<PAGE>
 
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
              EXCHANGE ACT OF 1934

                 For the quarterly period ended June 30, 1998

 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
              EXCHANGE ACT OF 1934

                        Commission File Number 33-89076


                       WEITZER HOMEBUILDERS INCORPORATED
                       ---------------------------------
             (Exact name of registrant as specified in its charter)

                 Florida                                       65-0502494
      -------------------------------------------------------------------
      (State or other jurisdiction of             (IRS Employer I.D. No.)
      incorporation or organization)

        5901 N.W. 151st Street, Suite 120, Miami Lakes, FL 33014-2428 
        -------------------------------------------------------------
            (Address of principal executive offices)       (Zip Code)

                                (305) 819-4663
             ----------------------------------------------------
             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.   X Yes     No
          ---     ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
                                                         Outstanding at
                Class                                    June 30, 1998
                -----                                    --------------
Class A Common Stock, $.01 Par Value                       2,360,254
Class B Common Stock, $.01 Par Value                       1,500,000

                                       1
<PAGE>
 
                              INDEX TO FORM 10-Q
                                                                          Page
                                                                          ----
                                                                           No.
                                                                           ---
PART I     FINANCIAL STATEMENTS

           Consolidated Balance Sheets -                                    3
           June 30, 1998 (unaudited) and September 30, 1997

           Consolidated Statements of Operations (unaudited)-
           Three and Nine Months Ended June 30, 1998 and 1997               4

           Consolidated Statements of Cash Flows (unaudited)-
           Three and Nine Months Ended June 30, 1998 and 1997               5

           Notes to Consolidated Financial Statements                       6

PART II    ITEM 2 - MANAGEMENT'S DISCUSSION                                 9

           Discussion and Analysis of Financial Condition and
           Results of Operations                                           10

PART III   OTHER INFORMATION

           Exhibits and Reports on Form 8-K                                16

           Signatures                                                      16

                                       2
<PAGE>
 
               WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE> 
<CAPTION> 

                                                                    June 30,            September 30,
                                                                      1998                  1997
                                                               ------------------      ---------------
ASSETS                                                            (Unaudited)
------
<S>                                                            <C>                     <C> 
Cash                                                           $          659,048      $       236,523
Restricted escrow funds                                                    10,000               82,105
Land                                                                   25,267,625           23,348,773
Construction-in-progress                                               16,389,716           15,833,115
Model furnishings, net of accumulated depreciation
  of $169,022 and $246,806, respectively                                  536,586              502,920
Deferred loan costs net of accumulated amortization
  of $106,715 and $611,646, respectively                                  147,572              348,383
Other assets, net of accumulated depreciation
  of $327,423 and $312,262, respectively                                  991,097            1,095,042
                                                               ------------------      ---------------
                                                               $       44,001,644      $    41,446,861
                                                               ==================      ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Customer deposits                                              $        1,197,332      $     1,173,742
Accounts payable and accrued liabilities                                4,064,199            3,006,640
Acquisition, development and construction loans payable                30,610,133           29,170,513
10% bonds payable                                                       3,843,308            3,681,343
Notes and loans payable                                                   479,292              288,893
                                                               ------------------      ---------------
                                                                       40,194,265           37,321,131
                                                               ------------------      ---------------

Commitments and contingencies

 Shareholders' equity:
Preferred stock, $.01 par, 5,000,000 shares authorized,
  none issued                                                                  --                   --
Class A Common Stock, $.01 par, 40,000,000 shares authorized,
  2,360,254 shares issued and outstanding                                  23,603               23,603
Class B Common Stock, $.01 par, 1,500,000 shares authorized,
  issued and outstanding                                                   15,000               15,000
Additional paid-in capital                                             10,330,950           10,330,950
Accumulated deficit                                                   (6,562,174)          (6,243,823)
                                                               ------------------      ---------------
                                                                        3,807,379            4,125,730
                                                               ------------------      ---------------
                                                               $       44,001,644      $    41,446,861
                                                               ==================      ===============
</TABLE> 

