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

                                   FORM 10-K

               X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
               -
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998



              [_] 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 33-89076


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



          FLORIDA                                           65-0502494
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)



                             5901 N.W. 151ST STREET
                                   SUITE 120
                           MIAMI LAKES, FLORIDA 33014
                    (Address of principal executive offices)



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


       SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  NONE


   SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:  CLASS A COMMON
                             STOCK, $.01 PAR VALUE


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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   [  ]

    The aggregate market value of voting stock held by non-affiliates of the
registrant as of December 16, 1998 was approximately $842,131 based on the $0.36
closing price for the Class A Common Stock as reported on the over-the-counter
market on such date.

    As of December 16, 1998, Weitzer Homebuilders Incorporated had 4,145,968
shares of Class A Common Stock, $.01 par value, and 1,500,000 shares of Class B
Common Stock, $.01 par value, outstanding.



                      DOCUMENTS INCORPORATED BY REFERENCE:

CERTAIN EXHIBITS LISTED IN PART IV ARE INCORPORATED BY REFERENCE TO CERTAIN OF
THE COMPANY PUBLIC FILINGS MADE PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,
INCLUDING THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER
30, 1996, THE COMPANY'S QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTERS ENDED
MARCH 31, 1996, JUNE 30, 1996, DECEMBER 31, 1996 AND  MARCH 31, 1997, REPORT ON
FORM 8-K FILED ON AUGUST 3, 1998, AND THE COMPANY'S REGISTRATION STATEMENT ON
FORM S-1 FILED PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED.

                                       1
<PAGE>
 
  PART I

  ITEM 1. BUSINESS

  GENERAL

     Weitzer Homebuilders Incorporated (the "Company"), organized in Florida in
  1994, is engaged, through its subsidiaries, primarily in the design,
  construction and sale of single-family homes and townhomes in Miami-Dade and
  Broward Counties located in Southeast Florida.  The Company offers a wide
  variety of moderately priced homes that are designed to appeal to the entry
  level and first time move-up buyers.  Since inception, the Company has
  delivered over 2,300 homes, including 440 in the fiscal year ended September
  30, 1998.  Base sales prices of the Company's homes range from approximately
  $84,000 to $260,000 and the average sales price of homes delivered during the
  fiscal year ended September 30, 1998 was approximately $115,000. At present,
  the Company is offering homes for sale in seven communities.  At September 30,
  1998, the Company had 980 available lots for sale. There is no assurance that
  all lots available for home construction will in fact be used for construction
  of homes since construction and sales of homes are subject to a variety of
  factors, including, without limitation, general and local economic conditions,
  availability of financing, interest rates and government regulation.
 
     The Company's principal executive offices are located at 5901 N.W. 151st
  Street, Suite 120, Miami Lakes, Florida 33014, (305) 819-4663.

  OPERATING STRATEGY

     The current operating strategy of the Company currently emphasizes the
  following elements:

  AFFORDABLE HOUSING AND VALUE PRICING.  The Company offers a wide variety of
  affordable to moderately priced homes that are designed to appeal to the
  entry-level and first time move-up buyers.  The Company strives to price its
  homes competitively, while providing perceived innovative designs, including
  architectural details and amenities in several of its projects typically found
  in more expensive homes, such as cathedral ceilings, recessed lighting, glass
  block, security and intercom systems.  The Company's models afford prospective
  homebuyers a variety of options and features so that they may customize their
  designs to suit their needs. In 1998, Weitzer built both detached single
  family homes and townhomes, each of which was offered in three different
  product types.



  CONSTRUCTION WARRANTY.  The Company acts as the general contractor for its
  projects and requires that its subcontractors and suppliers use quality,
  durable materials in the construction of its homes.  The Company generally
  provides home buyers with at least a one-year warranty on workmanship and
  building materials and a ten-year structural warranty.



  COST CONTROLS.  In general, the Company attempts to reduce certain risks in
  the homebuilding industry and maximize its financial resources by:  (i)
  acquiring land for development through seller financing (which generally
  allows for more favorable payment terms and lower closing costs); (ii)
  utilizing options and other similar agreements whereby the Company provides a
  relatively small deposit to obtain the right to purchase a specified number of
  lots over some period of time so long as 

                                       2
<PAGE>
 
  it exercises a certain number of options pursuant to a periodic takedown
  schedule; (iii) obtaining required zoning entitlements prior to purchasing
  land; (iv) for the most part, beginning construction of a home only after
  execution of a sales contract, receipt of a down payment and, where
  applicable, the buyer's receipt of mortgage approval; (v) using subcontractors
  on a fixed price basis; and (vi) obtaining volume discounts on construction
  materials.

