceptance provided the Company a $500,000 line of credit.
     Under this revolving credit facility, the Company may borrow and reborrow
     up to $500,000. All borrowings are due May 31, 1998, unless there is a
     change in control of the Company prior to such time, in which event the
     maturity of the loan will be accelerated. The interest rate on the line of
     credit is prime plus 2.5%, with interest accruing and added to principal on
     a monthly basis


                                      -35-
<PAGE>   36

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     in arrears. The Company is required to pay a fee to Acceptance on December
     31, 1997, and on the maturity date of the note, equal to 0.5% of the
     average unused portion of the line of credit during each period. The
     Company paid Acceptance a fee of $15,000 in connection with the
     restructuring of the $5.1 million mortgage loan and the establishment of
     the line of credit.

     On April 23, 1997, the Company borrowed $300,000 on the line of credit to
     pay 1996 real estate taxes due in the amount of $261,000 and to provide
     working capital. On August 25, 1997, the Company repaid Acceptance the
     $300,000 on the line of credit and $12,000 in accrued interest on the
     advance and the unused portion of the line of credit. At December 31, 1997,
     the interest accrued on the line of credit was $900.

     Acceptance has agreed to extend the terms of the original promissory note
     and the line of credit promissory note until May 31, 1999, in the event the
     Merger Transaction with PBD Holdings, Inc. is not consummated (see Note
     11).

     Acceptance beneficially owns 33.1% of the common stock of the Company. All
     of the Company's directors also are directors of Acceptance. George F.
     Valassis, who beneficially owns 9.7% of the common stock of the Company,
     also beneficially owns 23.1% of the common stock of Acceptance. By virtue
     of such positions with or interests in Acceptance, such persons may have a
     material indirect interest in the transactions described above between the
     Company and Acceptance.

     David L. Treadwell, Chairman of the Board of Directors, serves as the
     Company's Chief Executive Officer pursuant to an Employee Lease Agreement
     (the "Agreement") with Mr. Treadwell's primary employer, Prechter Holdings,
     Inc. (formerly, Heritage Network, Incorporated) ("Prechter Holdings"). The
     Agreement, which commenced on March 27, 1992, requires Mr. Treadwell to
     devote such time to his duties as Chief Executive Officer as he and the
     Board of Directors determine to be necessary. The Agreement, as currently
     amended, provides for an annual fee of $25,000, payable monthly. The
     Company also is required to pay a success fee of .5% with respect to
     transactions which are consummated during the term of the Agreement or
     closed within a specified period of time after termination of the
     Agreement, up to a maximum success fee of $75,000. The last amendment to
     the Agreement, executed in March 1997, extended the term of the Agreement
     until December 31, 1997, with automatic successive one month extensions.
     Either party may terminate the Agreement at any time, with or without
     cause, upon 30 days' notice. The Agreement will automatically terminate in
     the event that Mr. Treadwell ceases to be employed by Prechter Holdings or
     he ceases to serve as Chief Executive Officer of the Company, either
     voluntarily, due to his illness, incapacity or death, or his removal as
     Chief Executive Officer by the Board of Directors of the Company. Prechter
     Holdings was owed $30,000 and $43,800 under the Agreement for 1997 and
     1996, respectively. At December 31, 1997, the Company owed Prechter
     Holdings approximately $19,000 for unpaid fees and interest previously
     deferred under the Agreement. In February, 1998, the



                                      -36-
<PAGE>   37

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Company paid its obligation to Prechter Holdings in the amount of $19,123,
     including $373 accrued interest.

     As part of the original Agreement, Mr. Treadwell was granted the right to
     purchase from the Company 100,000 shares of common stock of the Company,
     par value $0.01 per share, for $2.7679 per share. These options, all of
     which are vested, terminate upon Mr. Treadwell's resignation as Chief
     Executive Officer of the Company or upon termination of the Agreement.

11.  Subsequent Events.

     The 8% mortgage note receivable due in April 1998, reflected on the
     balance sheets as of December 31, 1997 and 1996, was satisfied in January
     1998, in the amount of $3,927,941, including $1,177,941 of interest, which
     was discounted. Proceeds were used to retire Company debt in the amount of
     $3,142,353, pay real estate taxes in the amount of $229,725, with the
     balance to be used for Company operations.

     During January, 1998, the Company signed a contract for the sale of 3 acres
     of commercial land located on the west side of Major Boulevard in Orlando,
     Florida for $1,200,000. The buyer made a $10,000 deposit and has a 90-day
     no risk inspection period in which to look at the property to determine if
     it wants to go forward with the purchase. If the Buyer proceeds with the
     contract an additional $50,000 deposit will be required. Closing is
     estimated for September, 1998.

     During February, 1998, the Company signed a contract for the sale of 2.63
     acres of commercial land located on the north east corner of Republic Drive
     and Carrier Drive located in Orlando, Florida for $750,000. The buyer has a
     60-day risk free inspection period in which to look at the property to
     determine if it wants to go forward with the purchase. If the Buyer
     proceeds with the contract an additional $40,000 deposit will be required.
     Closing is estimated for July, 1998.

     During February, 1998, the Company signed a contract for the sale of 55
     acres gross (16.42 acres net) of multi-family land in the southwestern
     sector of Orlando, Florida for $2,040,000. The buyer has 90-day risk free
     inspection period in which to look at the property to determine if it wants
     to go forward with the purchase. If the Buyer proceeds with the contract an
     additional $90,000 deposit will be required. Closing is estimated for
     August, 1998.

     During February, 1998, the Company signed a contract for the sale of 1.74
     acres of commercial land located on the west side of Major Boulevard in
     Orlando, Florida for $665,000. The buyer has made a $10,000 deposit and has
     a 60-day no risk inspection period in which to determine if it wants to go
     forward with the purchase. If the Buyer proceeds with the contract an
     additional $40,000 deposit will be required. Closing is estimated for July,
     1998.



                                      -37-
<PAGE>   38

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     During March 1998, the Company signed a contract for the sale of 6.36 acres
     of commercial land located at the northeast intersection of Interstate 4
     and Kirkman Road in Orlando, Florida for $4,770,000. The buyer has made a
     $50,000 deposit and has a 60-day no risk inspection period in which to
     determine if it wants to go forward with the purchase. If the buyer
     proceeds with the contract an additional $50,000 deposit will be required
     and the closing would occur in August, 1998.

     During March 1998, the Company signed a contract for the sale of 42.03
     acres gross (15 acres net) of multi-family land located on Conroy Road in
     Orlando, Florida for $1,500,000. The buyer has made a $10,000 deposit and
     has a 90-day no risk inspection period in which to determine if it wants to
     go forward with the purchase. If the buyer proceeds with the contract an
     additional $90,000 deposit will be required and the closing would occur in
     September, 1998.

