<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                                       OR

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

             FOR THE TRANSITION PERIOD FROM __________ TO__________.

                          COMMISSION FILE NUMBER 1-9885

                             LEGEND PROPERTIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                   DELAWARE                                36-3465359
          (STATE OR OTHER JURISDICTION OF               (I.R.S. EMPLOYER
          INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)


    3755 7TH TERRACE, SUITE 301, VERO BEACH, FLORIDA                 32960
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 778-0180

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


         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 [ ].

         Shares of common stock outstanding as of November 12 , 1999: 6,290,874.


<PAGE>   2



                              TABLE OF CONTENTS

                        PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Item 1.       Financial Statements
<S>          <C>                                                                                     <C>
              Condensed Consolidated Balance Sheets at September 30, 1999 (unaudited) and
              December 31, 1998........................................................................3

              Condensed Consolidated Statements of Operations for the Three Months
              Ended September 30, 1999 and 1998 (unaudited)............................................4

              Condensed Consolidated Statements of Operations for the Nine Months
              Ended September 30, 1999 and 1998 (unaudited)............................................5

              Condensed Consolidated Statements of Cash Flows for the Nine Months
              Ended September 30, 1999 and 1998 (unaudited)............................................6

              Notes to Condensed Consolidated Financial Statements (unaudited).........................7

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of
              Operations..............................................................................11

Item 3        Quantitative and Qualitative Disclosures about Market Risks.............................19

                                               PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.......................................................................20

Item 6.       Exhibits and Reports of Form 8-K........................................................21

Signatures    ........................................................................................22
</TABLE>

                                       2
<PAGE>   3


                         PART I - FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
                                   (UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                        1999             1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                 <C>

                                  Assets
                                  ------

Real estate inventory                                                            $      76,267,105      82,873,914
Asset held for sale                                                                              -       7,916,175
Cash and cash equivalents                                                                5,476,510       4,446,864
Restricted cash and investments                                                          9,999,158      19,017,860
Accounts and notes receivable                                                            4,270,137       1,491,267
Property and equipment, net                                                             23,418,751      24,645,281
Intangible assets, net                                                                   1,484,067       1,646,542
Other assets, net                                                                        1,685,197       5,520,388
                                                                                    --------------- ----------------

                                                                                 $     122,600,924     147,558,291
                                                                                    --------------- ----------------

               Liabilities and Stockholders' Equity (Deficit)
               ----------------------------------------------

Notes payable to banks and others                                                $      22,602,512      40,722,737
Payables to related parties                                                             86,350,036      84,744,478
Accounts payable                                                                         2,352,672       3,033,693
Other notes and liabilities                                                             14,759,656      14,443,250
                                                                                    --------------- ----------------
                                                                                       126,064,876     142,944,158

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

Stockholders'equity (deficit) :
     Common stock, $.01 par value.  Authorized 10,000,000 shares; 6,311,678
         shares issued and 6,290,874 shares outstanding                                     63,117          63,117
     Additional paid-in capital                                                         44,171,143      44,171,103
     Accumulated deficit                                                               (47,576,896)    (39,498,771)
     Treasury stock, 20,804 shares                                                        (121,316)       (121,316)
                                                                                    --------------- ----------------

                               Total stockholders' equity (deficit)                     (3,463,952)      4,614,133
--------------------------------------------------------------------------------------------------------------------

                                                                                 $     122,600,924     147,558,291
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the Condensed Consolidated Financial Statements

                                       3
<PAGE>   4


                     LEGEND PROPERTIES INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                       1999              1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                   <C>
Revenues:
     Real estate sales                                                       $       27,495,708        7,941,346
     Club operations                                                                  1,368,162          985,599
     Patient services                                                                   693,640          623,589
     Other                                                                              946,928          298,240
                                                                                    ---------------- ---------------

                          Total revenues                                             30,504,438        9,848,774
                                                                                    ---------------- ---------------

Operating costs and expenses:
     Real estate sales                                                               22,861,163        6,043,361
     Club operations                                                                  1,656,001        1,536,510
     Patient services                                                                   510,405          494,689
     Other                                                                              475,411          426,201
     Selling, general and administrative                                              3,206,831        2,935,290
     Depreciation and amortization                                                      446,946          502,493
                                                                                    ---------------- ---------------
                         Total operating costs and expenses                          29,156,756       11,938,544
                                                                                    ---------------- ---------------
Operating  income (loss)                                                              1,347,682       (2,089,770)
                                                                                    ---------------- ---------------

Other income (expense):

     Interest income                                                                    123,390          172,298
     Interest expense, including loan cost amortization                                (448,233)      (1,378,869)
     Interest expense, related party                                                 (2,024,712)      (1,241,790)
     Other, net                                                                         120,432           17,500
                                                                                    ---------------- ---------------
                         Net other expense                                           (2,229,123)      (2,430,861)
                                                                                    ---------------- ---------------

Net loss                                                                     $         (881,441)      (4,520,631)
                                                                                    ---------------- ---------------
Net loss per share - basic and diluted                                       $            (0.14)           (0.72)
                                                                                    ---------------- ---------------

Weighted average number of common shares outstanding                                  6,290,874        6,290,874
--------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to the Condensed Consolidated Financial Statements

                                       4
<PAGE>   5



                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                       1999              1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                     <C>
Revenues:
     Real estate sales                                                       $       52,346,120       26,755,717
     Club operations                                                                  5,321,391        4,221,563
     Patient services                                                                 2,114,853        1,943,464
     Other                                                                            2,383,250        1,510,304
                                                                                    ---------------- ---------------

                          Total revenues                                             62,165,614       34,431,048
                                                                                    ---------------- ---------------

Operating costs and expenses:
     Real estate sales                                                               40,963,963       18,410,807
     Club operations                                                                  5,767,197        5,018,475
     Patient services                                                                 1,533,547        1,368,670
     Other                                                                            1,798,869          911,140
     Selling, general and administrative                                             11,659,394       10,473,874
     Depreciation and amortization                                                    1,344,187        1,561,327
                                                                                    ---------------- ---------------

                         Total operating costs and expenses                          63,067,157       37,744,293
                                                                                    ---------------- ---------------