  SOUTH FLORIDA MARKET.  Although the Company is continuously evaluating
  locations for new residential communities, the Company anticipates that in the
  near term its business and earnings will continue to be derived principally
  from the South Florida market. Based on the Company's knowledge of the South
  Florida homebuilding market, the Company believes it has certain competitive
  advantages in such market, including understanding of and experience with, the
  local market; controls and cost savings that result from the Company's
  centralized operations; and an experienced sales force that is generally
  employed on a long-term rather than project-by-project basis.

  LAND ACQUISITION AND DEVELOPMENT

     The Company acquires both improved building lots ready for construction,
  and tracts of land that require site improvements prior to construction.
  Generally, the Company attempts to acquire or control at least 100 lots in a
  development to achieve economies of scale in its marketing activities.  When
  contemplating the purchase of land for development, the Company considers the
  cost of the land, the desirability of the proposed project to targeted
  homebuyers, population growth patterns, competitive conditions and available
  financing.  The Company's land purchase agreements are typically subject to
  numerous conditions, including, but not limited to, the Company's ability to
  obtain or verify the necessary zoning and other governmental approvals for the
  proposed subdivision.  During the investigation period, the Company also
  confirms the availability of utilities, conducts hazardous waste and other
  environmental analyses, arranges construction financing and completes its
  marketing feasibility studies.  As a result, the Company is generally able to
  begin development activities immediately after closing the land purchase.

     The Company attempts to reduce the financial risks and capital requirements
  associated with maintaining its own inventory of lots by utilizing options and
  other similar agreements pursuant to which the Company provides a deposit and
  obtains the right to purchase a specified number of lots over a period of time
  so long as it exercises a certain number of its options pursuant to a periodic
  takedown schedule.  These agreements generally are on a nonrecourse basis, so
  that if the Company does not meet the takedown schedule, its only financial
  risk is forfeiture of a deposit.  Generally, the options are exercised only
  after prospective home buyers have executed a sales contract and made a down
  payment; however, the options may be exercised without having pre-sold the
  lots in order for the Company to preserve its option to purchase the remaining
  lots.

     The Company devotes time and effort in developing a design and marketing
  concept for each of its subdivisions, which includes a determination of size,
  style and price range of the homes, layout of streets, layout of individual
  lots and overall community design.  The product line offered in a particular
  subdivision depends upon many factors, including the housing generally
  available in the area, the needs of the particular market and the Company's
  cost of lots in the subdivision.  The 

                                       3
<PAGE>

     Company then undertakes development activities that include site planning,
     engineering and construction of roads, sewer, water and drainage
     facilities.

     Summary of Residential Projects

          The following information concerns the projects currently being
     developed as of September 30, 1998:

           Current Projects
<TABLE> 
<CAPTION> 
                                                                         Homes
                                                                       Delivered                          Range of Base
                                                             Number      Since        Lot         Year    Home Prices
     Name                       Location                    of Homes   Inception   Inventory     Opened      (000s)
     ----                       --------                    --------   ---------   ---------     ------      ------
<S>                             <C>                         <C>        <C>         <C>           <C>      <C> 
     Malibu Bay                 Pembroke Pines (Broward)                                         
                                                               500        143         357         1997    $  86 - 107
     Serena Lakes II            Miami-Dade                     376        375           1         1993    $  86 - 107
     Serena Lakes Townhomes     Miami-Dade                     264        264           0         1994    $   80 - 85
     Harmony Lakes              Davie (Broward)                407        291         116         1995    $ 120 - 176
     Hammocks                   Deerfield Beach (Broward)                          
                                                               151        147           4         1995    $ 120 - 144
     Tesoro at Forest Lakes     Miami-Dade                     251        155          96         1996    $ 107 - 130
     Lago Del Sol               Miami-Dade                     284         49         235         1997    $   84 - 87
     Fiesta                     Miami-Dade                      70          0          70         1998    $ 100 - 130
     Los Castillos at Windsor   
     Palms                      Miramar (Broward)              102          1         101         1998    $ 210 - 260
</TABLE> 

            Descriptions of the Company's projects follow:

     Malibu Bay. Located in Pembroke Pines, Broward County, Florida, this
     townhome community of 500 lots is offered to the first time homebuyer.
     Community amenities include a clubhouse and recreation facility, pool/sun
     deck, tennis courts and basketball court.

     Harmony Lakes. Located in the Town of Davie, in Broward County, Florida,
     this community has 236 single-family homes targeted to first-time move-up
     buyers and 171 townhomes targeted to entry level buyers, retirees and
     first-time move-up buyers as well. The community contains a recreation
     facility complete with community pool.

     Hammocks. Located in the City of Deerfield Beach, in Broward County,
     Florida, includes 151 single-family homes. This lakeside community targets
     both the entry-level buyer and the first-time move-up buyer. Units in this
     community are effectively sold out.