                See notes to consolidated financial statements

                                       3
<PAGE>
 
               WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE> 
<CAPTION> 

                                                            Three Months Ended                       Nine Months Ended
                                                                 June 30,                                June 30,
                                                   ------------------------------------     -----------------------------------
                                                         1998               1997                  1998               1997
                                                   ------------------  ----------------     -----------------   --------------- 
<S>                                                <C>                 <C>                  <C>                 <C>  
Revenues:
  Sales of homes                                   $       12,530,092  $     17,108,391     $      36,463,283   $    39,742,533 
  Interest income                                              25,971            46,902                87,858           136,535 
  Other income                                                 13,711            13,849               182,915           121,873 
                                                   ------------------  ----------------     -----------------   --------------- 
                                                           12,569,774        17,169,142            36,734,056        40,000,941 
                                                   ------------------  ----------------     -----------------   --------------- 

Operating costs and expenses:                                                                                                   
  Costs of homes sold                                      11,633,869        15,181,847            33,102,314        34,661,248 
  Selling expenses                                            660,666         1,110,234             1,830,125         2,844,275 
  General and administrative expenses                         358,435           532,712             1,300,239         1,327,448 
  Depreciation and amortization                               107,440           103,969               277,978           359,051 
  Amortization of goodwill                                          -            14,312                     -            42,937 
  Interest expense                                            283,489            17,306               541,751            45,313 
                                                   ------------------  ----------------     -----------------   --------------- 
                                                           13,043,899        16,960,380            37,052,407        39,280,272 
                                                   ------------------  ----------------     -----------------   --------------- 
                                                                                                                                
Income (loss) before income taxes                           (474,125)           208,762             (318,351)           720,669 
Provision for income taxes                                          -                 -                     -                 - 
                                                   ------------------  ----------------     -----------------   --------------- 
Net income (loss)                                  $        (474,125)  $        208,762     $       (318,351)   $       720,669 
                                                   ==================  ================     =================   ===============  
                                                                                                                                
Net income (loss) per common share -                                                                                            
basic and diluted                                  $           (0.12)  $           0.05     $          (0.08)   $          0.19 
                                                   ==================  ================     =================   ===============  
                                                                                                                                
Weighted average number of common                                                                                               
shares and common equivalents outstanding                   3,860,254         3,860,254             3,860,254         3,860,254 
                                                   ==================  ================     =================   ===============  
</TABLE> 

                See notes to consolidated financial statements

                                       4
<PAGE>
 
               WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE> 
<CAPTION> 

                                                                                                Nine Months Ended
                                                                                                    June 30,
                                                                                    ------------------------------------------
                                                                                           1998                  1997
                                                                                    ------------------    -------------------- 
<S>                                                                                 <C>                   <C> 
Cash flows from operating activities:
  Net income (loss)                                                                 $        (318,351)    $            720,669  
                                                                                    ------------------    -------------------- 
  Adjustments to reconcile net income to net cash provided by operating                                                         
      activities:                                                                                                               
    Depreciation, amortization and other non-cash charges                                      717,921                 688,134  
    Changes in assets and liabilities, net:                                                                                     
      Restricted escrow funds                                                                   72,105                 195,252  
      Construction in progress and land                                                    (2,475,453)             (8,494,130) 
      Other assets                                                                             113,648                 (71,145) 
       Customer deposits                                                                        23,590                (195,252) 
      Accounts payable and accrued liabilities                                               1,057,559                (128,752) 
                                                                                    ------------------    -------------------- 
                                                                                             (490,630)             (8,005,893) 
                                                                                    ------------------    -------------------- 
                                                                                                                                
        Net cash used in operating activities                                                (808,981)             (7,285,224) 
                                                                                    ------------------    -------------------- 
                                                                                                                                
Cash flows from investing activities:                                                                                           
  Purchase of model furnishings                                                              (398,514)               (107,695) 
  Advances for future projects                                                                      --               1,195,352  
                                                                                                                                
                                                                                    ------------------    -------------------- 
         Net cash (used in) provided by investing  activities                                (398,514)               1,087,657  
                                                                                    ------------------    -------------------- 
                                                                                                                                
Cash flows from financing activities:                                                                                           
  Acquisition, development and construction loan borrowings                                 26,842,779              37,659,286  
  Principal payments on acquisition, development and construction loans                   (25,403,158)            (30,705,679) 
  Payments on 10% bonds, 5%  debentures and other financing fees                                   --                (900,000) 
  Notes payable borrowings                                                                     425,000                  57,028  
  Principal payments on notes payable                                                        (234,601)               (141,113) 
                                                                                    ------------------    -------------------- 
        Net cash provided by financing activities                                            1,630,020               5,969,522  
                                                                                    ------------------    -------------------- 
                                                                                                                                