Operating loss                                                                         (901,543)      (3,313,245)
                                                                                    ---------------- ---------------

Other  income (expense):

     Interest income                                                                    447,185          636,732
     Interest expense, including loan cost amortization                              (1,926,857)      (3,919,692)
     Interest expense, related party                                                 (5,817,341)      (3,709,509)
     Other, net                                                                         120,432          394,437
                                                                                    ---------------- ---------------

                         Net other expense                                           (7,176,581)      (6,598,032)
                                                                                    ---------------- ---------------


Net loss                                                                     $       (8,078,124)      (9,911,277)
                                                                                    ---------------- ---------------

Net loss per share - basic and diluted                                       $            (1.28)           (1.58)
                                                                                    ---------------- ---------------

Weighted average number of common shares outstanding                                  6,290,874        6,290,874
--------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to the Condensed Consolidated Financial Statements

                                       5
<PAGE>   6



                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                       (A SUSIDIARY OF RGI HOLDINGS, INC.)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                  (UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                          1999            1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                 <C>
Cash flows from operating activities:
         Net loss                                                                    $ (8,078,124)      (9,911,277)
         Adjustments to reconcile net loss to net cash provided by (used
              in) operating activities:
              Depreciation and amortization                                             1,533,610        2,033,305
              Related party interest expense not paid                                   5,597,220        4,342,044
         Change in certain assets and liabilities:
              Decrease (increase) in real estate inventory and assets held
                  for sale                                                             14,522,984       (9,758,571)
              Decrease (increase) in accounts and notes receivable and
                  other assets                                                            994,974       (1,984,070)
              (Decrease) increase in accounts payable and other notes
                  and liabilities:                                                       (364,615)       4,859,372
                                                                                     ------------     ------------

         Net cash provided by (used in) operating activities                           14,206,048      (10,419,197)
                                                                                     ------------     ------------

Cash flows from investing activities:

              Decrease (increase) in restricted cash and investments                    9,018,702       (2,368,464)
              Proceeds from sale of property and equipment                                622,088                -
              Purchase of property and equipment                                         (617,004)        (455,390)
                                                                                     ------------     ------------

         Net cash provided by (used in) investing activities                            9,023,786       (2,823,854)
                                                                                     ------------     ------------
Cash flows from financing activities:
              Proceeds from notes payable to bank and others                           11,912,791       17,622,929
              Repayment of notes payable to bank and others                           (30,033,016)
              Proceeds from loans from related parties                                  3,750,000        3,796,834
              Repayment of loans from related parties                                  (7,741,661)               -
              Payment of loan fees and other                                              (88,303)        (172,551)
                                                                                     ------------     ------------
         Net cash provided by (used in) financing activities                          (22,200,188)       2,525,996
                                                                                     ------------     ------------
Net increase (decrease) in cash and cash equivalents                                    1,029,646      (10,717,055)

Cash and cash equivalents at beginning of period                                        4,446,864       12,732,681
                                                                                     ------------     ------------

Cash and cash equivalents at end of period                                           $  5,476,510        2,015,626
                                                                                     ------------     ------------

Supplemental Disclosure of Cash Flow Information:
     Cash paid during the period for interest, net of amount
         capitalized of $788,104 in 1999 and $946,895 in 1998                        $  1,954,403        3,617,866
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the Condensed Consolidated Financial Statements

                                       6
<PAGE>   7


                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 1999

1.       BASIS OF PRESENTATION

Legend Properties, Inc. (the Company or Legend) formerly known as Banyan
Mortgage Investment Fund (Banyan), is the surviving corporation from the
December 31, 1996 merger (the Merger) with RGI U.S. Holdings, Inc. (RGI/US).
Prior to the Merger, RGI/US was a wholly-owned subsidiary of RGI Holdings, Inc.
(Holdings). As of September 30, 1999, Holdings owns approximately 80% of the
outstanding common shares of the Company.

The condensed consolidated financial statements include the accounts of Legend
and its subsidiaries . In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for the periods presented. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the related disclosures contained
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998, filed with the Securities and Exchange Commission.

The results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full fiscal year.

2.       ACQUISITION AND DISPOSITION OF REAL ESTATE

On April 19, 1999, Ashburn Front Five LLC, a wholly owned subsidiary of the
Company, acquired the second parcel of the Ashburn Corporate Center which
comprises nearly 28 acres for an approximate purchase price of $4.3 million. In
Management's view, the acquisition of the additional parcel was necessary to
facilitate the disposition of the entire Ashburn Corporate Center.

In April 1999, the Company executed a contract for the sale of the entire
project to an unrelated third party. In accordance with the contract, the
purchaser deposited a $100,000 non-refundable deposit into escrow. Subsequently,
the purchaser was unwilling to move forward with the closing so in June 1999 the
Company, in accordance with the contract, terminated the contract and received
the $100,000 deposit. The deposit was recorded as other income in the Company's
financial statements.

On September 27, 1999, the Company, through its majority owned subsidiaries,
Ashburn Corporate Center, LC and Ashburn Front Five, LLC, sold the land and
related improvements of the Ashburn Corporate Center to Catapult Ventures LLC, a
non affiliated third party.

The sales price of the property was $15,150,000 (before closing costs of
approximately $790,000.) The Company used a portion of the proceeds to repay
existing mortgage notes of $5,940,000 and related party debts of $3,750,000 on
the credit facility advance from Holdings and $1,743,682 on additional Holdings
debt. The sale resulted in a gain for financial reporting purposes of
approximately $2.0 million and $2.3 million for federal income tax purposes.

                                       7
<PAGE>   8

3.       NOTES PAYABLE TO BANKS AND OTHERS

As of September 30, 1999, the Company's debt obligations, including payables to
related parties, totaled $108,952,548 of which $6,664,850 matures by December
31, 1999 and an additional $3,678,703 by December 31, 2000. None of these
maturities relate to payables to Holdings. In addition to the debt maturities
under existing financings, the Company requires additional financing to advance
its business plan. As of September 30, 1999, the Company had $5,476,510 of cash
and cash equivalents, which will not be sufficient to fund its existing and
future financing needs. The Company anticipates meeting its existing debt
obligations during the remainder of 1999 by the renewal and extension of
existing construction lines, and internally generated funds from real estate
sales and operations. If sufficient funds are not available from the above
sources, the Company anticipates delaying certain quarterly interest payments
to Holdings as allowed under the debt agreements. The Company also has
available, if needed, a $5 million credit facility from Holdings, which was
unused at September 30, 1999.

