<PAGE>

                                                                      FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549


(Mark One)
  x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
For the Quarterly Period Ended December 31, 1996

          OR

___  TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
For the Transition Period From            To
                               -----------   ----------

Commission file number  0-20614
                        -------

               THE ROTTLUND COMPANY, INC.
-----------------------------------------------------------------
(Exact name of registrants as specified in its charter)


     MINNESOTA                                                 41-1228259
------------------------------------------               --------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization                              Identification No.)


2681 Long Lake Road, Roseville, MN                          55113
-----------------------------------------------------------------------
(Address of principal executive offices)                 (Zip Code)


                             (612) 638-0500
------------------------------------------------------------------
(Registrant's telephone number, including area code)


                         Not Applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

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 reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                        Yes   x   No
                                             ---     ---

The number of shares outstanding of the Registrant's common stock, par value
$.10 per share, at January 28, 1997 was 5,715,780 shares.

                                        1

<PAGE>

                   THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

                                      INDEX



PART I.   FINANCIAL INFORMATION                                            PAGE

Item 1.   Financial Statements

          Consolidated balance sheets - December 31, 1996
          and March 31, 1996                                                  3

          Consolidated statements of operations - Three and
          nine months ended December 31, 1996 and 1995                        4

          Consolidated statements of cash flows - Nine
          months ended December 31, 1996 and 1995                             5

          Notes to consolidated financial statements                          6

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                 7


PART II.  OTHER INFORMATION                                                  11


SIGNATURES                                                                   12

                                        2

<PAGE>

Part I.  Financial Information
Item 1.  Financial Statements


                   THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES
                     Consolidated Balance Sheets - Unaudited
                                      As of

                                                     December 31,   March 31,
                                                       1996          1996
                                                     -----------   -----------
     ASSETS

Cash and cash equivalents                           $  1,046,857  $  3,437,186
Escrow and other receivables                           1,164,060     1,995,011
Land, development costs and finished lots             51,548,424    48,938,789
Residential housing completed and under
   construction                                       33,406,505    25,710,956
Property and equipment, net                              601,655       693,608
Deferred financing costs and other assets              3,058,718     2,980,725
                                                     -----------   -----------
                                                     $90,826,219   $83,756,275
                                                     -----------   -----------
                                                     -----------   -----------

     LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
     Senior notes payable                          $  34,553,499 $  35,000,000
     Notes payable                                    15,458,858     5,584,248
     Accounts payable                                  8,962,446    10,763,836
     Accrued liabilities                               3,157,058     3,920,968
     Income taxes payable                              1,335,736     3,091,337
                                                     -----------   -----------
           Total liabilities                          63,467,597    58,360,389
                                                     -----------   -----------

Shareholders' equity:
     Preferred stock, $.10 par value,
          10,000,000 shares authorized;
          none issued                                          -             -
     Common stock, $.10 par value,
          40,000,000 shares authorized;
          issued and outstanding 5,715,780
          and 5,683,493 respectively                     137,578       134,350
     Paid-in capital                                  11,527,672    11,472,317
     Retained earnings                                15,693,372    13,789,219
                                                     -----------   -----------
          Total shareholders' equity                  27,358,622    25,395,886
                                                     -----------   -----------
                                                     $90,826,219   $83,756,275
                                                     -----------   -----------
                                                     -----------   -----------


           See accompanying notes to consolidated financial statements

                                        3

<PAGE>

                   THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED


                           For the Three Months          For the Nine Months
                             Ended December 31,           Ended December 31,
                         -----------------------    ---------------------------
                             1996        1995         1996           1995
                         -----------  -----------   -------------   -----------

Net sales                $49,613,944  $26,994,216   $134,357,6199   $93,810,503
Cost of sales             43,201,588   22,240,774     116,401,962    79,074,360
                         -----------  -----------    ------------   -----------
                           6,412,356    4,753,442      17,955,657    14,736,143
Selling, general and
 administrative expense    4,770,184    3,045,350      14,389,520     9,682,601
                         -----------  -----------    ------------   -----------
Operating income           1,642,172    1,708,092       3,566,137     5,053,542

Other (income) expense:
  Interest expense           262,954       51,632         570,651        64,742
  Other income               (41,602)     (25,510)       (227,667)     (217,469)
                         -----------  -----------    ------------   -----------