     Tesoro at Forest Lakes. Located in West Kendall, Miami-Dade County Florida,
     this townhome/villa community of 251 lots is located in the master planned
     community of Forest Lakes. Tesoro at Forest Lakes targets the entry-level
     homebuyer.

     Lago del Sol. Located in Southwest Miami-Dade County, Florida, this
     townhome community of 284 lots is offered to first time homebuyers.
     Community amenities include a cabana, pool and sun deck.


                                       4
<PAGE>
 
  Fiesta.  Located in Southwest Miami-Dade County, Florida, this community is
  near the Serena Lakes community and includes 70 single-family homes.
  Targeting first-time homebuyers, the homes range from 1,300 to 1,900 square
  feet and are priced from $100,000 to $130,000. Sales commenced in February
  1998.

  Los Castillos at Windsor Palms.  This community of 102 upscale homes located
  in Miramar, Southwest Broward County, Florida, targets move-up buyers and
  provides larger homes ranging from 2,500 to 3,600 square feet at base selling
  prices ranging from $210,000 to $260,000. Sales commenced in February 1998.

  CONSTRUCTION

     The Company, directly or indirectly through an affiliate, acts as the
  general contractor for the construction of its residential developments. The
  general contractor's functions include monitoring the construction of each
  project (including monitoring compliance with zoning and building codes),
  participating in all significant design and building decisions, coordinating
  the activities of subcontractors and suppliers and controlling the quality and
  cost of the work. Subcontractors and material suppliers typically are retained
  after competitive bidding at a fixed price for a specific project, and the
  Company does not have any long-term contracts with any of its subcontractors.
  The Company generally requires that its subcontractors agree to its standard
  terms regarding matters such as frequency of payments, standards or work and
  materials and maintenance of insurance. The Company generally utilizes more
  than one subcontractor for each type of work to minimize increased costs and
  delays that might result if one of its subcontractors experiences financial or
  other difficulties.

     The Company has a fully integrated construction and accounting software
  package that utilizes the critical path method as the basis of the system. The
  critical path method details the integral steps necessary for the complete
  construction of a home and sets forth specific milestones and the timing
  necessary to achieve the milestones so that the Company can track the progress
  of the construction on each of its homes. All data is updated on a daily basis
  resulting in current information by project and by individual unit to increase
  the likelihood of, among other things, timely completion of homes under
  construction.

     The Company does not maintain significant inventories of construction
  materials except for materials for homes under construction and a limited
  amount of other materials. Generally, the construction materials used in the
  Company's operations are readily available from numerous sources, but prices
  can fluctuate due to various factors, including increased demand or supply
  shortages. Whenever possible, the Company negotiates agreements for price and
  volume discounts with national, regional or local suppliers of materials,
  which either the Company or its subcontractors will purchase. The Company does
  not have any long-term contractual commitments with suppliers of building
  materials.  Homebuilders from time to time may experience industry-wide
  shortages of certain raw materials, and as a result, prices of materials can
  fluctuate.  In addition, stringent building codes which were adopted in Miami-
  Dade County and Broward County have increased costs of homes. The Company
  generally has been able to pass along cost increases to the prospective
  buyers, 

                                       5
<PAGE>
 
  but there is no assurance that increased costs will not have a material
  adverse effect on the Company's operations.

  MARKETING AND SALES

     The Company sells substantially all of its homes through employees who work
  from sales offices located at the model homes in each project. The Company
  also sells its homes through independent real estate brokers. Sales personnel
  assist prospective homebuyers by providing them with floor plans, information
  on prices, options and custom features and tours of model homes. Sales
  personnel are trained by the Company and are periodically updated on the
  availability of financing, construction schedules, marketing and advertising
  plans. Most of the sales personnel are employed on a long-term rather than on
  a project-by-project basis, which the Company believes results in reduced
  training costs and a more motivated and experienced sales force.

     Each model complex consists of three to five models. Most models are fully
  merchandised to accentuate the design and size of the home. The merchandising
  is based upon the demographics and lifestyles of the target buyer. Upgrades in
  many of the Company's current homes include ceramic tiles, oversized kitchens
  and a separate shower and roman tub in master baths, Spanish tile roofs, brick
  paved driveways and walkways, security systems, and an upgraded designer
  appliance package. Each project's sales center contains graphic displays of
  the floor plans and a community site plan, as well as information on the
  history of the Company.

     The Company's advertising program encompasses various media. Signage is a
  primary medium, which is implemented when land is acquired. Upon the
  completion of the models, a full advertising campaign typically begins using
  newspaper, radio and direct mail. In addition, the Company provides incentives
  to independent real estate brokers as a means of ensuring broker
  participation.