In November, the Company renewed certain construction revolving lines of credit
and extended $5,017,939 of the $6,664,850 of debt obligations that mature by
December 31, 1999 to October 31, 2000.

There can be no assurance that the Company will be able to obtain the necessary
construction and development financing to satisfy the Company's liquidity needs
and implement its business plan. If the Company is unable to secure the
necessary financing or capital when needed, the plans for its projects will
likely be materially revised which would have a material adverse effect on the
Company's financial condition and results of operations.

4.       RELATED PARTY TRANSACTIONS

On May 18, 1999 the Company borrowed $3,750,000 under the $5 million credit
facility with Holdings. The advance was secured by certain real estate inventory
and property and bears interest at the prime rate plus 2 percent. Funds from the
$3,750,000 advance were used to repay a $2,248,279 unsecured note payable to
Holdings which matured on June 1, 1999 and to repay a portion of a $2,950,000
note payable to an unrelated third party.

On September 29, 1999, the $3,750,000 advance plus accrued interest was repaid
to Holdings. In addition, the Company made an additional $1,743,682 principal
payment to Holdings pursuant to the Company's agreement with Holdings. Funds
for the repayments were generated by the sale of the Ashburn Corporate Center,
as discussed in Note 2.

5.       CONTINGENCIES

Corporate Relocation and Management Restructuring

As part of the Company's corporate relocation to Vero Beach, Florida and a
restructuring of the corporate and project management, certain employment
relationships were terminated. During the first and second quarters of 1999, the
Company recorded a total charge of $850,000 for the base compensation
associated with certain contracts, other severance payments, and relocation
costs. Through September 30, 1999, $328,510 has been paid out by the Company.
The remaining accrual at September 30, 1999 is $521,490. Some employment
contracts include provisions for certain incentive compensation which is
contingent upon future events and circumstances that are not readily
predictable. Accordingly, the Company is unable to make a meaningful estimate
of the amount or range of additional compensation costs due, if any, under the
agreement.

                                       8
<PAGE>   9

Ashburn Corporate Center

During August 1998, Legend filed a lawsuit and a memorandum of Lis Pendens in
the Circuit Court of Loudoun County, Virginia against Atlantic Research
Corporation (ARC) which was amended in November 1998. Legend was seeking
specific performance under a real estate contract and any other relief the court
would offer. During the first quarter of 1999, Legend and ARC came to an
agreement concerning the real estate contract which resulted in Legend's
acquisition of the second Ashburn Corporate Center parcel (see Note 2). As a
result, the litigation noted above was withdrawn and dismissed in the second
quarter of 1999.

General Legal Matters

The Company is subject to various lawsuits arising in the ordinary course of
business. The Company is of the opinion that the outcome of any such lawsuits
will not have a material adverse effect on its operations.

6.       SUBSEQUENT EVENT

On October 15, 1999, the Company announced that it has received a proposal from
Holdings for the merger of the Company with a wholly-owned subsidiary of
Holdings. Pursuant to the offer, Holdings would acquire all of the outstanding
shares of the Company's common stock, not currently held by Holdings, for $0.13
per share in cash. Holdings currently holds approximately 80% of the Company's
common stock.

The Company's Board of Directors has established a special committee to
evaluate and consider the proposal. The proposed merger is subject to, among
other things, (i) the execution of a definitive merger agreement containing
customary terms, (ii) approval of the transaction by the Company's special
committee, Board of Directors and shareholders, (iii) compliance with all
applicable regulatory and governmental requirements and (iv) receipt of an
opinion from the special committee's financial advisor that the consideration
to be received by the public shareholders is fair from a financial point of
view.

                                       9
<PAGE>   10


7.       OPERATING SEGMENTS

The Company's reportable operating segments are distinct operations that service
differing markets. The real estate segment consists of the development,
construction and sales activities for all of the Company's properties. The club
operations segment consists of the clubhouse and related activities for Grand
Harbor and Oak Harbor. Patient services consist of the Royal Palm Convalescent
Center which offers skilled nursing care, and Somerset House which offers
assisted living care. Summarized information concerning the reportable segments
for the three and nine months ended September 30, 1999 and 1998, is presented in
the following table.

Nine Months Ended September 30, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                         Other,
                                                                Club      Patient     Corporate and
             ($000's omitted)                 Real Estate    Operations   Services    Eliminations      Total
-----------------------------------------------------------------------------------------------------------------
                   1999
<S>                                          <C>            <C>            <C>          <C>           <C>
Revenues                                       $ 52,346         5,321         2,115        2,384         62,166
Operating costs and expenses                    (48,478)       (6,961)       (2,595)      (5,033)       (63,067)
Other income/ expenses                           (6,306)            -          (183)        (688)        (7,177)
                                               --------      --------      --------     --------       --------
Net income (loss)                              $ (2,438)       (1,640)         (663)      (3,337)        (8,078)
                                               ========      ========      ========     ========       ========

                   1998

Revenues                                       $ 26,756         4,222         1,943        1,510         34,431
Operating cost and expenses                     (27,524)       (5,550)       (1,752)      (2,918)       (37,744)
Other income/expenses                            (5,108)         (255)          (67)      (1,168)        (6,598)
                                               --------      --------      --------     --------       --------

Net income (loss)                              $ (5,876)       (1,583)         (124)      (2,576)        (9,911)
                                               ========      ========      ========     ========       ========
</TABLE>

Three Months Ended September 30, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                         Other
                                                             Club       Patient      Corporate and
            ($000's omitted)               Real Estate    Operations     Services    Eliminations      Total
-----------------------------------------------------------------------------------------------------------------
                  1999
<S>                                        <C>            <C>          <C>            <C>           <C>
Revenues                                   $ 27,495          1,368           694           947         30,504
Operating costs and expenses                (25,431)        (1,667)         (844)       (1,214)       (29,156)
Other income/ expenses                       (1,983)            61           (35)         (272)        (2,229)
                                           --------       --------      --------      --------       --------
Net income (loss)                          $     81           (238)         (185)         (539)          (881)
                                           ========       ========      ========      ========       ========