Income before provision
 for income taxes          1,420,820    1,681,970       3,223,153     5,206,269
                         -----------  -----------    ------------   -----------
Provision for taxes          598,000      690,000       1,319,000     2,135,000
                         -----------  -----------    ------------   -----------
Net income               $   822,820  $   991,970    $  1,904,153   $ 3,071,269
                         -----------  -----------    ------------   -----------
                         -----------  -----------    ------------   -----------


  Net income per share         $0.15        $0.17           $0.33         $0.53
                         -----------  -----------    ------------   -----------
                         -----------  -----------    ------------   -----------

  Weighted average
   shares outstanding      5,723,879    5,744,719       5,745,884     5,753,492
                         -----------  -----------    ------------   -----------
                         -----------  -----------    ------------   -----------

           See accompanying notes to consolidated financial statements

                                        4

<PAGE>

                   THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

                                     For the Nine Months Ended
December 31,
                                                       1996           1995
                                                    -----------   ------------
OPERATING ACTIVITIES:

 Net income                                          $1,904,153    $ 3,071,269
 Adjustments to reconcile net income to
 net cash provided by operating activities:
    Depreciation                                        258,621        135,874
    Changes in operating items:
       Escrow and other receivables                     830,951        241,859
       Land, development costs and finished
          lots                                       (2,609,635)    (2,184,822)
       Residential housing completed and under
          construction                               (7,695,549)    (3,409,598)
       Deferred financing costs and other
          assets                                        (77,993)      (321,067)
       Accounts payable                              (1,801,390)    (1,973,264)
       Accrued liabilities                             (763,910)       149,912
       Income taxes payable                          (1,755,601)       907,597
                                                    -----------   ------------
          Net cash provided by(used for)
          operating activities                      (11,710,353)    (3,382,240)
                                                    -----------   ------------

INVESTING ACTIVITIES:
 Purchase of property and equipment, net               (166,668)      (148,381)
                                                    -----------   ------------

FINANCING ACTIVITIES:
 Proceeds from mortgage notes payable                 2,828,186         60,864
 Repayments of mortgage notes payable                (5,688,576)    (5,897,835)
 Proceeds from bank notes payable, net               12,735,000      4,611,309
 Stock options exercised                                 58,583
 Repayment of senior note payable                      (446,501)
                                                    -----------   ------------
    Net cash used for financing activities            9,486,692     (1,225,662)
                                                    -----------   ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS
                                                     (2,390,329)    (4,756,283)
CASH AND CASH EQUIVALENTS:
 Beginning of period                                  3,437,186      5,595,500
                                                    -----------   ------------

 End of period                                     $  1,046,857     $  839,217
                                                    -----------  -------------
                                                    -----------   ------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
 INFORMATION:
 Cash paid for interest, net of amounts
 capitalized                                           $570,651        $64,742
 Cash paid for income taxes                           2,574,834      1,010,403
                                                    -----------   ------------
                                                    -----------   ------------

           See accompanying notes to consolidated financial statements

                                        5

<PAGE>

                   THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1.   General

The financial statements included herein have been prepared by the Company
without audit, in accordance with generally accepted accounting principles, and
pursuant to the rules and regulations of the Securities and Exchange Commission.
These interim financial statements should be read in conjunction with the
consolidated financial statements and notes in the Company's annual report for
the year ended March 31, 1996 as filed with the Securities and Exchange
Commission.  In the opinion of management of the Company, these financial
statements contain all adjustments of a normal recurring nature necessary to
present fairly the financial position, results of operations and cash flows of
the Company for the interim periods presented.

North Coast Mortgage, Inc., a wholly owned subsidiary of The Rottlund Company,
Inc., is engaged in the business of originating residential mortgage loans as a
correspondent for various mortgage banking companies.

The Company has experienced, and expects to continue to experience, significant
variability in quarterly net sales and net income.  Operating results for the
three and nine months ending December 31, 1996 are not necessarily indicative of
the results that may be expected for the year ending March 31, 1997.


Note 2.   Note Payable to Bank

As of December 31, 1996, the Company had a line-of-credit arrangement with a
bank totaling $18,000,000, with interest at the bank's prime rate plus 1/2%.
Borrowings outstanding at December 31, 1996 were $13,235,000 under this
arrangement.  In addition, letters of credit totaling approximately $2,500,000
were outstanding under this arrangement at December 31, 1996.