     On March 5, 1998, the Company entered into an agreement and plan of merger
     with PBD Holdings, L.P. ("Holdings"), an affiliate of Pembroke Companies,
     Inc. and Blackacre Capital Group, L.P., pursuant to which a subsidiary of
     Holdings will be merged into the Company, and all of the outstanding shares
     of common stock of the Company ("Common Stock") will be converted into the
     right to receive $1.25 per share in cash (the "Merger Transaction"). The
     Merger Transaction has been approved by stockholders holding a majority of
     the outstanding shares of Common Stock, and the Company is currently
     preparing an Information Statement to be distributed in early April 1998 to
     all stockholders describing their rights with respect to the Merger
     Transaction. If the Merger Agreement is terminated by the Company due to
     the material breach thereof by Holdings, Holdings is required promptly to
     pay to the Company as liquidated damages a fee in cash in an amount equal
     to $500,000, plus all out-of-pocket expenses incurred in connection with
     the negotiation of the Merger by the Company, including, without
     limitation, reasonable fees and expenses of legal counsel, accountants and
     other professionals in connection with the negotiation and execution of the
     Agreement in Principle, the Merger Agreement and all of the transactions
     contemplated therein. Holdings has deposited $500,000 with an escrow agent
     to be used as part of the consideration to be paid to the Company's
     stockholders in the Merger Transaction or as a portion of such fee. If the
     Merger Agreement is terminated by Holdings due to the material breach
     thereof by the Company, the Company is required promptly to pay to Holdings
     as liquidated damages a fee in cash in an amount equal to $500,000, plus
     all out-of-pocket expenses incurred in connection with the negotiation of
     the Merger by Holdings, including, without limitation, reasonable fees and
     expenses of legal counsel, accountants and other professionals in
     connection with the negotiation and execution of the Agreement in
     Principle, the Merger Agreement and all of the transactions contemplated
     therein.

     The Company's loan from Acceptance, with an outstanding balance of
     approximately $2.5 million, is currently due on May 31, 1998. Acceptance
     has agreed to extend the term of the loan



                                      -38-
<PAGE>   39

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


until May 31, 1999, if the merger transaction with PBD Holdings, Inc. is not
consummated (see Note 6).




                                      -39-
<PAGE>   40

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     Not applicable.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Directors

         The following table sets forth information regarding the Company's
Board of Directors.

<TABLE>
<CAPTION>
                                           Position with Company, Principal
      Name                 Age            Occupation and Other Directorships
      ----                 ---            ----------------------------------
<S>                        <C>      <C>
Jay A. Bielfield           52       Mr. Bielfield has served as a Director since
                                    September 1992. Mr. Bielfield is an employee
                                    and a member of the board of directors of
                                    Little Caesar Enterprises, Inc. He also is a
                                    director of Detroit Tigers, Inc. and
                                    Acceptance Insurance Companies Inc. Mr.
                                    Bielfield is an Alternate Governor of the
                                    National Hockey League on behalf of the
                                    Detroit Red Wings, Inc.

Kenneth C. Coon            47       Mr. Coon has served as a Director since July
                                    1993. He has been chairman, president, chief
                                    executive officer and a director of
                                    Acceptance Insurance Companies Inc., a 33.1%
                                    owner of the Company, since December 1992,
                                    and served as interim chief executive
                                    officer of Acceptance prior to that time,
                                    beginning in February 1992. He has been
                                    president and a director of Acceptance's
                                    insurance subsidiaries since their formation
                                    or acquisition.

Michael R. McCarthy        46       Mr. McCarthy has served as a Director since
                                    July 1993. He has been chairman and a
                                    director of McCarthy & Co., a firm engaged
                                    in the investment banking business in Omaha,
                                    Nebraska, since it was organized in 1986. He
                                    is also a director and chairman of McCarthy
                                    Group, Inc., which is the parent of both
                                    McCarthy & Co. and McCarthy Group Asset
                                    Management and a director of Acceptance
                                    Insurance Companies Inc.
</TABLE>



                                      -40-
<PAGE>   41

<TABLE>
<CAPTION>
                                           Position with Company, Principal
      Name                 Age            Occupation and Other Directorships
      ----                 ---            ----------------------------------
<S>                        <C>      <C>
David L. Treadwell         43       Mr. Treadwell has served as Chairman, Chief
                                    Executive Officer and a Director since March
                                    1992. He has served as president and chief
                                    executive officer of Prechter Holdings, Inc.
                                    (formerly, Heritage Network, Incorporated),
                                    which provides management services for
                                    publishing, residential home building and
                                    other investment related businesses since
                                    January 1991. Since 1986, Mr. Treadwell also
                                    has served as president of Heritage
                                    Development Company, a real estate portfolio
                                    management and development company. Mr.
                                    Treadwell is a director of Acceptance
                                    Insurance Companies Inc.

</TABLE>

         No family relationships exist between any of the Company's Directors.

Executive Officers

         The following table sets forth information regarding the Company's sole
executive officer, who was appointed by the Board of Directors and serves at the
pleasure of the Board.

<TABLE>
<CAPTION>
                                           Position with Company, Principal
      Name                 Age            Occupation and Other Directorships
      ----                 ---            ----------------------------------
<S>                        <C>      <C>
David L. Treadwell         43       Chairman of the Board, Director and Chief
                                    Executive Officer. See "Directors" above for
                                    biographical information.
</TABLE>

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors, officers and holders of more than 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and any other equity securities of the Company. To the Company's knowledge,
based solely upon a review of the forms and certificates filed with the Company
by such persons, all persons who were Directors, executive officers or holders
of more than 10% of the Company's Common Stock complied with such Section 16(a)
filing requirements during fiscal year 1997.


ITEM 10. EXECUTIVE COMPENSATION.

         David L. Treadwell, Chairman of the Board of Directors, serves as the
Company's Chief Executive Officer pursuant to an Employee Lease Agreement (the
"Agreement") with Mr. Treadwell's primary employer, Prechter Holdings, Inc.
(formerly, Heritage Network, Incorporated) ("Prechter Holdings"). The Agreement,
which commenced



                                      -41-
<PAGE>   42

on March 27, 1992, requires Mr. Treadwell to devote such time to his duties as
Chief Executive Officer as he and the Board of Directors determine to be
necessary.

         Under the original Agreement, the Company paid Prechter Holdings at an
annual rate of $100,000 per year for Mr. Treadwell's services as Chief Executive
Officer of the Company. Prechter Holdings is responsible for all of Mr.
Treadwell's salary and bonus, if any, all administrative employment matters,
such as the payment of all federal, state and local employment taxes and
providing workers' compensation coverage, and all non-obligatory fringe benefit
programs, such as health insurance, holidays and vacation. The Company pays Mr.
Treadwell's reasonable travel expenses, including transportation to and from his
home city of Southgate, Michigan.

         To assist the Company's cash flow, Prechter Holdings proposed in April
1994, that $75,000 of the $100,000 annual fee due under the Agreement for 1994
be deferred pending the closing of future property sales or other transactions.
The Agreement was modified by Amendment No. 1 dated as of April 1, 1994, to
extend the agreement through December 31, 1994, and defer payment of
seventy-five percent (75%) of each monthly installment, without interest, for
the period April 1 through December 31, 1994, until the earlier of (a) such time
as the Company received cash from a property sale or other real estate
transaction and the Compensation and Options Committee determined that the
Company has sufficient cash flow to permit payment of such accrued fee, or (b)
December 31, 1994.

         Amendment No. 2 to the Agreement, dated as of January 1, 1995, extended
the Agreement through March 31, 1995. Under the amendment, beginning on December
31, 1994, interest on all deferred amounts accrued at the rate of twelve percent
(12%) per annum. Amendment No. 3 to the Agreement, dated as of April 1, 1995,
extended the Agreement through March 31, 1996. Under a fourth amendment to the
Agreement effective April 1, 1996, the fee to Prechter Holdings was reduced to
$25,000 per annum, payable monthly. The Company is also required to pay a
success fee of .5% with respect to transactions consummated during the term of
the Agreement and for transactions contracted for which are closed within a
specified period of time after termination of the Agreement, up to a maximum
success fee of $75,000. The renewal extended the Agreement until March 31, 1997.
A fifth amendment executed in March 1997 extended the term of the Agreement
until December 31, 1997, with automatic successive one month extensions. Either
party may terminate the Agreement at any time, with or without cause, upon 30
days' notice. The Agreement will automatically terminate in the event that Mr.
Treadwell ceases to be employed by Prechter Holdings or he ceases to serve as
Chief Executive Officer of the Company, either voluntarily, due to his illness,
incapacity or death, or his removal as Chief Executive Officer by the Board of
Directors of the Company.