Net increase (decrease) in cash                                                                422,525               (228,045) 
                                                                                                                                
Cash, beginning of period                                                                      236,523               1,521,799  
                                                                                    ------------------    -------------------- 
                                                                                                                                
Cash, end of period                                                                 $          659,048    $          1,293,754  
                                                                                    ==================    ==================== 
</TABLE> 

                See notes to consolidated financial statements

                                       5
<PAGE>
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION AND BUSINESS
-------------------------------------------

     Weitzer Homebuilders Incorporated (the "Company"), organized in Florida in
1994, is engaged primarily in the design, construction and sale of single family
homes and townhomes in Dade and Broward counties located in South Florida. The
Company offers a wide variety of moderately priced homes that are designed to
appeal to the entry level and first time move-up buyers.

     The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions for Form
10-Q and Rule 10-01 of Regulation S-X. These financial statements do not include
all information and notes required by generally accepted accounting principles
for complete financial statements, and should be read in conjunction with the
audited financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended September 30, 1997. The September 30,
1997 fiscal year end condensed balance sheet data was derived from audited
financial statements but does not include all disclosures required by generally
accepted accounting principles. The financial information furnished reflects all
adjustments, consisting only of normal recurring accruals which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods presented.
Certain prior quarter amounts have been reclassified to conform with the current
quarter presentation. These reclassifications did not have an overall effect on
the results from operations or earnings per share. The results of operations are
not necessarily indicative of results of operations which may be achieved in the
future.

     As discussed in the Company's annual report on Form 10k, the accompanying
financial statements have been prepared assuming that the Company will continue
as a going concern. As of June 30, 1998, the Company had $3.75 million principal
amount of its 10% bonds outstanding. The scheduled maturity of the 10% bonds was
June 30, 1998 (or July 30, 1998 after giving effect to applicable grace
periods). Subsequent to June 30, 1998, the Company consummated a private
financing of which the proceeds were used by the Company primarily to repay the
outstanding principal amount plus accrued interest of the 10% bonds as disclosed
in Note 4.

                                       6
<PAGE>
 
NOTE 2 - ADOPTION OF ACCOUNTING PRONOUNCEMENTS
----------------------------------------------

A. Earnings Per Share

     During the first quarter of fiscal year 1998, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("EPS") and has
reflected the adoption of such statements for all periods presented. The
adoption of this statement did not have any impact on previously reported EPS
amounts.

     Basic earnings per share ("Basic EPS") is computed by dividing net income
by the weighted average number of common shares outstanding during each period
presented. Diluted earnings per share ("Diluted EPS") is computed by dividing
net income by the weighted average number of common and common equivalent shares
during the period presented; outstanding warrants and stock options are
considered common stock equivalents and are included in the calculation using
the treasury stock method. Diluted EPS excludes the impact of warrants and stock
options as such amounts are anti-dilutive.

B. Capital Stock

     During the first quarter of fiscal year 1998, the Company adopted Statement
of Financial Accounting Standards No. 129 "Disclosure of Information about
Capital Structure", which requires disclosure of the pertinent rights and
privileges of the various securities outstanding.

     With respect to common stock, prior to the Company having earned an
aggregate of $7.5 million of adjusted operating income (as defined), the holders
of common stock are entitled to receive dividends, to the extent funds are
legally available, at the rate of $0.325 per share per annum for Class A Common
Stock and $0.001 per share per annum for Class B Common Stock, payable on a
quarterly basis. Since August 1996, the Board of Directors of the Company has
elected to forego the regularly scheduled cash dividend payments on its
outstanding shares of Class A Common Stock and Class B Common Stock and has not
declared any such dividends since that date. Cash dividends on both classes of
common stock are cumulative, and accordingly, the amount of such dividends
inures for the benefit of the Company's shareholders. As of June 30, 1998,
dividends in arrears amounted to $1,540,104. The Company accrues such dividends
on its financial statements only if and when declared by the Company's Board of
Directors.