     The volume and timing of the Company's home sales are substantially
  affected by the opening of new residential developments. Generally, a
  residential development will generate a high sales volume in the early period
  of its existence (due primarily to the wide choice of available lots), with
  sales activity decreasing as the project matures. In addition, the Company's
  ability to sell its homes is dependent, in large part, upon the ability of its
  buyers to obtain mortgage financing. The Company does not finance the purchase
  of homes in its communities but rather refers customers to a variety of
  mortgage lenders for their financing needs. The Company has experienced
  significant variability in sales on a quarterly basis as a result of, among
  other things, the timing of home closings, the cyclical nature of the
  homebuilding industry, changes in prevailing interest rates and other economic
  factors and changes in the costs of materials and labor.

     The Company's home closings are also dependent on the availability of
  homeowner's insurance.  Primarily as a result of Hurricane Andrew, there is a
  widespread shortage of available private insurance for homeowners in the State
  of Florida.  The State of Florida has created a joint underwriting association
  to provide insurance coverages to homeowners who cannot obtain private
  insurance; however, such State provided insurance affords homeowners less
  protection than is typically provided by private insurance carriers at greater
  costs and may not be purchased during periods in which there is a tropical
  storm which could threaten the State.

                                       6
<PAGE>
 
     Through its relationships with mortgage companies, the Company monitors the
  availability of governmental programs offering low interest mortgage financing
  to prospective home buyers as a means to market and increase the Company's
  demand for its homes. When programs become available, the Company reviews the
  terms of the program and the requisite commitment fee to determine whether it
  will submit a bid for the Company to obtain low interest financing for
  qualified homebuyers.

  CUSTOMER SERVICE AND QUALITY CONTROL

     The Company's customer service personnel are responsible for pre-closing,
  quality control home inspections with the buyer and responding to post-closing
  customer needs. The active participation of customer service personnel, in
  management's opinion, reduces post-closing repair costs, fosters the Company's
  reputation for quality and service and leads to repeat and referral business.
  The Company provides homebuyers with a limited warranty program which, in
  general, provides home buyers with at least a one-year warranty on workmanship
  and building materials through the Bonded Builders Home Warranty program, a
  privately insured program that establishes standards for the acceptable
  condition of a home and resolution of disputes.  Historically, the Company has
  not incurred any material costs relating to warranty claims or defects in
  construction.

  GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

     In developing a project, the Company must obtain the approval of numerous
  governmental authorities regulating such matters as permitted land uses and
  levels of density, the installation of utility services such as water and
  waste disposal and the dedication of acreage for open space, parks, schools
  and other community purposes. Several authorities in Florida have imposed
  impact fees as a means of defraying the cost of providing certain governmental
  services to developing areas, and the amount of these fees has increased
  significantly during recent years. Other Florida and local laws require the
  use of specific construction materials, which reduce the need for energy-
  consuming heating and cooling systems, or are expected to withstand certain
  wind speeds. Miami-Dade County and Broward County have enacted more stringent
  building codes as a result of Hurricane Andrew, which have resulted in
  increased costs of construction. The State of Florida and counties and cities
  within the State have also, at times, declared moratoriums on the issuance of
  building permits and imposed other restrictions in areas where the
  infrastructure (e.g., roads, schools, parks, water and sewage treatment
  facilities and other public facilities) does not reach minimum standards, all
  of which could have a material adverse effect on the Company's business. To
  date, the governmental approval processes and the restrictive zoning,
  moratoriums and allocation systems have not had a material adverse effect on
  the Company's development activities.

     The Company is subject to a variety of federal, state and local statutes,
  ordinances, rules and regulations concerning protection of health and the
  environment. The particular environmental laws, which apply to any given
  community, vary greatly according to the community site, the site's
  environmental conditions and the present and former uses of the site. These
  environmental laws may result in delays, cause the Company to incur
  substantial compliance and other costs and prohibit or severely restrict
  development in certain environmentally sensitive regions or areas. Prior to

                                       7
<PAGE>
 
  consummating the purchase of land, the Company engages independent
  environmental engineers to evaluate such land for the presence of hazardous or
  toxic materials, wastes or substances. The Company has not been materially
  adversely affected to date by the presence or potential presence of such
  materials.

     To varying degrees, certain permits and approvals may be required to
  complete the residential developments currently being planned by the Company,
  including land development permits (water, sewer, paving and drainage), sales
  center permits, model home permits and building permits. The process of
  obtaining permits and approvals is an ongoing process in the ordinary course
  of business that the Company is engaged in as it develops and constructs homes
  for its current and future planned projects. The ability of the Company to
  obtain necessary approvals and permits for these projects is often beyond the
  Company's control, and could restrict or prevent the development of otherwise
  desirable property. The length of time necessary to obtain permits and
  approvals increases the carrying costs of unimproved property acquired for the
  purpose of development and construction. In addition, the continued
  effectiveness of permits already granted is subject to factors such as changes
  in policies, rules and regulations and their interpretation and application.
  To minimize these risks, the Company generally restricts land purchases to
  tracts that have or will have zoning and all other related entitlements. To
  date, the Company has not encountered any material difficulties in obtaining
  permits and does not currently anticipate any material difficulties in
  obtaining permits in the future.