         As part of the original Agreement, Mr. Treadwell was granted the right
to purchase from the Company 100,000 shares of the common stock of the Company,
par value $0.01 per share, for $2.7679 per share. Options to purchase 50,000
shares vested on March 27, 1993, and options to purchase the remaining 50,000
shares vested on March 27, 1994. These options terminate upon Mr. Treadwell's
resignation as Chief Executive Officer of the Company or upon termination of the
Agreement. Mr. Treadwell has 10 days following termination of the Agreement to
exercise the options granted to him. On June 14, 1994, Mr. Treadwell was granted
options to purchase an additional 100,000 shares of



                                      -42-
<PAGE>   43

the Company's common stock for $2.00 per share. These options expired
unexercised on June 30, 1995.

         The following table is a summary of the compensation paid by the
Company to Mr. Treadwell for 1997, 1996 and 1995.

<TABLE>
<CAPTION>
==============================================================================================================
                                           SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------
                                                               Annual Compensation                Long Term
                                                                                                Compensation
--------------------------------------------------------------------------------------------------------------
                                                                                                   Awards
--------------------------------------------------------------------------------------------------------------
Name and Principal Position                     Year       Salary ($)        Bonus($)            Options (#)
--------------------------------------------------------------------------------------------------------------
<S>                                             <C>       <C>                <C>                 <C>
David L. Treadwell
Chairman  of the Board  and Chief  Executive    1997      $ 30,000(1)
Officer                                         1996        43,800(1)
                                                1995       100,000(1)
==============================================================================================================
</TABLE>

(1)      This amount was paid or has been accrued to Prechter Holdings for
         Mr. Treadwell's services as Chief Executive Officer pursuant to an
         Employee Lease Agreement, which provides for Mr. Treadwell's services
         to the Company.

         The following table details aggregated stock option exercises in 1997
and stock option values as of December 31, 1997, for unexercised stock options
held by the Company's executive officers:


<TABLE>
<CAPTION>
==================================================================================================================

                                    AGGREGATED STOCK OPTION EXERCISES IN 1997
                                 AND STOCK OPTION VALUES AS OF DECEMBER 31, 1997
------------------------------------------------------------------------------------------------------------------
                                                                                                    Value of
           Name               Shares Acquired on    Value Realized           Number of          Unexercised in-
                                 Exercise (#)            ($)                Unexercised            the-Money
                                                                              Options               Options
                                                                               at FY-End           at FY-End
                                                                        (#) Exercisable/        ($) Exerciable/
                                                                           Unexercisable         Unexercisable
------------------------------------------------------------------------------------------------------------------
<S>                           <C>                   <C>                   <C>                 <C>
David L. Treadwell                    0                    N/A              100,000/-0-            N/A (1)
==================================================================================================================
</TABLE>

(1)      At fiscal year end, December 31, 1997, the closing price of the Common
         Stock was $1.06 per share, based on the closing sale price on the
         Nasdaq SmallCap Market, which price was less than the exercise price of
         the stock options.



                                      -43-
<PAGE>   44

DIRECTORS' COMPENSATION

         Directors who are not employees of the Company are paid $2,500 for each
meeting of the Board of Directors attended in person and $500 for each committee
meeting attended in person, except that no separate compensation is paid for
attendance at a committee meeting held on the same day as, or within one day of,
a Board of Directors' meeting. Reasonable out-of-pocket expenses related to the
Directors' attendance at all meetings or incurred in connection with their
duties as a Director or committee member are also reimbursed by the Company.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table provides information as of March 6, 1998, unless
otherwise indicated, with respect to beneficial ownership of the Company's
common stock by each person known by the Company to be the beneficial owner of
more than 5% of its outstanding common stock.

<TABLE>
<CAPTION>
                                                     Amount and Nature of
     Name and Address of Beneficial Owner            Beneficial Ownership         Percent of Class
     ------------------------------------            --------------------         ----------------
<S>                                                  <C>                          <C>
PBD Holdings, L.P.                                       3,461,111(1)                  50.2%
c/o Pembroke Companies, Inc.
Suite 1200
1325 Avenue of the Americas,
New York, New York

Acceptance Insurance                                     2,280,500(2)                  33.1%
Companies Inc.
Suite 600 North
222 South 15th Street
Omaha, NE  68102

Third Capital, LLC                                         680,000(3)                  9.87%
314 Church Street, 9th Floor
Nashville, TN  37201

George F. Valassis                                         671,641(4)                   9.7%
2000 North Woodward
Suite 200
Bloomfield Hills, MI  48304

Allied Domecq Pension Funds                                445,370(5)                  6.46%
Wyndham Court
Pritchard Street
Bristol, England BS2 8RH
</TABLE>



                                      -44-
<PAGE>   45


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

(1)      Represents shares owned by Acceptance Insurance Company, George F.
         Valassis and certain other stockholders of the Company which PBD
         Holdings has a current right to vote, and a contingent right to
         purchase under certain circumstances if the Merger Agreement between
         the Company and PBD Holdings is terminated, under that certain
         Stockholder Agreement dated as of March 4, 1998, with Acceptance
         Insurance Company, George F. Valassis and certain other stockholders of
         the Company.

(2)      According to Amendment No. 25 to Schedule 13D filed March 9, 1998, by
         Acceptance Insurance Companies Inc. ("Acceptance") and Acceptance
         Insurance Company ("AIC"), a wholly-owned subsidiary of Acceptance,
         amending a Schedule 13D previously filed by Samelson Real Estate
         Partners, Inc. and Acceptance Insurance Holdings, Inc., AIC is shown as
         beneficially owning 2,280,500 shares of the Common Stock.

(3)      According to Schedule 13G filed December 11, 1997, by Third Capital,
         LLC, PAG Corp. and PAG Partners, L.P.

(4)      According to Amendment No. 2 to Schedule 13D filed April 12, 1990, by
         George F. Valassis.

(5)      According to the Schedule 13D filed November 5, 1993, by Tamanda II
         Corporation ("Tamanda"), Denmark Street (Bristol) Pension Trust Limited
         ("Denmark Street") and Allied-Lyons Pension Funds, consisting of
         Allied-Lyons Pension Fund and Allied-Lyons Executives Pension Fund (the
         "Pension Funds"). Tamanda, a wholly-owned subsidiary of Denmark Street,
         is the record owner of all of the shares of Common Stock. The Pension
         Funds, through their subsidiaries, own all of the capital stock of
         Denmark Street and, accordingly, the Pension Funds may be deemed to be
         the controlling persons of Tamanda and Denmark Street. Each of Tamanda,
         Denmark Street and the Pension Funds have shared power to vote or
         direct the vote of and to dispose or direct the disposition of all of
         the shares of Common Stock. (The Allied-Lyons funds are now known as
         the Allied Domecq funds.)

         The following table provides information as of March 6, 1998, unless
otherwise indicated, with respect to the beneficial ownership of the Company's
Common Stock by (i) each Director of the Company individually, (ii) the
Company's sole executive officer, (iii) all Directors and executive officers of
the Company as a group.