                                       7
<PAGE>
 
NOTE 3 - YEAR 2000 COMPLIANCE
-----------------------------

     As the year 2000 approaches, an issue has generically emerged regarding how
existing application software programs and operating systems can accommodate
this date. In brief, many existing application software products in the
marketplace were designed to only accommodate a two-digit date position which
represents the year (e.g., '95' is stored on the system and represents the year
1995). As a result, the year 1999 (i.e., `99') could be the maximum date value
these systems will be able to accurately process. Management is in the process
of working with its software vendors to assure that the Company is prepared for
the year 2000. Management does not anticipate that the Company will incur
significant operating expenses or be required to invest heavily in computer
system improvements to be year 2000 compliant.

NOTE 4 - SUBSEQUENT EVENT
-------------------------

     On July 28, 1998, the Company received subscriptions from Chai Capital,
Ltd., a Florida limited partnership (the "Partnership") for an aggregate of
$5,000,000 to purchase an aggregate $4,000,000 principal amount 14% Convertible
Subordinated Debentures (the "Debentures") of the Company and 1,785,714 shares
of the Company's authorized and unissued Class A Common Stock, $.01 par value
per share, valued at $.56 per share. The Debentures are for a term of three
years and bear interest at the rate of 14% per annum and are convertible at the
option of the holder into shares of the Company's Class A Common Stock at a
conversion price of $.56 per share. The conversion price of the Debentures and
the purchase price per share for the Company's Class A Common Stock was based
upon a 30-day average of the market price of the Company's Class A Common Stock.
The private financing was effectuated in three tranches. The first tranche being
consummated on July 29, 1998; the second tranche on July 30, 1998; and the third
tranche on July 31, 1998. The consummation of each tranche represented the date
that the Company received cleared funds from the Partnership in accordance with
the terms of the executed subscription for the investment described above. The
proceeds of the financing were used by the Company primarily to repay the
outstanding principal amount plus accrued interest of the Company's outstanding
10% bonds issued in 1994 that were currently due.

                                       8
<PAGE>
 
ITEM - 2
--------

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS

     This discussion should be read in conjunction with the Notes to the
Consolidated Financial Statements contained herein and Management's Discussion
and Analysis of Financial Condition and Results of Operations appearing in the
Company's Form-10K for the fiscal year ended September 30, 1997. Management of
the Company believes that quarterly comparisons may not give a true indication
of overall trends and changes in the Company's operations. The Company's sales
and net income are subject to significant variability based on, among other
things, the phase of development of its projects, the cyclical nature of the
homebuilding industry, changes in governmental regulations, changes in
prevailing interest rates, changes in product mix, changes in the costs of
materials and labor and other economic factors.

     Except for the historical information contained herein, the matters
discussed in this Form 10-Q are forward looking statements which involve risks
and uncertainties, including, but not limited to, economic, competitive,
governmental, and technological factors affecting the Company's operations,
markets, products, services, and prices and other factors discussed in the
Company's other filings with the Securities and Exchange Commission.

                                       9
                                      

                                      
<PAGE>
 
Results of Operations

General
-------
     The following table sets forth for the periods presented certain items of
the Company's consolidated financial statements expressed as a percentage of
their respective total revenues:

<TABLE> 
<CAPTION> 

                                                            Three Months            Three Months 
                                                             Ended June              Ended June 
                                                              30, 1998                30, 1997     
                                                       ----------------------- -----------------------
<S>                                                    <C>                     <C> 
Revenues                                                       100.0%                  100.0%
Cost of homes sold                                              92.6                    88.4
Selling, general and administrative expenses                     8.1                     9.6
Depreciation, amortization and interest expense                  3.1                     0.8
Net income (loss)                                               (3.8)                    1.2
</TABLE> 

<TABLE> 
<CAPTION> 

                                                            Nine Months             Nine Months
                                                             Ended June              Ended June
                                                              30, 1998                30, 1997
                                                      ----------------------- -----------------------
<S>                                                   <C>                     <C>   
Revenues                                                       100.0%                  100.0%
Cost of homes sold                                              90.1                    86.7
Selling, general and administrative expenses                     8.5                    10.4
Depreciation, amortization and interest expense                  2.3                     1.1
Net income                                                      (0.9)                    1.8
(loss)