  COMPETITION

     The homebuilding industry is highly competitive and fragmented. The Company
  competes on the basis of a number of interrelated factors, including location,
  reputation, amenities, design, quality and price, with numerous large and
  small builders, including some builders with nationwide operations and greater
  financial, marketing, sales and other resources.  At times competitors may
  offer homes at discounted prices for financial reasons. The Company also
  competes for residential sales with individual resales of existing homes and
  condominiums, including sales of homes at deeply discounted prices by lenders,
  banks and other similar institutions. Based on its knowledge and analysis of
  the homebuilding market and its knowledge of its competitors, Management
  believes that the Company's primary competitive strengths have been  (i) its
  ability to offer quality residences at affordable prices; (ii) the location of
  its communities; and (iii) its reputation for service, innovative design and
  value pricing.

     The Company also competes with other homebuilders for the acquisition of
  lots. Competition for available lots varies from market to market depending on
  supply and is based primarily on price, reputation and ability to build,
  market and sell homes. In this regard, Management believes that the Company's
  history of meeting lot takedown schedules and making timely payments has
  enhanced its competitive position with local area land developers.

  WARRANTIES, BONDS AND OTHER OBLIGATIONS

     The Company is often required, in connection with the development of its
  projects, to obtain performance or maintenance bonds or letters of credit in
  favor of governmental authorities and 

                                       8
<PAGE>
 
  others. The amount of such obligations outstanding at any time varies in
  accordance with the Company's pending construction activities. In the event
  any such obligations are drawn upon because of the Company's failure to build
  required infrastructure, the Company would be obligated to reimburse the
  issuing surety company or bank. At September 30, 1998, the Company had
  approximately $1,645,000 in letters of credit and performance bonds
  outstanding in connection with its development and construction activities.

     The Company generally provides homebuyers with at least a one-year warranty
  on workmanship and building materials and, in certain instances such as when
  financing is provided through a government loan or where city codes require, a
  ten-year structural warranty. The cost of providing extended warranties and
  warranty services was not material during the fiscal year ended September 30,
  1998. The subcontractors who perform most of the actual construction in turn
  provide warranties of workmanship to the Company typically of one year in
  duration following completion of their work and perform substantially all of
  the warranty work at no cost to the Company. The Company has not sustained any
  material claims for warranty services under its ten-year structural warranty
  program.

     The Company also has obligations to subsidize homeowners' associations in
  certain of its residential developments up to a pro rata portion of expenses
  based on the number of lots which have not been closed in such developments.
  To date, the Company has incurred minimal costs to subsidize homeowners'
  associations

  EMPLOYEES: LEASING ARRANGEMENT

     At September 30, 1998, the Company leased the services of approximately 56
  persons, including sales and marketing, construction, executive,
  administrative and clerical personnel.  All of the personnel of the Company
  are employees of Paychex Business Solutions, Inc. ("PBS"), which has an
  agreement for services with the Company.  PBS is a vehicle for small
  businesses to obtain workers' compensation and health care coverage at a
  discounted large group rate. PBS is the employer of record and assumes all
  payroll obligations and certain employee benefits administration (such as
  payroll preparation, payment and reporting of payroll taxes and workers'
  compensation, maintaining employee health insurance and related benefits) with
  respect to the personnel of the Company, while allowing the Company to retain
  management control of these persons, including supervision, job description
  and salary determinations. The Company determines changes in staffing levels
  and makes recommendations to PBS with respect to the hiring and firing of
  personnel. Although PBS has the right to do so, PBS has never failed to accept
  the recommendation of the Company with respect to hiring and firing of
  personnel. The Company prepays PBS for any payroll taxes, workers'
  compensation and health insurance and receives a report each quarter from PBS
  as to whether such payroll taxes were filed and paid in a timely manner.
  Should PBS fail to pay payroll taxes, workers' compensation or health
  insurance, the Company may be liable for such obligations.  References to
  employees of the Company contained herein will include individuals whose
  services are leased from PBS.  The Company believes that its relations with
  its personnel and subcontractors are satisfactory.

  Directors and Executive Officers of the Registrant


                                       9
<PAGE>
 
     The following table sets forth information, with respect to each person who
  is currently an executive officer or director of the Company, as indicated
  below.