<TABLE>
<CAPTION>
                  Name and Address                             Amount and Nature of               Percentage
                 of Beneficial Owner                         Beneficial Ownership (1)              of Class
                 -------------------                         ------------------------              --------
<S>                                                          <C>                                  <C>
Jay A. Bielfield (2)(3)                                                  2,400                        *
Little Caesar
  International, Inc.
2211 Woodward Avenue
Detroit, MI  48201-3400
</TABLE>



                                      -45-
<PAGE>   46



<TABLE>
<CAPTION>
                  Name and Address                             Amount and Nature of               Percentage
                 of Beneficial Owner                         Beneficial Ownership (1)              of Class
                 -------------------                         ------------------------              --------
<S>                                                          <C>                                  <C>
Kenneth C. Coon (4)                                                      1,000                        *
Acceptance Insurance
  Companies Inc.
Suite 600 North
222 South 15th Street
Omaha, NE  68102

Michael R. McCarthy (3)(5)                                               5,500                        *
McCarthy Group Asset Management
1125 South 103rd Street
Suite 450
Omaha, NE  68124

David L. Treadwell (3)(6)                                              100,000                       1.4
Prechter Holdings, Inc.
One Heritage Place
Suite 400
Southgate, MI  48195

All Directors and Officers                                             108,900                       1.6
as a Group (4 Persons)
</TABLE>

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

 *       Less than one percent.

(1)      This column sets forth shares of common stock which are deemed to be
         "beneficially owned" by the persons named in the table under Rule 13d-3
         of the Securities and Exchange Commission. Each of the persons named in
         the table have sole voting and investment power with respect to all
         shares beneficially owned by them except as otherwise described in the
         following footnotes.

(2)      Includes 2,400 shares held in an individual retirement account.

(3)      Does not include 2,280,500 shares held by Acceptance Insurance
         Companies Inc. ("Acceptance"), representing approximately 33% of the
         outstanding shares, beneficial ownership of which is disclaimed.
         Although beneficial ownership of the shares owned by Acceptance is
         disclaimed, as a director of Acceptance, he may be deemed to share
         voting and investment power with respect to such shares of common stock
         with Acceptance.

(4)      Does not include 2,280,500 shares held by Acceptance Insurance
         Companies Inc. ("Acceptance"), representing approximately 33% of the
         outstanding shares. Mr. Coon is Chairman, President, Chief Executive
         Officer and a Director of Acceptance. Although Mr. Coon disclaims
         beneficial ownership of the shares owned by Acceptance, as Chairman,
         President, Chief Executive Officer and a Director of Acceptance, he may
         be deemed to share voting and investment power with respect to such
         shares of common stock with Acceptance.

(5)      McCarthy Group Asset Management f/k/a LongView Capital Management, a
         registered investment advisor, shares authority to vote and to sell
         5,500 shares of common stock, which



                                      -46-
<PAGE>   47


         securities are held in a discretionary investment managed account at
         First National Bank of Omaha f/b/o James P. Wands.

(6)      Represents presently exercisable options to purchase 100,000 shares.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         A description of the relationships and affiliations of the directors,
officers and holders of more than 5% of the Common Stock of the Company with the
parties identified in this section are contained in the last paragraph of this
section.

Loan from Acceptance

         On February 1, 1995, the Company entered into a loan arrangement with
Acceptance Insurance Companies Inc., ("Acceptance") whereby Acceptance acquired
the Company's promissory note and mortgage to Valassis Enterprises, L.P. (which
had a balance of approximately $282,000 on such date) and provided additional
funds which were used to repay the Major Group Notes held by Acceptance in the
aggregate amount of approximately $103,000, fund the interest reserve for the
Company's loan with PNC Bank ($770,000), pay real estate taxes in the amount of
$326,597, pay loan closing and extension costs of $75,000, and provide working
capital of approximately $43,000. The aggregate indebtedness to Acceptance in
connection with these transactions was $1,600,000, represented by a single
promissory note due January 31, 1996, which provided for interest, at the rate
of twelve percent (12%) per annum, to accrue and be paid at maturity. The note
was secured by a second mortgage on substantially all of the Company's property.

         At December 31, 1996, the Company was indebted to Acceptance pursuant
to a loan restructure arrangement entered into on October 18, 1995, in the
principal amount of $5,064,144, comprised of $747,313 due to Acceptance under
the terms of a February 1995 restructuring and $4,316,881 previously owed to
Citizens Fidelity Bank and Trust Company, now known as PNC Bank, Kentucky, Inc.
("PNC"), which indebtedness was acquired by Acceptance immediately prior to the
restructuring. The aggregate indebtedness of the restructured loan was
represented by a single promissory note, due May 1, 1998, unless there was a
change in control of the Company prior to such time, in which event the maturity
of the loan will be accelerated. The interest rate on the restructured loan was
prime plus 1.5%, with interest payable quarterly in arrears. In January 1996,
the Company made a payment of $106,000 for interest relating to the fourth
quarter of 1995. The Company obtained permission to defer the remaining
quarterly interest payments due in 1996 and 1997 to Acceptance on its $5.1
million mortgage note in the event the Company's cash flow was insufficient to
make such payments, pending the receipt of funds from the sale of additional
properties or other sources. Accordingly, the Company did not make the $126,000
quarterly interest payments due on April 1, July 1, or October 1, 1996, and
January 1 and April 1, 1997. In September 1996, the Company made a payment to
Acceptance in the amount of $240,000 which was applied to the deferred interest
due from the first two quarters of 1996. The balance of the deferred interest as
of December 31, 1996, was approximately $263,000.



                                      -47-
<PAGE>   48

         The Company's obligation to pay the foregoing amount, as well as
additional interest of $123,614 accrued from January 1 through March 31, 1997,
was restructured in April 1997, and such aggregate accrued interest and the $5.1
million principal amount due to Acceptance have been consolidated into a new
promissory note due May 31, 1998, unless there is a change in control of the
Company prior to such time, in which event the maturity of the loan will be
accelerated. The interest rate on the restructured loan is prime plus 2.5%, with
interest accruing and added to principal on a quarterly basis in arrears.
Subject to the Company's right to prepay the note, the outstanding principal
amount of the note (or any portion thereof), plus accrued but unpaid interest,
is convertible into common stock of the Company at the option of Acceptance at
any time upon 20 days prior notice, based upon a price per share equal to the
average closing price of the common stock during the 30-day period immediately
preceding the date of Acceptance's notice of its election to convert. The
Company's indebtedness to Acceptance is secured by a first mortgage on
substantially all of the Company's property, including the certain notes and
mortgages payable to the Company from third parties.

         In April 1997, Acceptance provided the Company a $500,000 line of
credit. Under this revolving credit facility, the Company may borrow and
reborrow up to $500,000. All borrowings are due May 31, 1998, unless there is a
change in control of the Company prior to such time, in which event the maturity
of the loan will be accelerated. The interest rate on the line of credit is
prime plus 2.5%, with interest accruing and added to principal on a monthly
basis in arrears. The Company is required to pay a fee to Acceptance on December
31, 1997, and on the maturity date of the note, equal to 0.5% of the average
unused portion of the line of credit during each period. The Company paid
Acceptance a fee of $15,000 in connection with the restructuring of the $5.1
million mortgage loan and the establishment of the line of credit.

         Acceptance has agreed to extend the terms of the original promissory
note and the line of credit promissory note for a year, until May 31, 1999, if
the Merger Transaction with PBD Holdings is not consummated.

Employee Lease Agreement regarding David Treadwell

         David L. Treadwell, Chairman of the Board of Directors, serves as the
Company's Chief Executive Officer pursuant to an Employee Lease Agreement (the
"Agreement") with Mr. Treadwell's primary employer, Prechter Holdings, Inc.
(formerly, Heritage Network, Incorporated) ("Prechter Holdings"). See "Item 10.
Executive Compensation."

