<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 MARCH 31, 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)

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



13662 OFFICE PLACE, SUITE 201, WOODBRIDGE, VIRGINIA              22192
     (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE)
</TABLE>






       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (703) 680-2226

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

      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 May 10, 1999: 6,290,874.


<PAGE>   2


                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                   PART I - FINANCIAL INFORMATION
<S>          <C>                                                                           <C>
Item  1.         Financial Statements

              Condensed Consolidated Balance Sheets at March 31, 1999 (unaudited)
              and December 31, 1998.....................................................    3

              Condensed Consolidated Statements of Operations for the Three Months
              Ended March 31, 1999 and 1998 (unaudited).................................    4

              Condensed Consolidated Statements of Cash Flows for the Three Months
              Ended March 31, 1999 and 1998 (unaudited).................................    5

              Notes to Condensed Consolidated Financial Statements (unaudited)..........    6

Item 2.       Management's Discussion and Analysis of Financial Condition and Results
              of Operations.............................................................    9

Item 3.       Quantitative and Qualitative Disclosures about Market Risks...............   15

                                      PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.........................................................   16

Item 6.       Exhibits and Reports of Form 8-K..........................................   17

Signatures    ..........................................................................   19
</TABLE>


                                       2
<PAGE>   3

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                                                             1999             1998
-------------------------------------------------------------------------------------
                              Assets
                              ------
<S>                                                     <C>               <C>
Real estate inventory                                   $  79,419,885      82,873,914
Asset held for sale                                         7,970,682       7,916,175
Cash and cash equivalents                                   4,974,484       4,446,864
Restricted cash and investments                            11,170,644      19,017,860
Accounts and notes receivable                               1,803,112       1,491,267
Property and equipment, net                                23,897,075      24,645,281
Intangible assets, net                                      1,564,471       1,646,542
Other assets, net                                           5,709,216       5,520,388
                                                        -----------------------------
                                                        $ 136,509,569     147,558,291
                                                        =============================

                 Liabilities and Stockholders' Equity
                 ------------------------------------

Notes payable to banks and others                       $  32,864,762      40,722,737
Payables to related parties                                86,622,771      84,744,478
Accounts payable                                            3,278,326       3,033,693
Other notes and liabilities                                12,872,387      14,443,250
                                                        -----------------------------
                                                          135,638,246     142,944,158
                                                        -----------------------------
Stockholders' equity:
   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                                    (43,241,621)    (39,498,771)
   Treasury stock, 20,804 shares                             (121,316)       (121,316)
                                                        -----------------------------

                     Total stockholders' equity               871,323       4,614,133

-------------------------------------------------------------------------------------
                                                        $ 136,509,569     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 MARCH 31, 1999 AND 1998
                                  (UNAUDITED)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                             1999             1998
---------------------------------------------------------------------------------------
<S>                                                     <C>             <C>
Revenues:
   Real estate sales                                      $15,023,361       9,831,141
   Club operations                                          2,188,669       1,799,777
   Patient services                                           694,157         714,032
   Other                                                      746,926         474,691
                                                          ---------------------------
                  Total revenues                           18,653,113      12,819,641
                                                          ---------------------------
Operating costs and expenses:
   Real estate sales                                       10,990,730       5,573,576
   Club operations                                          2,150,668       1,849,856
   Patient services                                           504,724         454,000
   Other                                                      575,243         206,810
   Selling, general and administrative                      5,216,127       4,167,431
   Depreciation and amortization                              446,524         518,896
                                                          ---------------------------
                 Total operating costs
                    and expenses                           19,884,016      12,770,569
                                                          ---------------------------
Operating income (loss)                                    (1,230,903)         49,072
                                                          ---------------------------
Other income (expense):
   Interest income                                            206,835         265,753
   Interest expense, including loan cost
      amortization                                           (840,489)     (1,355,342)
   Interest expense, related party                         (1,878,293)     (1,274,788)
   Other, net                                                       -         351,937
                                                          ---------------------------
                 Net other expense                         (2,511,947)     (2,012,440)
                                                          ---------------------------