  NAME               AGE               POSITION

  Harry Weitzer      57     Chairman of the Board, President
                             and Chief Executive Officer

  Peter Kleinerman   46     Executive Vice President

  Sheryl Rice        32     Vice President - Controller

  James Rosewater    32     Vice President - Sales and Marketing
 
  Joseph B. Rose     64     Director

  Lawrence Hellring  51     Director

  Michael Ambrosio   51     Director
 
  Alan Litt          38     Director


     HARRY WEITZER has served as Chairman of the Board and Chief Executive
  Officer of the Company since its formation in June 1994 and as President since
  December 1994. Mr. Weitzer has also served as President and Chief Executive
  Officer of each of the Company's subsidiaries since their respective inception
  more than five years ago. Mr. Weitzer has over 27 years of experience in the
  homebuilding industry, being actively engaged as a homebuilder in Michigan
  (from 1968 to 1976) as well as in Southeast Florida (since 1976).  Mr. Weitzer
  is a limited partner of Chai Capital, Ltd., an affiliate of the Company, and
  an officer and director of Chai Capital Corp., the General Partner of Chai
  Capital, Ltd.

     Peter Kleinerman has served as Executive Vice President of the Company
  since March 1997.  From November 1995 to March 1997, Mr. Kleinerman served as
  the President of Jadan Capital Corp., which provided operational, financial
  and strategic advisory services.  From February 1993 to November 1995, Mr.
  Kleinerman served primarily as Executive Vice President at Atlantic Gulf
  Communities Corp., a publicly traded real estate development company.

     SHERYL RICE was appointed as Vice President and Controller of the Company
  on October 28, 1998.  Ms. Rice served as a controller of the Company since
  November 1997.  From October 1996 to November 1997, she served as Controller
  for The Cornerstone Group and from September 1988 to October 1996, as
  Assistant Controller for Landstar Development Corporation, both of which are
  real estate development and construction companies.

     JAMES ROSEWATER has served as Vice President-Marketing since May 1995. From
  December 1993 to April 1995, Mr. Rosewater served as Director of Marketing for
  Johnson Group Management, Inc./Dry Clean USA, Inc. From December 1989 to
  December 1993, Mr. Rosewater served as Director of Marketing for Dry Clean
  USA, Inc.  Mr. Rosewater is Mr. Weitzer's son-in-law.

     JOSEPH B. ROSE has served as a Director of the Company since May 1995.  Mr.
  Rose has been the sole proprietor of Joseph B. Rose  Construction Company
  since 1957 and the sole proprietor of 

                                      10
<PAGE>
 
  M.R. Management Company since 1967. These companies are engaged in the
  development and management of commercial and multiple occupancy properties in
  the Detroit, Michigan metropolitan area.

     LAWRENCE HELLRING has served as a Director of the Company since March 1996.
  Mr. Hellring is president and owner of Superior Windows, Corp. Mr. Hellring
  has been associated with Superior Windows, Corp., a privately held
  manufacturing company for the past eleven years.

     MICHAEL AMBROSIO has served as a Director of the Company since May 1996.
  Mr. Ambrosio is vice president of Simkins Industries, Inc. and executive vice
  president of Westfield Financial Corp., the real estate investment division of
  Simkins Industries, Inc.  Mr. Ambrosio has been associated with Simkins
  Industries, Inc. for the past five years.  Mr. Ambrosio is an officer and
  director of Chai Capital Corp., the General Partner of Chai Capital, Ltd.  A
  trust for the benefit of Mr. Ambrosio's wife is a limited partner of Chai
  Capital, Ltd., an affiliate of the Company.

     Alan Litt was elected as a Director of the Company in October 1998.  Mr.
  Litt has served as President of Castle American Construction for the past five
  years.  He brings over fifteen years of experience as a real estate developer,
  specializing in residential dwellings and the construction of institutional
  facilities.  Mr. Litt is a limited partner of Chai Capital, Ltd.

  Compliance with Section 16(a)

     Based solely upon a review of Forms 3 and 4 and amendments thereto
  furnished to the Company pursuant to Rule 16a-3(e) under the Securities
  Exchange Act of 1934 (the "Exchange Act"), during the Company's fiscal year
  ended September 30, 1998 and any Forms 5 and amendments thereto furnished to
  the Company with respect to its most recent fiscal year, and any written
  representations referred to in subparagraph (b)(2)(i) of Item 405 of
  Regulation S-K, except as set forth below, no person who at any time during
  the fiscal year ended September 30, 1998 was a director, officer or to the
  knowledge of the Company, a beneficial owner of more than 10% of any class of
  equity securities of the Company registered pursuant to Section 12 of the
  Exchange Act failed to file on a timely basis, as disclosed in Forms 3, 4 and
  5, reports required by Section 16(a) of the Exchange Act during the fiscal
  years ended September 30, 1997 or September 30, 1998.  Larry Hellring and
  Michael Ambrosio, who became directors of the Company in fiscal year 1996, did
  not file a Form 3 during fiscal year 1996.  These Forms 3 will be filed as
  soon as possible after the date hereof.  Harry Speizer and Peter Kleinerman,
  who became executive officers of the Company in fiscal year 1997, did not file
  a Form 3 during fiscal year 1997.  These Forms 3 will be filed as soon as
  possible after the date hereof.  Joseph B. Rose, a director of the Company who
  purchased 5,000 shares of Class A Common Stock during fiscal year 1998, did
  not file a Form 4 during fiscal year 1998.  This Form 4 will be filed as soon
  as possible after the date hereof.