                  1998

Revenues                                   $  7,942            986           623           298          9,849
Operating cost and expenses                  (8,962)        (1,537)         (495)         (945)       (11,939)
Other income/expenses                        (1,905)             -             -          (526)        (2,431)
                                           --------       --------      --------      --------       --------
Net income (loss)                            (2,925)          (551)         (128)       (1,173)        (4,521)
                                           ========       ========      ========      ========       ========
</TABLE>


                                       10
<PAGE>   11



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

OVERVIEW

Legend Properties, Inc. (the Company or Legend), formerly known as Banyan
Mortgage Investment Fund (Banyan), is the surviving corporation from the
December 31, 1996 merger (the Merger) of Banyan with RGI U.S. Holdings, Inc.
(RGI/US), a wholly owned subsidiary of RGI Holdings, Inc. (Holdings). As of
September 30, 1999, Holdings owns approximately 80% of the outstanding common
shares of the Company.

The Company's strategy is to realize and enhance the market potential of its
core assets. The Company currently controls more than 2,800 acres of land in a
master planned community (Southbridge), a residential golf community (Grand
Harbor), and a retirement community (Oak Harbor.)

Grand Harbor, including the Grand Harbor Golf and Beach Club, is a 772-acre
residential golf community located in Vero Beach, Florida. Oak Harbor, including
the Oak Harbor Club, Royal Palm Convalescent Center and Sommerset House, is a
116-acre retirement community also located in Vero Beach, Florida. The Royal
Palm Convalescent Center and Sommerset House are skilled nursing care and
assisted living facilities. Southbridge is a 2,685-acre master planned
development located in Prince William County, Virginia.

The Company is currently focused on continuing the development of
infrastructure, amenities and residential units at Grand Harbor and Oak Harbor
consistent with approved zoning and development plans. At Southbridge, the
Company intends to develop and sell land parcels. The Company's ability to
achieve these objectives is dependent on, among other things, securing
short-term and long-term financing related to the development on acceptable
terms.

On September 27, 1999, the Company sold the land and related improvements of
the Ashburn Corporate Center to a non affiliated third party.

On October 15, 1999, the Company announced that it has received a proposal from
Holdings for the merger of the Company with a wholly-owned subsidiary of
Holdings. Pursuant to the offer, Holdings would acquire all of the outstanding
shares of the Company's common stock, not currently held by Holdings, for $0.13
per share in cash. Holdings currently holds approximately 80% of the Company's
common stock.

The Company's Board of Directors has established a special committee to
evaluate and consider the proposal. The proposed merger is subject to, among
other things, (i) the execution of a definitive merger agreement containing
customary terms, (ii) approval of the transaction by the Company's special
committee, Board of Directors and shareholders, (iii) compliance with all
applicable regulatory and governmental requirements and (iv) receipt of an
opinion from the special committee's financial advisor that the consideration
to be received by the public shareholders is fair from a financial point of
view.

Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limiting the foregoing, words
such as "anticipates," "expects," "intends," "plans" and similar expressions are
intended to identify forward-looking statements. These statements are subject to
a number of risks and uncertainties. For a discussion of the factors affecting
the Company's business plan, see the Company's 1998 Annual Report on Form 10-K
"Management's Discussion and Analysis - Factors Affecting Legend's Business
Plan." Actual results could differ materially from those projected in the
forward-looking statements. The Company undertakes no obligation to update these
forward-looking statements to reflect future events or circumstances.

                                       11
<PAGE>   12

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has utilized internally generated funds, third party
borrowings and loans from Holdings and affiliated entities to fund its
construction and development activities, and ongoing operating expenses. The
deferral of interest due to Holdings pursuant to the terms of the loan
agreements has also assisted in allowing the Company to maintain and preserve
its liquidity and capital resources.

During the remainder of 1999, the Company contemplates continued expenditures
for development and construction activities at Grand Harbor, Oak Harbor and
Southbridge. For Grand Harbor and Oak Harbor, the Company anticipates utilizing
existing construction lines for the majority of the construction financing and
securing additional construction lines from existing external lenders for the
remainder. At Southbridge, the Company must arrange for development financing.

During the nine months ended September 30, 1999 the Company utilized existing
cash and cash equivalents, net sale proceeds from the sale of the Ashburn
Corporate Center and third party borrowings to fund its development,
construction and operating activities. The Company also borrowed $3,750,000
from Holdings which was utilized to repay a $2,248,279 unsecured note payable to
Holdings and to repay a portion of a $2,950,000 note payable to an unrelated
third party. The $3,750,000 borrowing, plus accrued interest, was
subsequently repaid to Holdings. In addition, a $1,743,682 principal
payment was also made to Holdings.

As of September 30, 1999, the Company's debt obligations, including payables to
related parties totaled $108,952,548 of which $6,664,850 matures by December
31, 1999 and an additional $3,678,703 by December 31, 2000. None of these
maturities relate to payables to Holdings. In addition to the debt maturities
under existing financings, the Company requires additional financing to advance
its business plan. As of September 30, 1999, the Company had $5,476,510 of cash
and cash equivalents, which will not be sufficient to fund its existing and
future financing needs. The Company anticipates meeting its existing debt
obligations during the remainder of 1999 by the renewal and extension of
existing construction lines, and internally generated funds from real estate
sales and operations. If sufficient funds are not available from the above
sources, the Company anticipates delaying certain quarterly interest payments
to Holdings as allowed under the debt agreements. The Company also has
available, if needed, a $5 million credit facility from Holdings, which was
unused at September 30, 1999. For future construction and development
activities, the Company anticipates utilizing existing or additional
construction lines as noted above. Once construction lines are established,
they are typically renewed on an annual basis after the bank's review of the
loan and the payment of extension fees.

There can be no assurance that the Company will be able to obtain the necessary
construction and development financing to satisfy the Company's liquidity needs
and implement its business plan. If the Company is unable to secure the
necessary additional financing or capital when needed, the plans for its
projects will likely be materially revised, which would have a material adverse
effect on the Company's financial condition and results of operations. See the
Company's 1998 Annual Report on Form 10-K "Factors Affecting Legend's Business
Plan".