         The Agreement, which commenced on March 27, 1992, requires Mr.
Treadwell to devote such time to his duties as Chief Executive Officer as he and
the Board of Directors determine to be necessary. The Agreement, as currently
amended, provides for a fee of $25,000 per annum, payable monthly. The Company
also is required to pay a success fee of .5% with respect to transactions
consummated during the term of the Agreement and for transactions contracted for
which are closed within a specified period of time after termination of the
Agreement, up to a maximum success fee of $75,000. The last amendment, executed
in March 1997, extended the term of the Agreement until December 31, 1997, with
automatic successive one month extensions. Either party may terminate the



                                      -48-
<PAGE>   49
Agreement at any time, with or without cause, upon 30 days' notice. The
Agreement will automatically terminate in the event that Mr. Treadwell ceases to
be employed by Prechter Holdings or he ceases to serve as Chief Executive
Officer of the Company, either voluntarily, due to his illness, incapacity or
death, or upon his removal as Chief Executive Officer by the Board of Directors
of the Company. The Company paid Prechter Holdings $30,000 under the Agreement
in 1997 and $43,800 in 1996.

         As part of the original Agreement, Mr. Treadwell was granted the right
to purchase from the Company 100,000 shares of the common stock of the Company,
par value $0.01 per share, for $2.7679 per share. Options to purchase 50,000
shares vested on March 27, 1993, and options to purchase the remaining 50,000
shares vested on March 27, 1994. These options terminate upon Mr. Treadwell's
resignation as Chief Executive Officer of the Company or upon termination of the
Agreement.

         Acceptance beneficially owns 33.1% of the common stock of the Company.
Messrs. Bielfield, Coon, McCarthy and Treadwell are directors of Acceptance.
George F. Valassis, who beneficially owns 9.7% of the common stock of the
Company, also beneficially owns 23.1% of the common stock of Acceptance. By
virtue of such positions with or interests in Acceptance, such persons may have
a material indirect interest in the transactions described above between the
Company and Acceptance.

                                     PART IV

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K.

(A)      EXHIBITS

<TABLE>
         <S>      <C>
         2.1      Agreement and Plan of Merger among the Company, PBD Holdings,
                  L.P. and Pembroke Acquisition, Inc., dated as of March 4,
                  1998.

         2.2      Amendment No. 1 dated as of March 26, 1998, to Agreement and
                  Plan of Merger, among the Company, PBD Holdings, L.P. and Pembroke
                  Acquisition, Inc., dated as of March 4, 1998.

         3.1      Certificate of Incorporation of the Company, as amended
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1987 and
                  as Exhibit 3.1 to the Company's Annual Report on Form 10-K for
                  the fiscal year ended December 31, 1987).

         3.2      Bylaws of the Company, as amended (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1990).

         4        Other instruments, notes or extracts from agreements defining
                  the rights of holders of long-term debt of the Company or its
                  subsidiaries have not been filed because (i) in each case the
                  total amount of long-term debt permitted thereunder does not
                  exceed 10% of the Company's consolidated assets, and (ii) the
                  Company hereby agrees that it will furnish such instruments,
                  notes and extracts to the Securities and Exchange Commission
                  upon its request.
</TABLE>



                                      -49-
<PAGE>   50

<TABLE>
         <S>      <C>
         10.1     Form of Indemnity Agreement between the Company and its
                  directors and certain officers, as utilized since December 12,
                  1988, (previously filed as an exhibit to the Company's Annual
                  Report on Form 10-K for the year ended December 31, 1988).

         10.2*    Salary Continuation Agreement dated November 19, 1986, between
                  the Company and Alvin L. Lawing, Jr. (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1987).

         10.3     Agreements dated July 8, 1982, between the Company and Oxford
                  Development Enterprises, Inc., as amended (previously filed as
                  an exhibit to Registration Statement Number 2-84680).

         10.4     Agreement dated June 16, 1978, between the Company, American
                  Television and Communications Corporation and others
                  (previously filed as an exhibit to Registration Statement
                  Number 2-84680).

         10.5*    1990 Stock Option Plan (previously filed as an exhibit to the
                  Company's Proxy Statement dated November 6, 1990, relating to
                  the Annual Meeting held on November 30, 1990).

         10.6     Assumption and Indemnification Agreement dated April 30, 1990,
                  by and between the Company, MPJV Corporation, a Florida
                  corporation for the benefit of The Prudential Insurance
                  Company of America, a New Jersey corporation (previously filed
                  as an exhibit to the Company's Current Report on Form 8-K
                  dated April 30, 1990).

         10.7     Loan Agreement dated as of October 11, 1989, between the
                  Company and Citizens Fidelity Bank and Trust Company (now
                  known as PNC Bank, Kentucky, Inc.), Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-K for the year ended December 31, 1989).

         10.8     Indemnification Agreement dated April 30, 1990, by and between
                  Major Center, a Joint Venture, a Florida general partnership,
                  MPJV Corporation, a Florida corporation, and The Prudential
                  Insurance Company of America, a New Jersey corporation
                  (previously filed as an exhibit to the Company's Current
                  Report on Form 8-K dated April 30, 1990).

         10.9     Mortgage Deed and Security Agreement granted October 11, 1989,
                  by the Company in favor of Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-K for the year ended
                  December 31, 1989).

         10.10    Security Agreement dated November 30, 1990, granted by the
                  Company in favor of Citizens Fidelity Bank and Trust Company,
                  Louisville, Kentucky (previously filed as an
</TABLE>



                                      -50-
<PAGE>   51

<TABLE>
         <S>      <C>
                  exhibit to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1990).

         10.11    Amendment to Loan Agreement, dated as of November 30, 1990,
                  between the Company and Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1990).

         10.12    Second Amendment to Loan Agreement, dated as of August 29,
                  1991, between the Company and Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1991).

         10.13    Amendment to Mortgage Deed and Security Agreement, dated
                  August 29, 1991, granted by the Company in favor of Citizens
                  Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1991).

         10.14    Loan Agreement, dated as of March 25, 1992, between the
                  Company and Valassis Enterprises, L.P. (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1991).

         10.15    Note, dated March 25, 1992, given by the Company to Valassis
                  Enterprises, L.P., in the original principal sum of
                  $3,000,000.00 (previously filed as an exhibit to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1991).

         10.16    Second Mortgage and Security Agreement, dated as of March 25,
                  1992, given by the Company to The Major Group, Inc. and
                  Valassis Enterprises, L.P. (previously filed as an exhibit to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended December 31, 1991).

         10.17    Hazardous Materials Indemnification Agreement, dated as of
                  March 25, 1992, between the Company and Valassis Enterprises,
                  L.P. (previously filed as an exhibit to the Company's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1991).

         10.18*   Employee Lease Agreement executed as of the 26th day of March,
                  1992, between the Company, Heritage Network Incorporated and
                  David L. Treadwell (previously filed as an exhibit to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 1992).

         10.19    Nonrecourse Purchase Money Mortgage by Chavez
                  Properties-Garrison Channel, Limited Partnership, a Georgia
                  limited partnership, in favor of Major Center, A Joint
</TABLE>



                                      -51-
<PAGE>   52

<TABLE>
         <S>      <C>
                  Venture, dated April 26, 1993 (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1993).

         10.20    Nonrecourse Purchase Money Promissory Note for $2,750,000 from
                  Chavez Properties-Garrison Channel, Limited Partnership, a
                  Georgia limited partnership, in favor of Major Center, A Joint
                  Venture, dated April 26, 1993 (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1993).

         10.21    Amendment to Mortgage Deed and Security Agreement, dated
                  January 31, 1994, granted by the Company in favor of PNC Bank,
                  Kentucky, Inc., formerly Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1993).