</TABLE> 
                                                               

                                       10
<PAGE>
 
Backlog and Available Lots for Sale or Under Option or Contract
---------------------------------------------------------------
     The following table sets forth the Company's backlog, the available lots
for sale and the available lots for construction for the periods presented. The
backlog consists of homes under sales contracts and includes homes under
construction, as well as homes, which have been sold but not started. At June
30,1998, approximately 77% of the homes in backlog were under construction. The
backlog increased from 239 homes at September 30, 1997 to 241 homes at June 30,
1998. The available lots for sale refer to the number of lots the Company owns,
on which it plans to construct homes, and excludes homes under sales contracts
included in backlog. There can be no assurances that settlements of homes
subject to sales contracts will occur or that all of the available lots for sale
will be built.

<TABLE> 
<CAPTION> 

Backlog of Homes and Available Lots for Sale
--------------------------------------------
                                                           June 30,        September 30,     June 30,  
                                                             1998              1997           1997     
                                                     ------------------  ----------------- -------------
<S>                                                 <C>                  <C>               <C>  
Number of homes in backlog                                      241               239                308
Aggregate sales value of homes in backlog           $    30,205,000      $  26,865,000     $  34,657,000
Available lots for sale                                         861                806               784
Available lots under option or contract                           0                375               463
                                                                                                        
</TABLE> 
                                                               

                                       11
<PAGE>
 
Comparison of the Three Months Ended June 30, 1998 and 1997
-----------------------------------------------------------

     The Company's revenues from home sales were approximately $12.5 million for
the three months ended June 30, 1998, as compared to approximately $17.1 million
for the three months ended June 30, 1997. The decrease can be attributed to a
23% decrease in the number of units sold, from 146 units to 113 units, as well
as in the mix of the products. Of the homes sold during the three month period
ended June 30, 1998, 85% were townhome units with an average sales price of
$104,670 and 15% were single family homes with an average sales price of
$160,400. In contrast, for the corresponding period ended June 30, 1997, 58% of
sold units represented townhome units with an average sales price of $113,750
and 42% represented single family homes with an average sales price of $136,250.

     The Company's costs of homes sold were approximately $11.6 million for the
three months ended June 30, 1998, as compared to approximately $15.2 million for
the three months ended June 30, 1997. The decrease is directly attributed to the
23% decrease in the number of units sold and the product mix of sales. Included
in the cost of homes sold is a settlement of a disputed real estate commission
related to Harmony Lakes, in the amount of approximately $121,000.

     Selling, general and administrative ("SG&A") expenses were approximately
$1.02 million for the three months ended June 30, 1998, compared to
approximately $1.64 million for the three months ended June 30, 1997. This is
attributed to reductions in several expense categories including marketing and
advertising, consulting fees and travel and entertainment. SG&A expenses as a
percentage of total revenues decreased from 9.6% during the three months ended
June 30, 1997 to 8.1% for the three months ended June 30, 1998.

     During the current quarter a significantly greater portion of interest was
expensed as a result of the completion of the land development phase for most of
the Company's communities.

     Net loss for the three months ended June 30, 1998 was approximately
$474,000 compared to net income of approximately $209,000 during the three
months ended June 30, 1997. The decrease is mainly attributed to the increase in
the cost of homes, as well as in the decrease of 23% in sales, as well as the
other items discussed above.

                                                               

                                       12
<PAGE>
 
Comparison of the Nine Months Ended June 30, 1998  and 1997
-----------------------------------------------------------

     The Company's revenues from home sales were approximately $36.5 million for
the nine months ended June 30, 1998, compared to approximately $39.7 million for
the same period last year. The decrease can be attributed to the number of units
sold, as well as in the composition of those sales. Of the 318 homes sold during
the nine month period ended June 30, 1998, 76% were townhome units and 24% were
single family homes. In contrast, for the nine month period ended June 30, 1997,
of the 349 homes sold, 48% were townhome units and 52% were single family homes.

     The Company's costs of homes sold were approximately $33.1 million for the
nine months ended June 30, 1998 compared to approximately $34.7 million for the
nine months ended June 30, 1997. The decrease is directly attributed to the 9%
decrease in the number of units sold and the product mix of the sale. Included
in the cost of homes sold is a settlement of a disputed real estate commission
related to Harmony Lakes, in the amount of approximately $121,000.