Net loss                                                  $(3,742,850)     (1,963,368)
                                                          ===========================
Net loss per share - basic and diluted                    $     (0.59)          (0.31)
                                                          ===========================
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 SUSIDIARY OF RGI HOLDINGS,INC.)
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                  (UNAUDITED)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                              1999          1998
---------------------------------------------------------------------------------------
<S>                                                     <C>              <C>
Cash flows from operating activities:
      Net loss                                          $ (3,742,850)     (1,963,368)
      Adjustments to reconcile net loss to net
         cash used in operating activities:
         Depreciation and amortization                       547,847         731,015
         Related party interest expense not paid           1,878,293       1,412,075
         Loss on sale of property and equipment                9,063               -
         Change in certain assets and liabilities:
              Decrease (increase) in real estate
                inventory                                  3,399,522      (7,572,677)
              Increase in accounts and notes
                receivable and other assets                 (473,919)       (715,417)
              Decrease in accounts payable and
                other notes and liabilities               (1,326,230)       (788,153)
                                                        ----------------------------
           Net cash provided by (used in)
             operating activities                            291,726      (8,896,525)
                                                        ----------------------------
Cash flows from investing activities:
      Decrease (increase) in restricted cash and
         investments                                       7,847,216        (563,063)
      Proceeds from sale of property and equipment           560,499               -
      Purchase of property and equipment                    (225,543)       (154,905)
                                                        ----------------------------
           Net cash provided by (used in)
             investing activities                          8,182,172        (717,968)
                                                        ----------------------------

Cash flows from financing activities:
      Proceeds from notes payable to bank and
         others                                            4,353,857       8,644,327
      Repayment of notes payable to bank and others      (12,211,832)     (7,163,105)
      Payment of loan fees and other                         (88,303)        (53,504)
                                                        ----------------------------
           Net cash provided by (used in)
             financing activities                         (7,946,278)      1,427,718
                                                        ----------------------------
Net increase (decrease) in cash and cash
   equivalents                                               527,620      (8,186,775)
Cash and cash equivalents at beginning of period           4,446,864      12,732,681
                                                        ----------------------------
Cash and cash equivalents at end of period              $  4,974,484       4,545,906
                                                        ============================
Supplemental Disclosure of Cash Flow Information:
   Cash paid during the period for interest,
   net of amount capitalized of $270,175 in 1999
   and $397,589 in 1998                                 $    719,158         947,355
---------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the Condensed Consolidated Financial Statements


                                       5
<PAGE>   6

                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 MARCH 31, 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 March 31, 1999, Holdings owns approximately 80% of the
outstanding common shares of Legend Properties, Inc.

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 three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full fiscal year.

2.    ACQUISITION 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. The Company
is marketing for sale its entire interest in the project and is currently
involved in active discussions with potential buyers concerning the sale of the
property. Management believes that strong development activity in Northern
Virginia has created an opportunity to achieve an acceptable return on the
outright sale of the property rather than proceeding with development as
originally planned.

3.    CONTINGENCIES

Corporate Relocation

During March 1999, certain employment relationships were severed as part of the
corporate relocation to Vero Beach, Florida. The Company has recorded a charge
for the base compensation associated with certain contracts, other severance
payments and relocation costs of $600,000. Some employment contracts also
provide for certain incentive and similar payments which are 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.


                                       6
<PAGE>   7

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 has been withdrawn and dismissed.

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.

4.    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 the Somerset House which offers
assisted living care. Summarized information concerning the reportable segments
is presented in the following table.

<TABLE>
<CAPTION>
                                                                          Other,
                                    Real         Club        Patient   Corporate and
       ($000's omitted)            Estate     Operations    Services    Eliminations    Total
----------------------------------------------------------------------------------------------
<S>                             <C>             <C>         <C>           <C>        <C>
             1999
Revenues                          $ 15,023       2,189         694           747       18,653
Operating costs and expenses       (13,792)     (2,946)       (881)       (2,265)     (19,884)
Other income/ expenses              (2,172)        (43)        (63)         (233)      (2,511)
                                --------------------------------------------------------------
Net income (loss)                 $   (941)       (800)       (250)       (1,751)      (3,742)
                                ==============================================================