  ITEM 2.  PROPERTIES

     The Company's principal business offices are in Miami Lakes in Miami-Dade
  County, Florida and consist of 9,000 square feet that are being leased from an
  unaffiliated third party through 1999.  

                                      11
<PAGE>
 
  Management is exploring opportunities to locate alternative office space at a
  more suitable location and at reduced cost.

  ITEM 3.  LEGAL PROCEEDINGS

    The Company has been involved from time to time in litigation arising in the
  ordinary course of business. The Company is not currently a party to any
  litigation that the Company believes could have a material adverse effect on
  the financial position or results of operations of the Company.
 
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth
  quarter of the fiscal year ended September 30, 1998.

  PART II

  ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS

  MARKET INFORMATION

     The Company's Class A Common Stock has been trading on the over-the-counter
  Bulletin Board ("OTC") since June 9, 1998 under the symbol "WTZRA".  The
  Company's Class A Common Stock had been traded on Nasdaq from April 26, 1995
  to June 8, 1998.  Prior to that time, there was no public market for the Class
  A Common Stock. There is no established public trading market for the
  Company's Class B Common Stock.  The following sets forth the range of high
  and low bid prices for the Class A Common Stock during each of the quarters
  presented.  The quotations set forth below are inter-dealer quotations,
  without retail mark-ups, markdowns or commissions and do not necessarily
  represent actual transactions.

                              CLASS A COMMON STOCK
                              --------------------

           QUARTERLY PERIOD ENDED             HIGH BID   LOW BID
           ----------------------             --------   -------

           September 30, 1998                  $0.438     $0.406
           June 30, 1998                       $0.594     $0.438
           March 31, 1998                      $0.938     $0.906
           December 31, 1997                   $0.875     $0.719
 
 
           September 30, 1997                  $1.562     $1.000  
           June 30, 1997                       $2.125     $1.000
           March 31, 1997                      $2.250     $1.437
           December 31, 1996                   $2.625     $1.250
 

                                      12
<PAGE>
 
     As of December 16, 1998, there were approximately 72 holders of record of
  the Company's Class A Common Stock.  This number does not include
  approximately 1,050 beneficial owners of the Common Stock whose shares are
  held in the names of various dealers, clearing agencies, banks, brokers and
  other fiduciaries.

      See "Management's Discussion and Analysis of Financial Condition and
  Results of Operations--Liquidity and Capital Resources" for a description of
  securities sold by the Company in July 1998.

  DIVIDENDS

     Prior to the Earnings Achievement Date (as hereinafter defined), the
  holders of the Common Stock are entitled to receive, if, when and as declared
  by the Board of Directors of the Company to the extent funds are legally
  available therefor, dividends at the rate of (i) $.325 per share per annum,
  with respect to the Class A Common Stock, and (ii) $.001 per share per annum,
  with respect to the Class B Common Stock, payable quarterly on the fifteenth
  day of February, May, August and November of each year.  For periods following
  the Earnings Achievement Date, holders of the Class A Common Stock and the
  Class B Common Stock are entitled to receive such dividends, in equal amounts
  per share, as may be declared from time to time by the Board of Directors out
  of funds legally available therefor.

     The "Earnings Achievement Date" is a date which is 10 business days
  following the filing by the Company with the Securities and Exchange
  Commission of the first Form 10-Q or Form 10-K, as the case may be (the "SEC
  Report"), which reflects that, as of the last day of the period to which such
  SEC Report relates, the Company has had an aggregate of $7,500,000 of
  Operating Income earned since April 1, 1995 (the "Earnings Achievement").
  "Operating Income" of the Company for any fiscal period means the Consolidated
  Net Income for such period, (x) increased or decreased by all income tax
  expense or benefit for such period, and (y) decreased by all dividends paid or
  accrued during such period. "Consolidated Net Income" of the Company for any
  period means the consolidated income or loss of the Company and its
  subsidiaries as set forth on the Company's consolidated statement of income
  for any such fiscal period and as determined in accordance with generally
  accepted accounting principles consistently applied, provided that (i) the
  results of operations of any person acquired in a pooling of interests
  transaction for any period prior to the date of such acquisition shall be
  excluded, and (ii) (a) any gains or losses from  assets sales or reserves
  related thereto (other than a disposition of housing inventory in the ordinary
  course of business), (b) any gains or losses upon the  extinguishment of
  indebtedness, including the write-off of unamortized deferred loan costs and
  unamortized original issue discount in connection with the retirement of the
  Company's 10% Bonds (as discussed below), or any amortization relating to
  original issue  discount and deferred loan costs in connection with such 10%
  Bonds, and (c) any extraordinary gains or losses, shall be excluded.  No later
  than (i) 45 days after the end of the Company's fiscal quarter which is not
  the year-end or (ii) 90 days after the fiscal year-end, as the case may be,
  the Chief Financial Officer of the Company shall determine if the Earnings
  Achievement has occurred.