     Selling, general and administrative ("SG&A") expenses were approximately
$3.1 million for the nine months ended June 30, 1998 as compared to
approximately $4.2 million for the nine months ended June 30, 1997. This is
attributed to reductions in several expense categories including marketing and
advertising, consulting fees and travel and entertainment. SG&A expenses as a
percentage of total revenues decreased from 10.4% for the nine months ended June
30, 1997 to 7.3% for the nine months ended June 30, 1998.

     During the current nine month period ended on June 30, 1998, a
significantly greater portion of interest was expensed as a result of the
completion of the land development phase for most of the Company's communities.

     Net loss for the nine months ended June 30, 1998 was approximately $318,000
compared to net income of approximately $720,000 during the nine months ended
June 30, 1997. The decrease is mainly attributed to the increase in the cost of
homes, as well as in the decrease of 9% in sales, as well as the other items
discussed above.

                                                               

                                       13
<PAGE>
 
Liquidity and Capital Resources

General
-------

     On July 28, 1998, the Company received subscriptions from Chai Capital,
Ltd., a Florida limited partnership (the "Partnership") for an aggregate of
$5,000,000 to purchase an aggregate $4,000,000 principal amount 14% Convertible
Subordinated Debentures (the "Debentures") of the Company and 1,785,714 shares
of the Company's authorized and unissued Class A Common Stock, $.01 par value
per share, valued at $.56 per share. The Debentures are for a term of three
years and bear interest at the rate of 14% per annum and are convertible at the
option of the holder into shares of the Company's Class A Common Stock at a
conversion price of $.56 per share. The conversion price of the Debentures and
the purchase price per share for the Company's Class A Common Stock was based
upon a 30-day average of the market price of the Company's Class A Common Stock.
The private financing was effectuated in three tranches. The first tranche being
consummated on July 29, 1998; the second tranche on July 30, 1998; and the third
tranche on July 31, 1998. The consummation of each tranche represented the date
that the Company received cleared funds from the Partnership in accordance with
the terms of the executed subscription for the investment described above. The
proceeds of the financing were used by the Company primarily to repay the
outstanding principal amount plus accrued interest of the Company's outstanding
10% bonds issued in 1994 that were currently due.

     In addition, pursuant to the terms of the Debentures, the Company may not
incur debt in excess of $200,000 per annum and may not issue any securities in
the future (other than securities issuable upon exercise and/or conversion of
currently outstanding derivative securities), without the prior consent of the
Partnership.

     The Company is in the process of refinancing its existing acquisition,
development and construction loans with one of its primary lenders in order to
reduce the overall cost of financing. The other primary lender of the Company is
refinancing the outstanding debt balance of approximately $22 million at a lower
overall cost of capital with similar covenants as the Company is currently
obligated to abide by.

     The Company may require additional equity and/or debt financing in the
future depending upon the level of cash flow generated from operations. No
assurance can be given that the Company will be able to secure such financing,
if needed, on terms deemed favorable by the Company.

                                                               

                                       14
<PAGE>
 
Cash Flows
----------

     During the nine months ended June 30, 1998, the Company had used
approximately $809,000 in operating activities, primarily as a result of a $2.5
million increase in construction in process. The Company also invested
approximately $398,000 for the purchase of furniture for three of its new model
centers. During that period, the Company had net cash flow provided by financing
activities of approximately $1.6 million arising principally from borrowings on
acquisition, development and construction loans.

     For the nine months ended June 30, 1998, the Company experienced a combined
net positive cash flow of approximately $422,500.

                                                               

                                       15
<PAGE>
 
PART II.  OTHER INFORMATION


EXHIBITS AND REPORTS ON FORM 8-K

(b) On August 3, 1998, the Company filed a Current Report on Form 8-K with
respect to the consummation of its private financing.


SIGNATURES
-----------

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


                                                /s/ Harry Weitzer
Date:    August 11, 1998                       ---------------------------------
                                                Harry Weitzer
                                                Chairman of the Board, President
                                                and Chief Executive Officer  
                                                (Principal Executive Officer) 



                                                /s/ Sheryl S. Rice
Date:    August 11, 1998                        --------------------------------
                                                Sheryl S. Rice                
                                                Controller                    
                                                (Principal Accounting Officer) 
   

                                                               

                                       16