Total assets                      $103,507      13,730      15,773         3,500      136,510
Capital expenditures                    79          22           -           125          226
                                --------------------------------------------------------------

             1998

Revenues                          $  9,831       1,800         714           475       12,820
Operating cost and expenses         (8,620)     (2,340)       (837)         (974)     (12,771)
Other income/expenses               (2,327)       (255)        (67)          637       (2,012)
                                --------------------------------------------------------------
Net income (loss)                 $ (1,116)       (795)       (190)          138       (1,963)
                                ==============================================================
Total assets (as of
  December 31, 1998)              $113,101      13,684      15,523         5,250      147,558
Capital expenditure's                   34          90        (135)          166          155
----------------------------------------------------------------------------------------------
</TABLE>

                                       7
<PAGE>   8

5.    DEBT OBLIGATIONS

As of March 31, 1999, the Company's debt obligations totaled $119,487,533 of
which $18,469,419 matures by December 31, 1999 and an additional $4,055,728 by
December 31, 2000. The Company has substantial debt repayments in 1999 under
existing financing and requires additional financing to advance its business
objectives. As of March 31, 1999, the Company had $4,974,484 of cash and cash
equivalents, which will not be sufficient to fund these obligations. The
Company anticipates meeting its existing debt obligations during the remainder
of 1999 from the potential net proceeds from the sale of Ashburn that was
discussed earlier, 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 refinancing certain land acquisition financing and delaying certain
quarterly interest payments as allowed under the debt agreements. The Company
also has available, if needed, a $5 million credit facility from Holdings.

There can be no assurance that the Company will be able to obtain the necessary
construction and development financing to implement its objective or that, if
available, the terms and conditions will be acceptable to the Company. 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.


                                       8
<PAGE>   9

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

OVERVIEW

Legend Properties, Inc., formerly known as Banyan Mortgage Investment Fund (the
Company or Legend), is the surviving corporation from the December 31, 1996
merger (the Merger) of Banyan Mortgage Investment Fund (Banyan) with RGI U.S.
Holdings, Inc. (RGI/US), a wholly owned subsidiary of RGI Holdings, Inc.
(Holdings). As of March 31, 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), a retirement community (Oak Harbor), and a commercial business park
development (Ashburn Corporate Center).

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 Ashburn Corporate
Center (Ashburn) is a 116-acre commercial business park development located in
Loudoun County, Virginia planned for office and flex/tech uses.

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 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. The Company
is marketing for sale its entire interest in the project and is currently
involved in active discussions with potential buyers concerning the sale of the
property. Management believes that strong development activity in Northern
Virginia has created an opportunity to achieve an acceptable return on the
outright sale of the property rather than proceeding with development as
originally planned.

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.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has utilized internally generated funds, third party
borrowings, 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.

                                       9
<PAGE>   10

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
or renewing existing construction lines for the majority of the construction
financing and securing additional construction lines from existing external
lenders for the remainder. Existing construction lines are typically renewed
after the bank's review of the loan and the payment of extension fees. At
Southbridge, the Company must arrange for development financing. 

During the first quarter 1999, the Company utilized existing cash and cash
equivalents and third party borrowings to fund its development, construction
and operating activities.

As of March 31, 1999, the Company's debt obligations totaled $119,487,533 of
which $18,469,419 matures by December 31, 1999 and an additional $4,055,728 by
December 31, 2000.

As noted above, the Company has substantial debt repayments in 1999 under
existing financings and requires additional financing to advance its business
plan. As of March 31, 1999 the Company had $4,974,484 of cash and cash
equivalents, which will not be sufficient to fund these obligations. The
Company anticipates meeting its existing debt obligations during the remainder
of 1999 from the potential net proceeds from the sale of Ashburn that was
discussed earlier, 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 refinancing certain land acquisition financing and delaying certain
quarterly interest payments as allowed under the debt agreements. The Company
also has available, if needed, a $5 million credit facility from Holdings.

For future construction and development activities, the Company anticipates
utilizing existing or additional construction lines as noted above.

There can be no assurance that the Company will be able to obtain the necessary
construction and development financing to implement its plan or that, if
available, the terms and conditions will be acceptable to the Company. 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 the 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 expenses include charges for substantial amounts
previously capitalized.

