<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549


                                   FORM 10-Q

               Quarterly Report Pursuant to Section 13 or 15 (d)
                    of the Securities Exchange Act of 1934

                    For the Six Months Ended June 30, 1997
                       Commission File Number 33-28493-A

                          CONDEV LAND FUND III, LTD.
                          --------------------------
            (Exact name of registrant as specified in its charter)
   
               FLORIDA                               59-2943405
               -------                               ----------
   (State or other jurisdiction of                (I.R.S. Employer
    incorporation of organization)               Identification No.)

                               2487 Aloma Avenue
                          Winter Park, Florida 32792
                   (Address of principal executive offices)

Registrant's telephone number, including area code: (407) 679-1748


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

                                       1
<PAGE>
 
                          CONDEV LAND FUND III, LTD.

                                     INDEX
   
                                                            PAGE
                                                           NUMBER
PART I.  FINANCIAL INFORMATION:

         ITEM 1.   Financial Statements

                   Statement of Assets,
                   Liabilities and Partner's
                   Capital - June 30, 1997 and
                   December 31, 1996                          3

                   Statement of Income & Expense
                   Three Months Ended June 30, 1997
                   and June 30, 1996                          4
 
                   Statement of Income & Expense
                   Six Months Ended June 30, 1997
                   and June 30, 1996                          5
 
                   Statement of Cash Receipts and
                   Disbursements-Six months ended
                   June 30, 1997                              6

                   Notes to Financial Statements              7 - 9

          ITEM 2.  Management's Discussion and Analysis
                   of Financial Condition and Results
                   of Operations                              9 - 10

PART II.  OTHER INFORMATION:

          ITEM 6.  Exhibits and Reports on Form 8-K           10

                                       2
<PAGE>
 
                        PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:
         ---------------------

The accompanying financial statements, in the opinion of Condev Associates, the
general partner of Condev Land Fund III, Ltd., reflect all adjustments (which
include only normal recurring adjustments) necessary to a fair statement of the
financial position, the results of operations and the changes in cash position
for the periods presented.

                          CONDEV LAND FUND III, LTD.
            STATEMENT OF ASSETS, LIABILITIES AND PARTNER'S CAPITAL
                      JUNE 30, 1997 AND DECEMBER 31, 1996

<TABLE>
<CAPTION>
 
 
                                    ASSETS
                                    ------
<S>                                       <C>            <C>
 
                                          June 30, 1997  December 31, 1996
                                          -------------  -----------------
Cash and Cash Equivalents                 $  105,286        $  101,678
Investment in Joint Venture (2)              535,049          1,366,879
Land, at cost (3)                            405,467            405,467
Organization Costs                             2,311              2,311
                                          ----------         ----------
 
Total Assets:                             $1,048,113         $1,876,335
                                          ==========         ==========
</TABLE>


                       LIABILITIES AND PARTNER'S CAPITAL
                       ---------------------------------
<TABLE>
<CAPTION>
 
<S>                                       <C>                <C>
Liabilities                               $        0         $        0
                                          ----------         ----------
 
Partner's Capital:
    General Partner                       $     (602)        $      319)
    Limited Partners                       1,848,655          1,876,654
    Less: Distributions                     (799,940)                 0
                                          ----------         ----------
 
      Total Partner's Capital:            $1,048,113         $1,876,335
                                          ----------         ----------
 
Total Liabilities and Partner's
  Capital:                                $1,048,113         $1,876,335
                                          ==========         ==========
</TABLE>

                                       3
<PAGE>
 
                          CONDEV LAND FUND III, LTD.
                        STATEMENT OF INCOME AND EXPENSE
              THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                              June 30, 1997   June 30, 1996
                              -------------   -------------
<S>                           <C>             <C>
                 INCOME
                 ------

Interest and Other Income       $  4,223         $2,835
                                --------         ------   

Total Income                    $  4,223         $2,835
                                --------         ------
 
            OPERATING EXPENSES
            ------------------                 
 
Professional fees                      0              0
 
Equity in loss of Joint Venture   34,952              0
 
Management fees                    1,872              0
 
Other expense                         12              0
 
Office expense                     1,062          1,556
                                --------         ------
 
Total Operating Expenses:       $ 37,898         $1,556
                                --------         ------
 
Net Profit/(Loss)               $(33,675)        $1,279
                                ========         ======
 
</TABLE>

                                       4
<PAGE>
 
                          CONDEV LAND FUND III, LTD.
                        STATEMENT OF INCOME AND EXPENSE
               SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                              June 30, 1997   June 30, 1996
                              -------------   -------------
<S>                           <C>             <C>
                 INCOME
                 ------

Interest and Other Income        $  5,209        $   3,717
                                 --------        ---------