 For each of Legend's projects, cash flow generated from operations can differ
substantially from reported earnings, depending on the status of the development
cycle. At Southbridge, which is in the initial stages of development,
significant cash outlays are required for, among other things, land
acquisitions, processing zoning and other regulatory approvals, construction of
amenities, sales facilities, major roads, utilities, general landscaping and
debt service. Since a major part of these initial expenditures is capitalized,
income reported for financial statement purposes during the initial years may
significantly exceed operating cash flow. At the Grand Harbor and Oak Harbor
properties, which have completed the initial stages of development, operating
cash flow can exceed earnings reported for financial statement purposes, since
earnings include the expense for substantial expenditures that were previously
capitalized.

Nine Months Ended September 30, 1999

The Company had cash and cash equivalents of $5,476,510 and $4,446,864 at
September 30, 1999 and December 31, 1998, respectively. The increase during the
nine months ended September 30, 1999 is

                                       12
<PAGE>   13

attributable to $14,206,048 and $9,023,786 in cash provided by operating and
investing activities, respectively, which was partially offset by cash being
used in financing activities of $22,200,188.

Cash Flows from Operating Activities: For the nine month ended September 30,
1999, the Company generated cash flow from operating activities of $14,206,048,
primarily due to the following:

-    A decrease in real estate inventory of $14,522,984, primarily due to the
     sale of the Ashburn Corporate Center, the sale of 51 units at Grand Harbor,
     25 units at Oak Harbor, and 108 residential lots at Southbridge, which
     reduced inventory by $36,994,627. These decreases were offset by additional
     costs for construction and development of $22,471,643. Construction of
     residential units at Grand Harbor and Oak Harbor and development of
     residential lots at Southbridge continues so that finished units and lots
     will be available during the remainder of 1999 and beyond to satisfy
     existing contracts.

-    Related party interest expense of $5,597,220 that was not paid pursuant to
     the terms of the loan agrements.

-    Depreciation and amortization of $1,533,610 related primarily to fixed
     asset depreciation and loan cost amortization for Grand Harbor and Oak
     Harbor.

-    A decrease in accounts and notes receivable and other assets, offset by a
     decrease in accounts payable and other notes and liabilities of $994,974
     and $364,615, respectively. Fluctuations in these accounts are generally
     due to the timing of the payments or collections related to certain assets
     and liabilities, including trade accounts payable, advances from customers,
     prepaid expenses, and accounts and notes receivable. These fluctuations can
     vary significantly from period to period depending on the timing of
     closings, and construction and development activities. Due to the nature of
     the Company's business, significant fluctuations in these operating assets
     and liabilities are not considered unusual

Partially offset by the following:

-    Net losses of $8,078,124 due to substantial interest expenses, corporate
     overhead, including severance costs of $850,000 and operating losses at Oak
     Harbor and Southbridge, offset by operating profits at Grand Harbor,
     resulting from better than expected sales results and Ashburn, primarily
     from the sale of the Ashburn Corporate Center.

Cash Flows from Investing Activities: For the nine months ended September 30,
1999, the Company generated cash flow from investing activities of $9,023,786.
Certain deposits that were held as collateral against a bank loan were released
and used to pay down that debt pursuant to a renegotiated loan agreement.
Moreover, customer deposits declined as a result of sales activity which, when
combined with the release of the deposit, caused a decline in restricted cash
and investments of $9,018,702. Proceeds from sale of property and equipment
totaled $622,088, which relates to the Company's disposition of a corporate
condo. All of these were partially offset by the purchase of $617,004 of
property and equipment.

Cash Flows from Financing Activities: The Company used $22,200,188 in cash for
financing activities during the nine months ended September 30, 1999. Borrowings
from third-party lenders used primarily to fund certain construction and
development costs at Grand Harbor and Oak Harbor totaled $11,912,791. A portion
of the debt repayments of $30,033,016 relates to the loan payment made from the
release of the deposit that was discussed previously. The remainder resulted
from the sale of residential units and club memberships at Grand Harbor and Oak
Harbor, as well as the sale of Ashburn Corporate Center. In addition, the
Company borrowed $3,750,000 from related parties, which was used to repay
$2,248,279 of maturing related party debt and a portion of maturing third party
lender debt. This advance, along with an additional $1,743,382 related party
debt, was subsequently repaid with the proceeds resulting from the Ashburn sale.

                                       13
<PAGE>   14

Nine Months Ended September 30, 1998

The Company's cash and cash equivalents balance at September 30, 1998, and
December 31, 1997, was $2,015,626 and $12,732,681 respectively. The decrease in
the nine months ended September 30, 1998 is attributable to cash utilized in
operating, and investing activities of $10,419,197, $2,823,854 respectively, as
well as cash provided by financing activities of $2,525,996.

Cash Flows from Operating Activities: For the nine months ended September 30,
1998, the Company utilized cash in operating activities of $10,419,197,
primarily due to the following:

-    Net losses of $9,911,277, due primarily to operating losses at the Oak
     Harbor, Southbridge and Chapman's Landing developments, substantial
     interest expense as well as corporate overhead expenses. These losses are
     primarily offset by an operating profit at the Grand Harbor project. Sales
     at Oak Harbor were less than anticipated and lower than the comparable
     period of 1997, while Southbridge experienced delays in lot develpment due
     to an extremely wet winter and spring in the Washington D.C. area, and
     closed on only 37 lots in the nine months ended September 30, 1998. Due to
     delays in obtaining the final permits and the ongoing negotiations with the
     State of Maryland, the Company had only commenced limited development at
     Chapman's Landing, but continued to incur substantial expense to obtain the
     final permits required for significant development to begin. Grand Harbor
     generated an operating profit, mainly because of the sale of a 20-acre
     parcel of raw land and the sale of 53 residential units, compared to 37
     units in 1997.