Quarter Ended March 31, 1999

The Company had cash and cash equivalents of $4,974,484 and $4,446,864 at March
31, 1999 and December 31, 1998, respectively. The increase during the first
quarter of 1999 is attributable to cash provided by operating and investing
activities of $291,726 and $8,182,172, respectively, offset by $7,946,278 in
cash used in financing activities.

Cash Flows from Operating Activities: For the quarter ended March 31, 1999,
Legend's operating activities generated cash of $291,726.



                                       10
<PAGE>   11

Cash provided by operating activities for the quarter ended March 31, 1999 was
primarily due to the following:

-     Depreciation and amortization of $547,847 related primarily to fixed
      asset depreciation and loan cost amortization for Grand Harbor and Oak
      Harbor.

-     Related party interest expense of $1,878,293 that was not paid pursuant
      to the terms of the loan agreements.

-     A decrease in real estate inventory of $3,399,522 caused primarily by the
      sale of 23 units at Grand Harbor, 9 units at Oak Harbor, and 40
      residential lots at Southbridge. These sales reduced inventory by
      $10,990,730. This reduction was offset by additional costs for
      construction and development of $7,591,208 as construction of residential
      units continued at Grand Harbor and Oak Harbor. Moreover, development
      activities continued at Southbridge so that finished lots will be
      available during 1999 and beyond to satisfy existing contracts.

Partially offset by the following:

-     Net losses of $3,742,850 due to substantial interest expenses, corporate
      overhead and operating losses at Oak Harbor, Southbridge, and Ashburn,
      offset by an operating profit at Grand Harbor. Oak Harbor and Southbridge
      are in the initial phases of sales operations, while Ashburn incurred
      certain costs associated with holding the property during the period it
      has been held for sale without any compensating revenues. Grand Harbor's
      operating profits have resulted from the timing of unit closing which are
      traditionally higher during the first quarter and better than expected
      sales results.

-     An increase in accounts and notes receivable and other assets of $473,919
      and a decrease in accounts payable and other notes and liabilities of
      $1,326,230 for the first quarter of 1999. 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.

Cash Flows from Investing Activities: For the quarter ended March 31, 1999, the
Company generated cash flow from investing activities of $8,182,172. During the
first quarter of 1999, 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 $7,847,216. The Company also
sold a corporate housing unit for $560,499. All of this was offset by the
purchase of $225,543 of property and equipment.

Cash Flows from Financing Activities: The Company used $7,946,278 in cash for
financing activities during the first quarter of 1999. A total of $4,353,857
was borrowed from third-party lenders which was used primarily to fund certain
construction and development costs as Grand Harbor and Oak Harbor. A
substantial portion of the debt repayments of $12,211,832 made during the first
quarter of 1999 relate 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.

Quarter Ended March 31, 1998

Legend's cash and cash equivalents balance at March 31, 1998, and December 31,
1997, was $4,545,906 and $12,732,681, respectively. The decrease in the first
quarter of 1998 is attributable to cash utilized in operating and investing
activities of $8,896,525 and $717,968, respectively, partially offset by cash
provided by financing activities of $1,427,718.



                                       11

<PAGE>   12

Cash flows from Operating Activities: For the quarter ended March 31, 1998,
Legend utilized cash in operating activities of $8,896,525.

Cash utilized in operations in the quarter ended March 31, 1998 was primarily
due to the following:

-     Net losses of $1,963,368, due primarily to operating losses at the Oak
      Harbor, Southbridge and Chapmans's Landing developments, substantial
      interest expense as well as corporate overhead expenses. These losses are
      partially offset by an operating profit at the Grand Harbor project.
      Sales at Oak Harbor were less than anticipated, while Southbridge
      experienced delays in lot development due to an extremely wet winter in
      the Washington D.C. area, and closed on only 8 lots in the quarter ended
      March 31, 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 16 residential units.