         10.22    Second Amendment to Mortgage Note, dated January 31, 1994, by
                  the Company and PNC Bank, Kentucky, Inc., formerly Citizens
                  Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1993).

         10.23    Third Amendment to Loan Agreement, dated as of January 31,
                  1994, by the Company and PNC Bank, Kentucky, Inc., formerly
                  Citizens Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Amendment No.
                  1 to Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 1993).

         10.24*   Consultant Services Agreement, effective April 1, 1994,
                  between the Company and Development Consultants, Inc. of
                  Orlando (previously filed as an exhibit to the Company's
                  Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 1994).

         10.25*   Amendment No. 1 to Employee Lease Agreement, as of the first
                  day of April, 1994, between the Company and David L. Treadwell
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).

         10.26*   Amendment No. 2 to Employee Lease Agreement, as of January 1,
                  1995, between the Company and David L. Treadwell (previously
                  filed as an exhibit to the Company's Annual Report on Form
                  10-KSB for the fiscal year ended December 31, 1994).

         10.27    Amendment to Citizens Agreement, dated as of the first day of
                  February, 1995, among Valassis Enterprises, L.P., Acceptance
                  Insurance Companies Inc., the Company and PNC Bank, Kentucky,
                  Inc., formerly known as Citizens Fidelity Bank and Trust
</TABLE>



                                      -52-
<PAGE>   53

<TABLE>
         <S>      <C>
                  Company (previously filed as an exhibit to the Company's
                  Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 1994).

         10.28    Mortgage Modification and Future Advance Agreement, dated
                  February 1, 1995, between Acceptance Insurance Companies Inc.
                  and the Company (previously filed as an exhibit to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1994).

         10.29    Assignment of Mortgage and Other Security Documents, dated
                  January 25, 1995, from Valassis Enterprises, L.P. to
                  Acceptance Insurance Companies Inc. (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-KSB for the
                  fiscal year ended December 31, 1994).

         10.30    Renewal and Consolidation Promissory Note, dated February 1,
                  1995, made by the Company in favor of Acceptance Insurance
                  Companies Inc. in the original principal sum of $1,600,000.00
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).

         10.31    Third Amendment to Mortgage Note, dated January 31, 1995, by
                  the Company and PNC Bank, Kentucky, Inc., formerly Citizens
                  Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).

         10.32    Fourth Amendment to Loan Agreement, dated as of January 31,
                  1995, by the Company and PNC Bank, Kentucky, Inc., formerly
                  Citizens Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).

         10.33    Amendment to Mortgage Deed and Security Agreement, dated
                  January 31, 1995, granted by the Company in favor of PNC Bank,
                  Kentucky, Inc., formerly Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1994).

         10.34    Purchase Money Mortgage and Promissory Note for $1,310,000
                  from Bara Vineland, Inc., a Florida corporation, in favor of
                  Major Realty Corporation, dated May 5, 1995 (previously filed
                  as an exhibit to the Company's Quarterly Report on Form 10-QSB
                  for the quarter ended June 30, 1995).

         10.35    Collateral Assignment of Nonrecourse Purchase Money Promissory
                  Note and Mortgage for $1,310,000 from Bara Vineland, Inc., a
                  Florida corporation, in favor of Major Realty Corporation,
                  dated May 5, 1995, to PNC Bank, Kentucky, Inc. (previously
                  filed as an
</TABLE>



                                      -53-
<PAGE>   54

<TABLE>
         <S>      <C>
                  exhibit to the Company's Quarterly Report on Form 10-QSB for
                  the quarter ended June 30, 1995).

         10.36    Fifth Amendment to Loan Agreement, dated as of September 1,
                  1995, by the Company and PNC Bank, Kentucky, Inc., formerly
                  Citizens Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  1995).

         10.37    Purchase Money Mortgage and Promissory Note for $3,580,000
                  from Cracker Barrel Old Country Store, Inc., a Kentucky
                  corporation, in favor of Major Realty Corporation, dated
                  September 1, 1995 (previously filed as an exhibit to the
                  Company's Quarterly Report on Form 10-QSB for the quarter
                  ended September 30, 1995).

         10.38    Restated and Consolidated Promissory Note, dated October 18,
                  1995, made by the Company in favor of Acceptance Insurance
                  Companies Inc. in the original principal sum of $5,064,144
                  (previously filed as an exhibit to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  1995).

         10.39    Sixth Amendment to Loan Agreement, dated as of October 18,
                  1995, by the Company and Acceptance Insurance Companies Inc.
                  (previously filed as an exhibit to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  1995).

         10.40    Mortgage and Note Modification Agreement, dated as of October
                  18, 1995, by the Company and Acceptance Insurance Companies
                  Inc. (previously filed as an exhibit to the Company's
                  Quarterly Report on Form 10-QSB for the quarter ended
                  September 30, 1995).

         10.41    Indemnity Agreement, dated as of April 1, 1994, between the
                  Company and Development Consultants of Orlando, Inc.
                  (previously filed as Exhibit 10.61 to the Company's Annual
                  Report on Form 10-KSB for the fiscal year ended December 31,
                  1995).

         10.42*   Amendment No. 1 to Consultant Services Agreement, dated as of
                  April 1, 1995, between the Company and Development Consultants
                  of Orlando, Inc. (previously filed as Exhibit 10.62 to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1995).

         10.43*   Amendment No. 3 to Employee Lease Agreement, dated April 1,
                  1995, between the Company, Heritage Network Incorporated and
                  David L. Treadwell (previously filed as Exhibit 10.63 to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1995).
</TABLE>



                                      -54-
<PAGE>   55

<TABLE>
         <S>      <C>
         10.44*   Amendment No. 4 to Employee Lease Agreement, dated as of April
                  1, 1996, between the Company, Heritage Network Incorporated
                  and David L. Treadwell (previously filed as Exhibit 10.64 to
                  the Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1995).

         10.45*   Amendment No. 2 to Consultant Services Agreement, dated March
                  20, 1997, between the Company and Development Consultants of
                  Orlando, Inc. (previously filed as Exhibit 10.45 to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1996).

         10.46*   Amendment No. 5 to Employee Lease Agreement, dated March 20,
                  1997, between the Company, Heritage Network Incorporated and
                  David L. Treadwell (previously filed as Exhibit 10.46 to the
                  Company's Amendment No. 1 to Annual Report on Form 10-KSB/A
                  for the fiscal year ended December 31, 1996).

         10.47    Mortgage Modification Agreement, dated as of April 1, 1997, by
                  the Company and Acceptance Insurance Companies Inc.
                  (previously filed as Exhibit 10.47 to the Company's Amendment
                  No. 1 to Annual Report on Form 10-KSB/A for the fiscal year
                  ended December 31, 1996).

         10.48    Restated and Consolidated Promissory Note, dated as of April
                  1, 1997, made by the Company in favor of Acceptance Insurance
                  Companies Inc. in the original principal sum of $5,450,728.32
                  (previously filed as Exhibit 10.48 to the Company's Amendment
                  No. 1 to Annual Report on Form 10-KSB/A for the fiscal year
                  ended December 31, 1996).

         10.49    Line of Credit Promissory Note, dated as of April 1, 1997,
                  made by the Company in favor of Acceptance Insurance Companies
                  Inc. in the original principal sum of $500,000 (previously
                  filed as Exhibit 10.49 to the Company's Amendment No. 1 to
                  Annual Report on Form 10-KSB/A for the fiscal year ended
                  December 31, 1996).

         10.50*   Amendment No. 3 to Consultant Services Agreement, dated
                  January 1, 1998, between the Company and Development
                  Consultants of Orlando, Inc.

         21       Subsidiaries of the Company.

         27       Financial Data Schedule (for SEC use only).
</TABLE>

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

*  Management contract or compensatory plan or arrangement.