-    An increase in real estate inventory and assets held for sale of
     $9,758,571. The primary reason for this increase was the acquisition of the
     initial parcel in the Ashburn Corporate Center and related development
     activity totaling approximately $7.7 million. In addition, construction of
     residential units continued at Grand Harbor and Oak Harbor. Development
     activities continued at Southbridge in order to develop finished lots for
     expected deliveries in 1998 and beyond under existing contracts, however
     development activities were slow during the early part of the year because
     of the extremely wet winter in the area. In total, land acquisition,
     development and construction activities totaled $28,169,378. This was
     offset by sales of 53 and 12 units at Grand Harbor and Oak Harbor,
     respectively, 37 residential lot sales at Southbridge and the sale of a
     20-acre parcel of raw land at Grand Harbor. These sales reduced inventory
     by $18,410,807.

-    An increase in accounts and notes receivable and other assets of $1,984,070
     during the nine months ended September 30, 1998. Fluctuations in these
     accounts are generally due to the timing of the payment of certain
     liabilities, including trade payables, advances from customers, prepaid
     expenses, and the collection of accounts, and notes receivable. These
     fluctuations can vary significantly from period to period depending on the
     timing of sale closing, and development and construction activities. Due to
     the nature of Legend's business, significant fluctuations in operating
     assets and liabilities are not considered unusual.

Partially offset by the following:

-    Related party interest expense of $4,342,044 was accrued but not paid
     during the nine months ended September 30, 1998 pursuant to the terms of
     the loan agreements.

-    Depreciation and amortization of $2,033,305 related primarily to fixed
     assets at Grand Harbor and Oak Harbor and amortization of deferred loan
     costs.

-    An increase in accounts payable and other liabilities of $4,859,372 during
     the nine months ended September 30, 1998. Fluctuations in these accounts
     are generally due to the timing of the payment of certain liabilities,
     including trade payables, advances from customers, prepaid expenses, and
     the collection of accounts, and notes receivable. These fluctuations can
     vary significantly from period to period depending on the timing of sale
     closing, and development and construction activities. Due to the nature of
     Legend's business, significant fluctuations in operating assets and
     liabilities are not considered unusual.

                                       14
<PAGE>   15

Cash Flows from Investing Activities: For the nine months ended September 30,
1998, the Company utilized cash flow in investing activities of $2,823,854. Cash
utilized in investing activities was attributable to an increase in customer
deposits and other restricted cash at Grand Harbor and Oak Harbor, and the
establishment of development cash escrows for the Ashburn project. In addition,
property and equipment was purchased for a total of $455,390.

Cash Flows from Financing Activities: For the nine months ended September 30,
1998, the Company was provided net cash from financing activities in the amount
of $2,525,996. The Company borrowed an additional $17,622,929 from external
parties ($5,940,000 at Ashburn, $8,474,952 at Grand Harbor and $3,207,977 at Oak
Harbor). The borrowings at Ashburn was used to finance the first takedown of
land acquisition described above, while the borrowings at Grand Harbor and Oak
Harbor were used primarily to fund certain construction and development costs.
Repayments on external debt totaled $18,721,216 (Corporate $996,220, Grand
Harbor $13,101,695 and Oak Harbor $4,623,301). Repayments were made primarily
from funds generated through sales of residential units and club memberships and
from existing cash resources. In addition, the Company borrowed $3,796, 834 from
Holdings and paid loan fees of $172,551.

RESULTS OF OPERATIONS

Results of operations for the three and nine months ended September 30, 1999,
are composed of the consolidated revenues and expenses of Southbridge, Grand
Harbor, Oak Harbor and Ashburn, whereas the results of operations for the three
and nine months ended September 30, 1998 are composed of the consolidated
revenues and expenses of Southbridge, Chapman's Landing, Grand Harbor, Oak
Harbor, and Ashburn. Chapman's Landing (a 2,227-acre parcel in Charles County,
Maryland) was sold during October 1998, while Ashburn was acquired during March
1998 and April 1999. Accordingly, the 1999 and 1998 results of operations are
not comparable.

Nine  months ended September 30, 1999 compared with 1998

Total revenues for the nine months ended September 30, 1999 and 1998 were
$62,165,614 and $34,431,048, respectively. The sale of the Ashburn Corporate
Center, along with increases in real estate sales at Grand Harbor, Oak Harbor
and Southbridge, primarily caused the growth in revenues.

Real estate sales increased $25,590,403 for the nine months ended September 30,
1999 as compared to 1998. Oak Harbor sold 25 units at an average sales price of
$365,000 during 1999 versus 12 units at an approximate average of $380,000
during the corresponding 1998 period. The increase in volume is primarily due
to an increase in the number of lots sold and an improved marketing strategy.
The increase in the number of lots sold resulted in the lower average sale
price. Grand Harbor stayed relatively consistent in volume but generated
slightly higher average sales prices with 51 sold units at an average sales
price of $402,000 during the nine months ended September 30 1999, compared to
53 units sold during the corresponding period of 1998 at an approximate average
of $350,000. Sales prices range from $165,000 to $1,100,000 at Grand Harbor and
Oak Harbor, and accordingly average sales prices may fluctuate significantly
from period to period. The 1999 results include the sale of the Ashburn
Corporate Center for $15,150,000, while the 1998 results include the sale of a
20-acre raw land parcel at Grand Harbor for $1,927,500.

Southbridge sold 108 lots at an average sales price of approximately $41,000
during the first nine months of 1999, as compared to 37 lots at an average of
$42,500 for the corresponding period of 1998. The increase in lots sold
reflects a more active marketing strategy in 1999 and due to the fact that
deliveries were delayed due to extremely wet weather in 1998. Lot sales prices
range from $24,000 to over $65,000 at Southbridge and accordingly, average
sales prices may fluctuate from period to period.

Also contributing to the growth in revenues was the increase in club operations.
Continued sales activities at both Grand Harbor and Oak Harbor was the chief
component in the rise of club membership and the corresponding operating
revenues between the nine months ended September 30, 1998 and 1999.

                                       15
<PAGE>   16

Patient service revenues increased in the nine months ended September 30, 1999,
compared to the same period in 1998, due to slightly higher patient levels.

A growth in real estate sales expense was primarily responsible for the increase
in operating costs and expenses between the nine months ended September 30, 1999
and 1998. This change corresponds chiefly to the increase in sales discussed
above.