Total Income                     $  5,209        $   3,717
                                 --------        ---------

          OPERATING EXPENSES
          ------------------
 
Professional fees                   7,000            7,000
 
Equity in loss of Joint Venture    21,830              990
 
Management fees                     1,872                0
 
Other expense                          51                0
 
Office expense                      2,738            3,708
                                 --------        ---------
 
Total Operating Expenses:        $ 33,491        $  11,698
                                 --------        ---------
 
Net Profit (Loss)                $(28,282)       $(  7,981)
                                 ========        =========
 
</TABLE>

                                       5
<PAGE>
 
                          CONDEV LAND FUND III, LTD.
                            STATEMENT OF CASH FLOWS
                        SIX MONTHS ENDED JUNE 30, 1997
<TABLE>

<S>                                                          <C> 
Cash Flows from Operating Activities:

    Net Income                                               $ (28,282)
    Adjustments to Reconcile Net Income
     To Net Cash Provided by Operating
     Activities:
         Equity in income of joint venture                      21,830
         Cash Provided by Changes in:
           Accounts receivable                                       0
                                                             ---------

Net Cash Provided in Operating Activities:                   $  (6,452)


Cash Flows from Investing Activities:

  Distributions from Joint Venture, net                      $ 810,000
  Investments In Joint Ventures                              $       0
                                                             ---------

Net Cash Used in Investing Activities:                       $ 810,000
                                                             ---------

Cash Flows from Financing Activities:
  Distributions to Partners                                   (799,940)
                                                             ---------

Net Cash Provided by Financing Activities:                   $(799,940)
                                                             ---------

Net increase in Cash                                         $   3,608

Cash and Cash Equivalents at Beginning of Year               $ 101,678
                                                             ---------

Cash and Cash Equivalents at End of Period                   $ 105,286
                                                             =========
</TABLE>

                                       6
<PAGE>
 
Note 1  BUSINESS:
        ---------

        Condev Land Fund III, Ltd. (the "Partnership") was formed on February
        15, 1989 pursuant to the provisions of the Florida Revised Uniform
        Limited Partnership Act for the purpose of acquiring and holding for
        investment unimproved land in Central Florida.

        The Offering Period for the Partnership originally scheduled to expire
        on July 2, 1990 was extended to June 30, 1991. As of June 30, 1991, the
        Partnership had received $2,446,000 in partnership capital.

        The Partnership has made two investments.  Refer to Note 2 INVESTMENT
        IN JOINT VENTURE and Note 3 INVESTMENT IN LAND for details.
 
        As provided under the terms of the Partnership Agreement, the
        Partnership was to be in existence until December 31, 1996. In
        accordance with Florida Limited Partnership Law and the Partnership
        Agreement, after December 31, 1996 the Partnership has been in
        liquidation with no change in the status of the limited partners of
        general partner.


Note 2  INVESTMENT IN JOINT VENTURE:
        ----------------------------

        The Partnership owns a 90% interest in Condev Osceola Joint Venture. The
        joint venture partner, Condev Osceola, Ltd., is a private partnership
        sponsored by the general partner. On May 31, 1991, Condev Osceola Joint
        Venture purchased two parcels of land aggregating 8.6 acres and related
        sewer capacity within the Kyng's Heath commercial subdivision on S.R.
        535 near its intersection with Highway 192 in Osceola County, Florida.
        The property is zoned tourist-commercial in Osceola County, Florida.

        The purchase price of this property was $1,740,000 or $4.64 per square
        foot, and the purchase price for the sewer capacity was $22,400. The
        Partnership received an appraisal on this property of $2,260,000 or
        $6.02 per square foot.

        On February 28, 1996, Condev Osceola Joint Venture entered into a
        Contract for Sale of Real Estate with a timeshare developer and operator
        for 5.08 acres of this site and the related sewer capacity. On August
        28, 1996, the Joint Venture concluded the sale. The buyer was Orlando
        Resort Development Group, which intends to build 92 time-share units and
        related amenities on the site.

        The purchase price was $1,250,000, or approximately $250,000 per acre.
        In addition, the buyer reimbursed the Joint Venture $22,400 for
        sewer capacity reserved for the site.  The buyer made a cash
        payment at closing of $350,000, and issued its promissory note in
        the amount of $900,000 to the Joint Venture.  The mortgage note
        was repaid, together with 

                                       7
<PAGE>
 
        accrued interest, on April 2, 1997. After expenses, which included a
        deferred 5% real estate commission, the net cash received by the Joint
        Venture was $861,270. A total of $810,000 was distributed by the Joint
        Venture to the Partnership, and $799,940 was distributed to limited
        partners. As provided in the Partnership Agreement, the balance of
        $10,060 was added to Partnership reserves to provide for future
        expenses.