                                      -55-
<PAGE>   56


(B)      REPORTS ON FORM 8-K

         None.






                                      -56-
<PAGE>   57



                                   SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 30 day of March, 1998.

                                    MAJOR REALTY CORPORATION


                                    By: /s/ David L. Treadwell
                                        ----------------------------
                                        David L. Treadwell, Chairman
                                        and Chief Executive Officer


         In accordance with the requirements of the Exchange Act, this Report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                  Signature                                         Title                              Date
                  ---------                                         -----                              ----
<S>                                             <C>                                               <C>

/s/ David L. Treadwell                          Chairman of the Board of Directors,               March 30, 1998
--------------------------------------------    Chief Executive Officer, Principal
David L. Treadwell                              Financial Officer, Principal
                                                Accounting Officer

/s/ Jay A. Bielfield                            Director                                          March 30, 1998
--------------------------------------------
Jay A. Bielfield

/s/ Kenneth C. Coon                             Director                                          March 30, 1998
--------------------------------------------
Kenneth C. Coon

/s/ Michael R. McCarthy                         Director                                          March 30, 1998
--------------------------------------------
Michael R. McCarthy
</TABLE>




                                      -57-
<PAGE>   58



                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
   Exhibit No.    Description
   -----------    -----------
   <S>            <C>
         2.1      Agreement and Plan of Merger among the Company, PBD Holdings,
                  L.P. and Pembroke Acquisition, Inc., dated as of March 4,
                  1998.

         2.2      Amendment No. 1 dated as of March 26, 1998, to Agreement and
                  Plan of Merger, among the Company, PBD Holdings, L.P. and Pembroke
                  Acquisition, Inc., dated as of March 4, 1998.

         3.1      Certificate of Incorporation of the Company, as amended
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1987 and
                  as Exhibit 3.1 to the Company's Annual Report on Form 10-K for
                  the fiscal year ended December 31, 1987).

         3.2      Bylaws of the Company, as amended (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1990).

         4        Other instruments, notes or extracts from agreements defining
                  the rights of holders of long-term debt of the Company or its
                  subsidiaries have not been filed because (i) in each case the
                  total amount of long-term debt permitted thereunder does not
                  exceed 10% of the Company's consolidated assets, and (ii) the
                  Company hereby agrees that it will furnish such instruments,
                  notes and extracts to the Securities and Exchange Commission
                  upon its request.

         10.1     Form of Indemnity Agreement between the Company and its
                  directors and certain officers, as utilized since December 12,
                  1988, (previously filed as an exhibit to the Company's Annual
                  Report on Form 10-K for the year ended December 31, 1988).

         10.2*    Salary Continuation Agreement dated November 19, 1986, between
                  the Company and Alvin L. Lawing, Jr. (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1987).

         10.3     Agreements dated July 8, 1982, between the Company and Oxford
                  Development Enterprises, Inc., as amended (previously filed as
                  an exhibit to Registration Statement Number 2-84680).

         10.4     Agreement dated June 16, 1978, between the Company, American
                  Television and Communications Corporation and others
                  (previously filed as an exhibit to Registration Statement
                  Number 2-84680).

         10.5*    1990 Stock Option Plan (previously filed as an exhibit to the
                  Company's Proxy Statement dated November 6, 1990, relating to
                  the Annual Meeting held on November 30, 1990).
</TABLE>



                                      -58-
<PAGE>   59

<TABLE>
         <S>      <C>
         10.6     Assumption and Indemnification Agreement dated April 30, 1990,
                  by and between the Company, MPJV Corporation, a Florida
                  corporation for the benefit of The Prudential Insurance
                  Company of America, a New Jersey corporation (previously filed
                  as an exhibit to the Company's Current Report on Form 8-K
                  dated April 30, 1990).

         10.7     Loan Agreement dated as of October 11, 1989, between the
                  Company and Citizens Fidelity Bank and Trust Company (now
                  known as PNC Bank, Kentucky, Inc.), Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-K for the year ended December 31, 1989).

         10.8     Indemnification Agreement dated April 30, 1990, by and between
                  Major Center, a Joint Venture, a Florida general partnership,
                  MPJV Corporation, a Florida corporation, and The Prudential
                  Insurance Company of America, a New Jersey corporation
                  (previously filed as an exhibit to the Company's Current
                  Report on Form 8-K dated April 30, 1990).

         10.9     Mortgage Deed and Security Agreement granted October 11, 1989,
                  by the Company in favor of Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-K for the year ended
                  December 31, 1989).

         10.10    Security Agreement dated November 30, 1990, granted by the
                  Company in favor of Citizens Fidelity Bank and Trust Company,
                  Louisville, Kentucky (previously filed as an exhibit to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1990).

         10.11    Amendment to Loan Agreement, dated as of November 30, 1990,
                  between the Company and Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1990).

         10.12    Second Amendment to Loan Agreement, dated as of August 29,
                  1991, between the Company and Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1991).

         10.13    Amendment to Mortgage Deed and Security Agreement, dated
                  August 29, 1991, granted by the Company in favor of Citizens
                  Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1991).

         10.14    Loan Agreement, dated as of March 25, 1992, between the
                  Company and Valassis Enterprises, L.P. (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1991).
</TABLE>



                                      -59-
<PAGE>   60


<TABLE>
         <S>      <C>
         10.15    Note, dated March 25, 1992, given by the Company to Valassis
                  Enterprises, L.P., in the original principal sum of
                  $3,000,000.00 (previously filed as an exhibit to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1991).

         10.16    Second Mortgage and Security Agreement, dated as of March 25,
                  1992, given by the Company to The Major Group, Inc. and
                  Valassis Enterprises, L.P. (previously filed as an exhibit to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended December 31, 1991).

         10.17    Hazardous Materials Indemnification Agreement, dated as of
                  March 25, 1992, between the Company and Valassis Enterprises,
                  L.P. (previously filed as an exhibit to the Company's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1991).

         10.18*   Employee Lease Agreement executed as of the 26th day of March,
                  1992, between the Company, Heritage Network Incorporated and
                  David L. Treadwell (previously filed as an exhibit to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 1992).

         10.19    Nonrecourse Purchase Money Mortgage by Chavez
                  Properties-Garrison Channel, Limited Partnership, a Georgia
                  limited partnership, in favor of Major Center, A Joint
                  Venture, dated April 26, 1993 (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1993).

         10.20    Nonrecourse Purchase Money Promissory Note for $2,750,000 from
                  Chavez Properties-Garrison Channel, Limited Partnership, a
                  Georgia limited partnership, in favor of Major Center, A Joint
                  Venture, dated April 26, 1993 (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1993).

         10.21    Amendment to Mortgage Deed and Security Agreement, dated
                  January 31, 1994, granted by the Company in favor of PNC Bank,
                  Kentucky, Inc., formerly Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1993).

         10.22    Second Amendment to Mortgage Note, dated January 31, 1994, by
                  the Company and PNC Bank, Kentucky, Inc., formerly Citizens
                  Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1993).

         10.23    Third Amendment to Loan Agreement, dated as of January 31,
                  1994, by the Company and PNC Bank, Kentucky, Inc., formerly
                  Citizens Fidelity Bank and Trust Company,
</TABLE>


                                      -60-
<PAGE>   61

<TABLE>
         <S>      <C>
                  Louisville, Kentucky (previously filed as an exhibit to the
                  Company's Amendment No. 1 to Annual Report on Form 10-KSB for
                  the fiscal year ended December 31, 1993).

         10.24*   Consultant Services Agreement, effective April 1, 1994,
                  between the Company and Development Consultants, Inc. of
                  Orlando (previously filed as an exhibit to the Company's
                  Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 1994).