Gross margin as a percentage of real estate sales was 22% for the nine months
ended September 30, 1999 (25% excluding the sale of the Ashburn Corporate
Center), compared to 31% (27% excluding the sale of the 20 acre parcel of raw
land at Grand Harbor) for the comparable period in 1998. Gross margins realized
on the sale of residential units at Grand Harbor and Oak Harbor may fluctuate
significantly depending upon the type and location of product sold. The
decline in the gross margin between 1998 and 1999 is attributable to a higher
number of Southbridge lots closing in 1999 which had lower margins. Gross
margins for Grand Harbor and Oak Harbor for 1999 were comparable to 1998.

Club operations costs and expenses increased $748,722 between 1998 and 1999.
This increase is chiefly due to the increase in club membership that was
discussed earlier. The Club operations for Grand Harbor are an amenity provided
to Grand Harbor residences in order to spur real estate sales, while the Oak
Harbor Club is in its initial stages of operations. Profitability of these
operations can vary from period to period depending upon sales volume and
operating costs, which are linked to factors such as the seasonal nature of
their usage depending on the time of year, overall membership levels, and
similar factors.

Patient services costs and expenses increased $164,877 between 1998 and 1999
which is attributable to higher patient levels.

An increase in selling, general and administrative expenses between 1998 and
1999 also contributed to the rise in operating costs and expenses. The increase
is primarily due to higher marketing costs related to the revised marketing
strategies, certain payroll incentives and $850,000 in severance costs. Also
contributing to the increase was the cost of holding Ashburn during the period
it has been held for sale. These increases were offset by the decline between
1998 and 1999 in operating costs for Chapman's Landing, which was sold during
1998.

Total other expense increased primarily as a result of the increase in related
party interest expense and a decrease in other income, net between 1998 and
1999. The increase in related party interest expense between 1998 and 1999 is
due to the higher outstanding payable to related parties which is attributable
to additional advances during the second half of 1998 and the capitalization of
unpaid interest on these advances into the payable balance on December 31, 1998.
Interest expense declined because of a net reduction in external indebtedness
that was caused by significant loan payments made out of the proceeds from the
previously discussed sale of Chapman's Landing and sales of units at Grand
Harbor and Oak Harbor, which was offset by the borrowings related to acquiring
Ashburn.

The combination of the above changes resulted in a net loss of $8,078,124 ($1.28
per share) for the nine months ended September 30, 1999, as compared to a net
loss of $9,911,277 ($1.58 per share) for the nine months ended September 30,
1998.

Three months ended September 30, 1999 compared with 1998

Total revenues for the three months ended September 30, 1999 and 1998 were
$30,504,438 and $9,848,774, respectively. The sale of the Ashburn Corporate
Center, along with increases in real estate sales at Grand Harbor, Oak Harbor
and Southbridge primarily caused the growth in revenues.

Real estate sales increased $19,554,362 for the three months ended September 30,
1999 as compared to 1998. The Ashburn Corporate Center was sold in September
1999 at a sales price of $15,150,000, with no comparable bulk sale in the third
quarter of 1998. Grand Harbor sold 12 units at an approximate average sales
price of $517,000 during the three months ended September 30, 1999, while 15
units were sold during the corresponding period of 1998 at an approximate
average of $415,000. At Oak Harbor, 9 units at an average

                                       16
<PAGE>   17

sales price of $406,000 were sold during 1999 versus 3 units at an approximate
average of $330,000 during the corresponding 1998 period. Southbridge sold 34
lots at an average sales price of approximately $41,500 during the three months
ended September 30, 1999 as compared to 17 lots at an average of $42,500 for the
corresponding period of 1998.

Also contributing to the growth in revenues was the increase in club operations.
Continued sales activities at both Grand Harbor and Oak Harbor was the chief
component in the rise of club membership and the corresponding operating
revenues between the three months ended September 30, 1998 and 1999.

Patient service revenues increased in the three months ended September 30, 1999,
compared to the same period in 1998, due to slightly higher patient levels.

A growth in real estate sales expense was primarily responsible for the increase
in operating costs and expenses between the three months ended September 30,
1999 and 1998. This change corresponds chiefly to the increase in sales
discussed earlier.

Gross margin as a percentage of real estate sales was 17% (21% excluding the
sale of Ashburn Center) for the three months ended September 30, 1999, compared
to 24% for the comparable period in 1998.

Club operations costs and expenses increased $119,491 for the three months ended
September 30, 1999 as compared to 1998. This increase is chiefly due to the
increase in club membership that was discussed earlier.

Patient services costs and expenses increased $15,716 between 1998 and 1999
which is attributable to higher patient levels.

An increase in other operating expenses between 1998 and 1999 also contributed
to the rise in operating costs and expenses.

Total other expense decreased primarily as a result of an decrease in interest
expense between 1998 and 1999. The decrease in interest expense is due to a net
reduction in external indebtedness that was caused by significant loan payments
made out of the proceeds from the previously discussed sale of Chapman's Landing
and sales of units of at Grand Harbor and Oak Harbor. This was offset by an
increase in related party interest expense between 1998 and 1999, due to higher
outstanding payable balances as a result of additional advances during the
second half of 1998 and the capitalization of unpaid interest on these advances
into the loans at December 31, 1998.

The combination of the above changes resulted in a net loss of $881,441 ($0.14
per share) for the three months ended September 30, 1999, as compared to a net
loss of $4,520,631 ($0.72 per share) for the three months ended September 30,
1998.

YEAR 2000 UPDATE

The Company has addressed the issue of computer programs and embedded computer
chips that are unable to distinguish between the year 1900 and 2000. The
problems arise from computer software and hardware that fail to distinguish
dates in the "2000's" from dates in the "1900's", because historically computers
and software have used only two digits to identify the year in a date. The
Company has identified all of the assets that may be affected by this problem,
and has completed an assessment of these assets, which include business
computers and related software, building mechanical systems, and certain
equipment. Most of the major or significant computer systems, mechanical
systems, and equipment were assessed by inquiries with the related vendor or
testing of the systems. The majority of the systems were found to be compliant.
As of September 30, 1999, the Company has completed its assessment, effected any
necessary replacements and predominantly all systems are now Y2K compliant. The
approximate cost of modifications to become "Year 2000" compliant were $150,000.