-     An increase in accounts and notes receivable and other assets of $715,417
      and decrease in accounts payable and other liabilities of $788,153 during
      the three months ended March 31, 1998. Fluctuations in these accounts are
      generally due to the timing of the payment of certain liabilities,
      including trade payable, advances from customers, prepaid expenses, and
      the collection of accounts and notes receivable. The 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.

-     An increase in real estate inventory of $7,572,677. The primary reason
      for this increase was the acquisition of the initial parcel in the
      Ashburn Corporate Center and related development activity. 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 under existing contracts,
      however the construction activity was slower than expected mainly because
      of the extremely wet winter in the area. In total these construction,
      development and land acquisition activities totaled $13,146,253. This was
      offset by sales of 16 and 4 units at Grand Harbor and Oak Harbor,
      respectively, 8 residential lot sales at Southbridge and the sale of a
      20-acre parcel of raw land at Grand Harbor. These sales reduced inventory
      by $5,573,576.

Partially offset by the following:

-     Related party interest expense of $1,412,075 was not paid during the
      quarter ended March 31, 1998 pursuant to the terms of the loan
      agreements.

-     Depreciation and amortization expense of $731,015 related primarily to
      fixed assets at Grand Harbor and Oak Harbor and amortization of deferred
      loan costs.

Cash Flows from Investing Activities: For the quarter ended March 31, 1998,
Legend utilized cash flow in investing activities of $717,968. The amount of
cash utilized in investing activities increased mainly due to an increase in
customer deposit and other restricted cash at Grand Harbor and Oak Harbor, and
establishing a cash escrow for the Ashburn project. In addition property and
equipment was purchased for a total of $154,905.

Cash Flows from Financing Activities: For the quarter ended March 31, 1998,
Legend generated net cash from financing activities in the amount of
$1,427,718. The Company borrowed an additional $8,644,327 from external
parties. 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 was used primarily to fund certain construction and development costs.
Repayments on external debt totaled $7,163,105. The repayments were made
primarily from funds generated through sales of residential units and club
memberships and from using the cash available at December 31, 1997.



                                       12
<PAGE>   13

RESULTS OF OPERATIONS

Results of operations for the three months ended March 31, 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 months
ended March 31, 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 the first Ashburn parcel was acquired during March
1998.

Total revenues for the three months ended March 31, 1999 and 1998 were
$18,653,113 and $12,819,641, respectively. Increases in real estate sales at
Grand Harbor, Oak Harbor and Southbridge primarily caused the growth in
revenues.

Real estate sales increased $5,192,220 for the three months ended March 31,
1999 as compared to March 31, 1998. Grand Harbor sold 23 units at an
approximate average sales price of $425,000 during the first quarter of 1999,
while 16 units were sold during the corresponding period of 1998 at an
approximate average of $390,000. This was caused by improved marketing
strategies, which include increased advertising and promotion, and the health
of the US economy. Similar causes lead to Oak Harbor's sale of 9 units at an
approximate average sales price of $320,000 during the three months ended March
31, 1999 versus 4 units at an approximate average of $350,000 during the
corresponding 1998 period. 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 1998 results also include the sale of
a 20-acre raw land parcel at Grand Harbor while 1999 does not include a
comparable item.

The Company sold 40 Southbridge lots at an average sales price of approximately
$44,000 during the first quarter of 1999 as compared to 8 lots at an
approximate average of $38,000 for the corresponding period of 1998. This
increase reflects a more active marketing strategy, the strength of the US
economy, and enhanced lot deliveries, which had been reduced during the first
quarter of 1998 because of extremely wet weather.

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 first quarter of 1998 and 1999.

A growth in real estate sales expense was primarily responsible for the
increase in operating costs and expenses between the three months ended March
31, 1999 and 1998. This change corresponds chiefly to the increase in sales
discussed earlier.

Gross margin as a percentage of real estate sales was 43% (32% excluding the
sale of the 20 acre parcel of raw land at Grand Harbor) for the first quarter
of 1998, compared to 27% for the comparable period in 1999. Gross margins
realized on the sale of residential units at Grand Harbor and Oak Harbor may
fluctuate significantly depending upon the type of product sold. Changes in the
mix of product types sold accounts for the decline in the grose margin,
excluding the 20 acre parcel, between 1998 and 1999.