         10.25*   Amendment No. 1 to Employee Lease Agreement, as of the first
                  day of April, 1994, between the Company and David L. Treadwell
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).

         10.26*   Amendment No. 2 to Employee Lease Agreement, as of January 1,
                  1995, between the Company and David L. Treadwell (previously
                  filed as an exhibit to the Company's Annual Report on Form
                  10-KSB for the fiscal year ended December 31, 1994).

         10.27    Amendment to Citizens Agreement, dated as of the first day of
                  February, 1995, among Valassis Enterprises, L.P., Acceptance
                  Insurance Companies Inc., the Company and PNC Bank, Kentucky,
                  Inc., formerly known as Citizens Fidelity Bank and Trust
                  Company (previously filed as an exhibit to the Company's
                  Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 1994).

         10.28    Mortgage Modification and Future Advance Agreement, dated
                  February 1, 1995, between Acceptance Insurance Companies Inc.
                  and the Company (previously filed as an exhibit to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1994).

         10.29    Assignment of Mortgage and Other Security Documents, dated
                  January 25, 1995, from Valassis Enterprises, L.P. to
                  Acceptance Insurance Companies Inc. (previously filed as an
                  exhibit to the Company's Annual Report on Form 10-KSB for the
                  fiscal year ended December 31, 1994).

         10.30    Renewal and Consolidation Promissory Note, dated February 1,
                  1995, made by the Company in favor of Acceptance Insurance
                  Companies Inc. in the original principal sum of $1,600,000.00
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).

         10.31    Third Amendment to Mortgage Note, dated January 31, 1995, by
                  the Company and PNC Bank, Kentucky, Inc., formerly Citizens
                  Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).
</TABLE>



                                      -61-
<PAGE>   62

<TABLE>
         <S>      <C>
         10.32    Fourth Amendment to Loan Agreement, dated as of January 31,
                  1995, by the Company and PNC Bank, Kentucky, Inc., formerly
                  Citizens Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Annual Report
                  on Form 10-KSB for the fiscal year ended December 31, 1994).

         10.33    Amendment to Mortgage Deed and Security Agreement, dated
                  January 31, 1995, granted by the Company in favor of PNC Bank,
                  Kentucky, Inc., formerly Citizens Fidelity Bank and Trust
                  Company, Louisville, Kentucky (previously filed as an exhibit
                  to the Company's Annual Report on Form 10-KSB for the fiscal
                  year ended December 31, 1994).

         10.34    Purchase Money Mortgage and Promissory Note for $1,310,000
                  from Bara Vineland, Inc., a Florida corporation, in favor of
                  Major Realty Corporation, dated May 5, 1995 (previously filed
                  as an exhibit to the Company's Quarterly Report on Form 10-QSB
                  for the quarter ended June 30, 1995).

         10.35    Collateral Assignment of Nonrecourse Purchase Money Promissory
                  Note and Mortgage for $1,310,000 from Bara Vineland, Inc., a
                  Florida corporation, in favor of Major Realty Corporation,
                  dated May 5, 1995, to PNC Bank, Kentucky, Inc. (previously
                  filed as an exhibit to the Company's Quarterly Report on Form
                  10-QSB for the quarter ended June 30, 1995).

         10.36    Fifth Amendment to Loan Agreement, dated as of September 1,
                  1995, by the Company and PNC Bank, Kentucky, Inc., formerly
                  Citizens Fidelity Bank and Trust Company, Louisville, Kentucky
                  (previously filed as an exhibit to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  1995).

         10.37    Purchase Money Mortgage and Promissory Note for $3,580,000
                  from Cracker Barrel Old Country Store, Inc., a Kentucky
                  corporation, in favor of Major Realty Corporation, dated
                  September 1, 1995 (previously filed as an exhibit to the
                  Company's Quarterly Report on Form 10-QSB for the quarter
                  ended September 30, 1995).

         10.38    Restated and Consolidated Promissory Note, dated October 18,
                  1995, made by the Company in favor of Acceptance Insurance
                  Companies Inc. in the original principal sum of $5,064,144
                  (previously filed as an exhibit to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  1995).

         10.39    Sixth Amendment to Loan Agreement, dated as of October 18,
                  1995, by the Company and Acceptance Insurance Companies Inc.
                  (previously filed as an exhibit to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  1995).
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         <S>      <C>
         10.40    Mortgage and Note Modification Agreement, dated as of October
                  18, 1995, by the Company and Acceptance Insurance Companies
                  Inc. (previously filed as an exhibit to the Company's
                  Quarterly Report on Form 10-QSB for the quarter ended
                  September 30, 1995).

         10.41    Indemnity Agreement, dated as of April 1, 1994, between the
                  Company and Development Consultants of Orlando, Inc.
                  (previously filed as Exhibit 10.61 to the Company's Annual
                  Report on Form 10-KSB for the fiscal year ended December 31,
                  1995).

         10.42*   Amendment No. 1 to Consultant Services Agreement, dated as of
                  April 1, 1995, between the Company and Development Consultants
                  of Orlando, Inc. (previously filed as Exhibit 10.62 to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1995).

         10.43*   Amendment No. 3 to Employee Lease Agreement, dated April 1,
                  1995, between the Company, Heritage Network Incorporated and
                  David L. Treadwell (previously filed as Exhibit 10.63 to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1995).

         10.44*   Amendment No. 4 to Employee Lease Agreement, dated as of April
                  1, 1996, between the Company, Heritage Network Incorporated
                  and David L. Treadwell (previously filed as Exhibit 10.64 to
                  the Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1995).

         10.45*   Amendment No. 2 to Consultant Services Agreement, dated March
                  20, 1997, between the Company and Development Consultants of
                  Orlando, Inc. (previously filed as Exhibit 10.45 to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1996).

         10.46*   Amendment No. 5 to Employee Lease Agreement, dated March 20,
                  1997, between the Company, Heritage Network Incorporated and
                  David L. Treadwell (previously filed as Exhibit 10.46 to the
                  Company's Amendment No. 1 to Annual Report on Form 10-KSB/A
                  for the fiscal year ended December 31, 1996).

         10.47    Mortgage Modification Agreement, dated as of April 1, 1997, by
                  the Company and Acceptance Insurance Companies Inc.
                  (previously filed as Exhibit 10.47 to the Company's Amendment
                  No. 1 to Annual Report on Form 10-KSB/A for the fiscal year
                  ended December 31, 1996).

         10.48    Restated and Consolidated Promissory Note, dated as of April
                  1, 1997, made by the Company in favor of Acceptance Insurance
                  Companies Inc. in the original principal sum
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                                      -63-
<PAGE>   64


<TABLE>
         <S>      <C>
                  of $5,450,728.32 (previously filed as Exhibit 10.48 to the
                  Company's Amendment No. 1 to Annual Report on Form 10-KSB/A
                  for the fiscal year ended December 31, 1996).

         10.49    Line of Credit Promissory Note, dated as of April 1, 1997,
                  made by the Company in favor of Acceptance Insurance Companies
                  Inc. in the original principal sum of $500,000 (previously
                  filed as Exhibit 10.49 to the Company's Amendment No. 1 to
                  Annual Report on Form 10-KSB/A for the fiscal year ended
                  December 31, 1996).

         10.50*   Amendment No. 3 to Consultant Services Agreement, dated
                  January 1, 1998, between the Company and Development
                  Consultants of Orlando, Inc.

         21       Subsidiaries of the Company.

         27       Financial Data Schedule (for SEC use only).
</TABLE>

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

         *  Management contract or compensatory plan or arrangement.




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