                                        6

<PAGE>

Item 2.

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


GENERAL

The following table sets forth certain information regarding the Company's
operations for the periods indicated.

                                              Percentage of Net Sales
                                              -----------------------

                                   For The Three Months     For The Nine Months
                                    Ended December 31        Ended December 31
                                   --------------------     ------------------
                                    1996          1995       1996        1995
                                    ----          ----       ----        ----

Net sales                           100.0%       100.0%     100.0%      100.0%
Cost of sales                        87.1         82.4       86.6        84.3
                                  -------       ------     ------      ------
 Gross profit                        12.9         17.6       13.4        15.7

 Selling, general and
 administrative expense               9.6         11.3       10.7        10.3
                                  -------       ------     ------      ------
Operating income                      3.3          6.3        2.7         5.4

Other (income) expense:
 Interest                              .5           .2         .3          .1
 Other                                (.1)         (.1)       (.2)        (.2)
                                  -------       ------     ------      ------
 Income before provision
  for income taxes                    2.9          6.2        2.4         5.5
 Provision for income
  taxes                               1.2          2.6        1.0         2.3
                                  -------       ------     ------      ------
 Net income                           1.7%         3.6%       1.4%        3.2%
                                  -------       ------     ------      ------
                                  -------       ------     ------      ------

Number of homes closed                379          242      1,022         850
                                  -------       ------     ------      ------
                                  -------       ------     ------      ------
BACKLOG

The following table sets forth the Company's backlog as of the dates indicated:

                                         Number of
                      December 31,       Homes           Sales Value
                      ------------       ---------       -----------
                          1996                 434       $63,642,488
                          1995                 450       $49,025,000

                                        7

<PAGE>

THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1995

Net sales for the three months ended December 31, 1996, increased by 83.7%, to
$49.6 million, from $27.0 million for the comparable period of 1995.  The number
of homes closed by the Company increased by 56.6% to 379 homes for the three
months ended December 31, 1996, from 242 homes during the same period in 1995.
The average selling price of a home increased 17.4% to $130,900, during the
three months ended December 31, 1996 from $111,500 for the comparable period in
1995.  This increase was due to a greater number of closings in single family
developments where the sales price of homes is generally higher than other homes
sold by the Company, and higher sales prices in the multi-family segment as the
product mix changed to a greater emphasis on empty nesters from products
targeted towards existing renters.  This will vary on a quarter by quarter basis
and does not establish a trend.

Gross profit increased by 33.3%, to $6.4 million for the three months ended
December 31, 1996, from $4.8 million for the comparable period of 1995.  Gross
profit as a percentage of net sales decreased to 12.9% from 17.8% primarily due
to rising material and labor costs caused by the strength in the overall
homebuilding industry, and continued start up costs in some of the Company's
newer markets.

Selling, general and administrative expenses increased by 60.0% to $4.8 million
in the three months ended December 31, 1996, from $3.0 million for the
comparable period of 1995.  This increase is due to an increase in variable
costs related to the increase in revenue during the quarter as well as continued
start up costs in some of the Company's newer markets.  As a percentage of net
sales, selling, general and administrative expense decreased to 9.6% for the
three month period ended December 31, 1996, from 11.3% for the same period in
1995.

Interest expense increased to $263,000 for the three months ended December 31,
1996, from $52,000 for the comparable period in 1995.  The Company capitalizes
certain interest costs for land development and includes such capitalized
interest in cost of home sales when the related homes are delivered to
purchasers.  The increase was primarily due to an increase in short term
borrowings which were used to finance the Company's increased level of business
activity.

The Company's effective tax rate for both periods was approximately 40% which
reflects the federal statutory rate plus state taxes, net of federal income tax
benefit.

                                        8

<PAGE>

NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 1995

Net sales for the nine month period ended December 31, 1996, increased by 43.3%,
to $134.4 million, from $93.8 million for the comparable period of 1995.  The
number of homes closed by the Company increased by 20.2%, to 1022 homes for the
nine months ended December 31, 1996, from 850 homes during the same period in
1995.  The average selling price of a home increased 19.0% to $131,500, in 1996
from $110,400 for the same period in 1995. This increase was due to a greater
number of closings in single family developments where the sales price of homes
is generally higher than other homes sold by the Company, and higher sales
prices in the multi-family segment as the product mix changed to a greater
emphasis on empty nesters from products targeted towards existing renters.  This
will vary on a quarter by quarter basis and does not establish a trend.