        The Joint Venture continues to own 2.94 acres of land in this location.

   A summary of the assets, liabilities and venturers' capital of Condev
   Osceola Joint Venture as of June 30, 1997 are as follows:

                           ASSETS
                           ------
 
        Cash                                  $   5,536
        Note Receivable                               0
        Prepaid Expenses                            236
        Investments in land                     589,715
                                              ---------
                                              $ 595,487
                                              =========
 
            LIABILITIES AND VENTURERS' CAPITAL
            ----------------------------------
 
        Accounts Payable                            988
        Venturers Capital                       618,755
        Current Profit/(Loss)                   (24,256)
                                              ---------
                                              $ 595,487
                                              =========
 

Note 3  INVESTMENT IN LAND:
        -------------------

        In 1993, the Partnership purchased a 10-acre parcel of commercially
        zoned land fronting on the east side of U.S. Highway 27 in Lake County,
        Florida, approximately 1.5 miles north of the U.S. 192 and U.S. 27
        intersection.

        The purchase price of the property was $400,000 or $.92 per square foot.
        The Partnership received a $400,000 appraisal of the land at the time of
        acquisition.

Note 4  DISTRIBUTIONS TO PARTNERS:
        --------------------------

        Pursuant to the partnership agreement, cash flow generated each year by
        the Partnership is to be distributed 99% to the limited partners and 1%
        to the general partner. There were no cash flow distributions during the
        first six months of 1997.

                                       8
<PAGE>
 
        Pursuant to the partnership agreement, proceeds realized from the sale
        of properties, after the establishment of reserves for future operating
        costs, are to be distributed at least annually. There was a distribution
        to limited partners during the second quarter of 1997 in the amount of
        $799,940 relating to the repayment of the mortgage note described in
        Note 2 above.

 
Note 4  RELATED PARTY TRANSACTIONS:
        ---------------------------

        The Partnership Agreement provides for the reimbursement to the general
        partner of administrative expenses incurred in the direct operation of
        the partnership. For the six months ended June 30, 1997, a total of
        $2,243 was reimbursed to the general partner for direct expenses
        incurred.

        When properties are sold, an affiliate of the general partner may be
        paid real estate commissions in amounts customarily charged by others
        rendering similar services with such commissions plus commissions paid
        to nonaffiliated brokers not to exceed 10% of the gross sales price. No
        real estate commissions were paid to the general partner or any
        affiliate during the six months ended June 30, 1997.

        The general partner is obligated to loan up to $100,000 to the
        Partnership during its term to meet working capital requirements. No
        such loans were made to the Partnership during the six months ended 
        June 30, 1997.


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        -----------------------------------------------------------
        AND RESULTS OF OPERATIONS
        -------------------------

        For the six months ended June 30, 1997 total income was $5,209. This
        came from interest earned on deposits and short-term investments. For
        the six months ended June 30, 1996, total income was $3,717. There were
        no sales of property during the 1996 or 1997 period. Expenses for the
        six months ended June 30, 1997 were $33,491 compared to total expenses
        of $11,698 in 1996. The major component of these expenses was equity in
        the loss of Condev/Osceola Joint Venture, which paid deferred real
        estate commissions due to a non-affiliated broker upon repayment of the
        Orlando Resort Development Group mortgage. Other expenses were
        relatively unchanged. The net loss for the six months ending June 30,
        1997 was $ 28,282, compared to a net loss of $7,981 for the comparable
        period in 1996.

        Total assets decreased from $1,876,335 at December 31, 1996 to
        $1,048,728 at June 30, 1997. This reflects the net results of operations
        for the period, less distributions to limited partners. Assets can be
        expected to decline in the future as properties are sold and
        distributions are made to limited partners.

                                       9
<PAGE>
 
        Liquidity remained at a satisfactory level. Cash and equivalents
        increased slightly from $101,678 at 1996 year-end to $105,286 at 
        June 30, 1997.
 

                                    PART II

Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
        ---------------------------------

        (A)  Exhibits/Index

             None

        (B)  Reports on Form 8-K

             There were no reports of Form 8-K for the period ended 
             June 30, 1997.

                                       10
<PAGE>
 
                          CONDEV LAND FUND III, LTD.
                                  SIGNATURES


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


                                       CONDEV LAND FUND III, LTD.
                                       BY: Condev Associates, General Partner






July 31, 1997                          /s/ Robert N. Gardner
-------------                          ---------------------
    DATE                               Robert N. Gardner, Partner



July 31, 1997                          /s/ Joseph J. Gardner
-------------                          ---------------------
    DATE                               Joseph J. Gardner, Partner

                                       11