Club operations costs and expenses grew $300,812 between the first quarter of
1998 and 1999. This increase is chiefly due to the rise in club operations 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
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.



                                       13
<PAGE>   14

An increase in selling, general and administrative expenses between the first
quarter of 1998 and 1999 also contributed to the rise in operating costs and
expenses. A growth in marketing costs, which accompanied the improved marketing
strategies that were previously discussed, certain payroll incentive and
$600,000 in severance costs were the chief cause of this increase. Also
contributing to this was the cost of holding Ashburn during the period it has
been held for sale. These increases were offset by the decline between the
first quarter of 1998 and 1999 in operating costs for Chapman's Landing, which
was sold during 1998.

Total other expense increased primarily as a result of an increase in related
party interest expense and a decline in other net income between the first
quarter of 1998 and 1999. The 1998 other net income includes certain amounts
received from liquidating trusts whereas 1999 does not have a comparable item.
The increase in related party interest expense between the first quarter of
1998 and 1999 is due to higher outstanding payable balances as a result of
additional advances during the second half of 1998 and the capitalization of
unpaid interest into the loans at 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 $3,742,850
($0.59 per share) for the three months ended March 31, 1999, as compared to a
net loss of $$1,963,386 ($0.31 per share) for the three months ended March 31,
1998.

YEAR 2000 UPDATE

The Company is continuing to advance its program to address 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 is completing its 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 have been assessed by
inquiries with the related vendor or testing of the systems. The assessment of
the remaining major systems is nearing completion and should be completed
during the second quarter of 1999. The majority of the systems which have been
assessed have been found to be compliant. The Company is progressing with its
program to replace the few non-compliant systems found by its assessment. It
has actively sought quotes for purchasing new systems or has performed similar
tasks, and is near to completing this process. The estimated cost of
modifications to become "Year 2000" compliant is not expected to exceed
$150,000, and should be completed during the third quarter or 1999.

The nature of the Company's business minimizes its exposure to the "Year 2000"
problem. Nevertheless, it is possible during the final assessment and the
implementation phase that other significant risks could be identified.
Contingency plans are beginning to be 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 is replacing 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 financial conditions 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.


                                       14
<PAGE>   15

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 March 31,
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                9.3    0.4    0.4    0.4    0.4    2.8    13.7   13.7
Average interest rate        12.3%   6.3%   6.3%   6.3%   6.3%   6.3%       -      -

Variable rate LIBOR debt       0.1    0.2    0.2    0.2   34.4      -    35.1   35.1
Average interest rate         7.6%   7.6%   7.6%   7.6%   7.6%      -       -      -

Variable rate prime debt       9.4    0.8      -      -   53.1      -    63.3   63.3
Average interest rate         9.4%   9.6%   9.6%   9.6%   9.6%      -       -      -

Variable rate bank cost of
  funds debt                   0.8    2.1    2.6    1.9      -      -     7.4    7.4
Average interest rate         7.6%   7.6%   7.6%   7.6%      -      -       -      -
</TABLE>

The table only incorporates those exposures that exist as of March 31, 1999,
and it does not consider those exposures or positions which could arise after
that date. As a result the Company's gain or loss with respect to interest rate
fluctuations will depend on the exposures that arise after March 31, 1999, the
Company's hedging strategy during that period and interest rates.



                                       15
<PAGE>   16

                           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 has been settled
and dismissed.

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.


                                       16
<PAGE>   17

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
(a)     EXHIBITS:

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>

---------

<TABLE>
<S>     <C>
(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.
</TABLE>

                                         17
<PAGE>   18

<TABLE>
<S>     <C>
(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 March 31, 1999
</TABLE>



                                       18
<PAGE>   19

                                   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.


<TABLE>
<S>                                   <C>
Date:  May 14, 1999                    LEGEND PROPERTIES, INC.

                                       By: /s/ PETER J. HENN
                                          --------------------------------
                                             Peter J. Henn, President,
                                             Chief Executive Officer




                                       By: /s/ ROBERT B. CAVOTO
                                          --------------------------------
                                                Robert B. Cavoto
                                             Chief Financial Officer
</TABLE>




                                       19