Gross profit increased by 22.4%, to $18.0 million for the nine month period
ended December 31, 1996, from $14.7 million for the comparable period of 1995.
Gross profit as a percentage of revenue decreased to 13.4% from 15.7%, primarily
due to rising material and labor costs caused by the strength in the overall
homebuilding industry, and continued start up costs in some of the Company's
newer markets.

Selling, general and administrative expenses increased by 48.5%, to $14.4
million in the nine month period ended December 31, 1996, from $9.7 million for
the comparable period of 1995.  This increase is due to an increase in variable
costs related to the increase in revenue during the quarter as well as continued
start up costs in some of the Company's newer markets.  As a percentage of net
sales, selling, general and administrative expenses increased to 10.7% for the
nine months ended December 31, 1996, from 10.3% for the same period in 1995.

Interest expense increased to $571,000 for the nine months ended December 31,
1996, from $65,000 for the same period in 1995.  The Company capitalizes certain
interest costs for land development and includes such capitalized interest in
cost of home sales when the related homes are delivered to purchasers.  The
increase was primarily due to an increase in short term borrowings which were
used to finance the Company's increased level of business activity.

The Company's effective tax rate for both periods was approximately 40% which
reflects the federal statutory rate plus state taxes, net of federal income tax
benefit.

                                        9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996, the Company had available cash and cash equivalents of
approximately $1,047,000.

The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisition and inventory balances.  In December 1994, the
Company issued $25 million of 12.11% Senior Notes payable and in February 1996,
the Company issued an additional $10 million of 9.42% Senior Notes payable
(collectively referred to as the "Senior Notes").  Proceeds were used to retire
certain mortgage notes payable and for working capital purposes.  Interest on
the Senior Notes is due monthly through November 1996.  Principal and interest
payments of approximately $552,000 are due monthly beginning December 1996
through December 2004.

At December 31, 1996, the Company also had an $18.0 million revolving credit
facility from a commercial lender.  Borrowings under this facility's line of
credit totaled approximately $13.2 million at December 31, 1996.  The Company
has the capacity as of December 31, 1996 to borrow an additional $4.7 of short-
term debt, if otherwise available, without violating the terms of the Senior
Notes.  The issuance of the Senior Notes and the availability of the unsecured
line of credit provide additional liquidity and flexibility to the Company over
the next two to three years.  The Company believes that amounts available under
its existing borrowing arrangements (assuming extensions and renewals of debt in
the ordinary course of business) and amounts generated from operations will
provide funds adequate for its home building activities and debt service
including the Company's recent expansions to Iowa, Florida, New Jersey and
Indiana.



INFLATION

The Company, as well as the homebuilding industry in general, may be adversely
affected during periods of high inflation, primarily because of higher land,
material and labor costs.  In addition, higher mortgage interest rates may
significantly affect the affordability of permanent mortgage financing to
prospective purchasers.  The Company attempts to pass through to its customers
any increase in its costs through increased selling prices, and to date,
inflation has not had a material adverse effect on the Company's results of
operations.  However, there is no assurance that inflation will not have a
material adverse impact on the Company's future results of operations.

                                       10

<PAGE>

PART II - OTHER INFORMATION

Items 1 through 5.  Not applicable.

Item 6.  Exhibits and Reports on Form 8-K.

     (a)  Exhibits. 

          (i)  Credit facility dated October 23, 1996 with The First
               National Bank of Boston.

     (b)  Reports on Form 8-K.

          The registrant filed no reports on Form 8-K during the three months
          ended December 31, 1996.



                                       11

<PAGE>

                                   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 thereunto duly authorized.



                                             THE ROTTLUND COMPANY, INC.



Date:     January 28, 1997                   By: /s/ David H. Rotter
                                                -------------------------------
                                              DAVID H. ROTTER
                                              President and
                                              Chief Executive Officer



Date:     January 28, 1997                   By: /s/ Lawrence B. Shapiro
                                                -------------------------------
                                              LAWRENCE B. SHAPIRO
                                              Vice President of Finance
                                              Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)