The nature of the Company's business minimizes its exposure to the "Year 2000"
problem. Nevertheless, it is possible that other significant risks could arise
that were not identified during its review. Contingency

                                       17
<PAGE>   18

plans are being developed to address various possible interruptions, which
include the failure of accounting and related information systems including
point of sales systems, building mechanical devises, and equipment. To date, the
Company has identified and replaced all systems that could present a material
risk of not being "Year 2000" ready. However, it is possible that unforeseen
business interruptions could have a material adverse effect on the Company's
financial condition and results of operations. Moreover, if any third parties
that provide important goods or services to the Company fail to appropriately
address their "Year 2000" issues, there could be a material adverse effect on
the Company's financial conditions and results of operations.

                                       18
<PAGE>   19



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company is exposed to market risks associated with interest changes on the
debt used to fund its construction, development, and operating activities. The
Company's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flow and to lower overall borrowing
costs. The Company uses a mixture of fixed rate debt, interest rate swap
agreements, and offsetting financial instruments such as annuity contracts to
mitigate this risk. The Company does not enter into other derivative financial
instruments for speculative purposes.

The Company's interest rate risk is monitored by management. The table below
presents the principal amounts, weighted-average interest rates and fair values
required to evaluate the expected cash flows of the Company under debt and
related agreements and its sensitivity to interest rate changes at September 30,
1999.


<TABLE>
<CAPTION>
                                                                                       There               Fair
          (000,000's omitted)            2000      2001      2002    2003     2004     -after     Total    Value
-----------------------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>       <C>     <C>      <C>      <C>       <C>      <C>
Fixed rate debt                               0.0       0.4     0.4      0.4      0.4      2.8       4.4     4.4
Average interest rate                        6.3%      6.3%    6.3%     6.3%     6.3%     6.3%

Variable rate LIBOR debt                      0.0       0.1     0.2      0.2     34.0      0.0      34.5    34.5
Average interest rate                        8.0%      8.0%    8.0%     8.0%     8.0%     0.0%

Variable rate prime debt                      6.4       1.1     0.1      0.0     55.6      0.0      63.2    63.2
Average interest rate                        9.5%      9.7%    9.7%     9.8%     9.8%     0.0%

Variable rate bank cost of funds debt         0.2       2.1     2.6      1.8      0.0      0.0       6.7     6.7
Average interest rate                        7.6%      7.6%    7.6%     7.6%     0.0%     0.0%
</TABLE>

The table incorporates those exposures that exist as of September 30, 1999, and
does not consider those exposures or positions which could arise after that
date. As a result the Company's cost of funds with respect to interest rate
fluctuations will depend on the exposures that arise after September 30, 1999,
the Company's hedging strategy during that period and interest rates.

                                       19
<PAGE>   20



                                               PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Ashburn Corporate Center

During August 1998, Legend filed a lawsuit and a memorandum of Lis Pendens in
the Circuit Court of Loudoun County, Virginia against Atlantic Research
Corporation (ARC) which was subsequently amended in November 1998. Legend was
seeking specific performance under a real estate contract and any other relief
the court would offer. During the first quarter of 1999, Legend and ARC came to
an agreement concerning the real estate sales contract which resulted in
Legend's acquisition of the second Ashburn Corporate Center parcel that was
discussed previously. As a result, the litigation noted above was settled and
dismissed during the second quarter of 1999.

General Legal Matters

The Company is subject to various lawsuits arising in the ordinary course of
business. The Company is of the opinion that the outcome of any such lawsuits
will not have a material adverse effect on its operations.

                                       20
<PAGE>   21



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT NO.
<S>     <C>
3.1     Amended and Restated Certificate of Incorporation of the Registrant..(1)
3.2     Bylaws of Registrant, as amended and restated as of July 1, 1996..(2

10.1    Edward F. Podboy's Employment Contract dated _________,1998(3)

10.2    Credit Agreements, Notes and Warrants between Registrant and Morgens
        Waterfall, Vintiadis & Co, Inc.(4)10.3 Loan Modification Agreement,
        dated as May 20, 1996, by and between Registrant and RGI Holdings, Inc.
        (SoGen Loan) (5)

10.4    Loan Modification Agreement, dated as of May 21, 1996, by and between
        Registrant and RGI Holdings, Inc. (Morgens Loan) (5

10.5    Registration Rights Agreement, dated as of May 21,1996, by and between
        Registrant and RGI Holdings,Inc. (5)

10.6    Second Stipulation and Agreement of Settlement, signed September 17,
        1997, In Re: Banyan Mortgage Investment Fund Shareholders Litigation.(6)

27.1    Financial Data Schedule

99.1    Form of Director Stock Option Agreements dated July 1, 1993, July
        24,1994 and July 7, 1995.(7)

99.2    Form of Executive Stock Option Agreements dated July 1, 1993, January
        12, 1994 and February 8, 1995.(7)
</TABLE>

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

(1)     Incorporated by reference to the Registrant's Report on Form 10-K for
        the year ended December 31, 1996.

(2)     Incorporated by reference to the Registrant's Report on Form 10-Q for
        the quarter ended June 30, 1996.

(3)     Incorporated by reference to the Registrant's Report on Form 10-K for
        the year ended December 31, 1997.

(4)     Incorporated by reference to Exhibits 10(a) through 10(n) to the
        Registrant's Report on Form 10-k for the year ended December 31, 1994.

(5)     Incorporated by reference to the Registrant's Report on Form 8-K dated
        May 20, 1996.

(6)     Incorporated by reference to the Registrant's Report on Form 10-K for
        the quarter ended September 30, 1997.

(7)     Incorporated by reference to the Registrant's Report on Form 10-K for
        the year ended December 31, 1995.

        (b)       Reports on Form 8-K:

        No reports were filed on Form 8-K during the quarter ended
        September 30, 1999

                                       21
<PAGE>   22



                                   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.

Date:  November 19, 1999                 LEGEND PROPERTIES. INC


                                         By: /s/ Peter J. Henn
                                         --------------------------------
                                         Peter J. Henn
                                         President and Chief Executive Officer

                                         By: /s/ Robert B. Cavoto
                                         --------------------------------
                                         Robert B. Cavoto
                                         Chief Financial Officer


                                       22