                                       13
<PAGE>
 
     The Company is also restricted under the terms of its existing loan
  agreements from declaring or paying any dividends or making any other
  distributions on any shares of capital stock of the Company.

     The Company's Board of Directors had determined that it is in the best
  interests of the Company and its shareholders to retain all earnings and to
  forego the cash dividend payments on its outstanding shares of Class A and
  Class B Common Stock since August 1996. The Company's determination to forego
  such payments was based in part, on the Board of Directors' continued
  determination that such cash was necessary to maintain the Company's then
  current level of operations and, would be better used to facilitate the
  Company's growth. Cash dividends on the Class A and Class B Common Stock are
  cumulative, and accordingly, the amount of such dividends would inure for the
  benefit of the Company's shareholders. The Company accrues such dividends on
  its financial statements only if and when the Company's Board of Directors
  declared such dividends. The Company will continue to evaluate future cash
  dividend payments depending upon then current business conditions,
  opportunities for growth and on the then current financial condition of the
  Company. Accordingly, no assurance can be given as to when the Company plans
  on resuming, if at all, the declaration of such cash dividends and/or the
  payment of such cash dividends.

     Each share of Class B Common Stock can be converted into one share of Class
  A Common Stock if the Earnings Achievement Date (as defined) has occurred and
  all accumulated and unpaid dividends on the Class A Common Stock have been
  declared and paid in full.

  ITEM 6. SELECTED FINANCIAL DATA

     The following table sets forth selected consolidated financial data for the
  Company.  As of September 30, 1994, Harry Weitzer contributed all of the
  outstanding shares of capital stock of certain corporations which were general
  partners of the Weitzer Homebuilding Partnerships (the "Weitzer Subsidiaries")
  to the Company in exchange for 1,500,000 shares of Class B Common Stock (the
  "Weitzer Entities Exchange").  The selected consolidated financial data give
  effect to the Weitzer Entities Exchange for each of the relevant periods, and
  treats the Weitzer Entities Exchange on a basis similar to a pooling of
  interests, which has the effect of combining all companies as if the
  combination had been effective for the periods presented.  Prior to May 1995,
  the Company conducted substantially all of its operations through the Weitzer
  Homebuilding Partnerships.    During that time, the Company used the equity
  method to account for its investment in the Weitzer Homebuilding Partnerships
  and, accordingly, the selected consolidated financial data of the Company
  during this time do not include the revenues, assets or equity of the Weitzer
  Homebuilding Partnerships. Subsequent to May 1995, the Company consolidated
  the operations of the Weitzer Homebuilding Partnerships with the financial
  statements of the Company.  The selected consolidated financial data should be
  read in conjunction with the consolidated financial statements of the Company
  and the notes thereto included elsewhere herein.  The selected consolidated
  financial data of the Company for the five fiscal years ended September 30,
  1998 have been derived from the Company's audited consolidated financial
  statements.

                                       14
<PAGE>

Selected Financial Information for the Company

<TABLE> 
<CAPTION> 
                                                                   YEARS ENDED SEPTEMBER 30,
                                    ------------------------------------------------------------------------------
                                        1994           1995          1996             1997            1998
                                        -----          -----         -----            -----           ----
<S>                                 <C>            <C>            <C>             <C>             <C> 
INCOME STATEMENT DATA:
Equity in earnings of 50%-owned
      affiliated partnerships (1)   $  1,847,738   $    686,711   $       --      $       --      $       --
Sales of homes                           998,849     13,450,684     37,391,780      55,419,763      50,599,859
Net income (loss)                      1,647,149         68,814     (2,962,046)     (3,168,279)       (784,858)
Net income (loss) per share                 --     $       0.03   $      (0.81)   $      (0.82)   $      (0.19)
Pro forma net income (2)                 966,597           --             --              --              --
Pro forma net income per share      $       0.54           --             --              --              --
Average number of shares
      Outstanding (3)                  1,801,300      2,277,950      3,649,204       3,860,254       4,158,688
Dividends declared per share                --     $       0.08   $       0.24            --              --

<CAPTION> 

                                                               September 30,
                                    ----------------------------------------------------------------------
                                         1994        1995         1996           1997          1998
                                         ----        ----         ----           ----          ----
<S>                                 <C>           <C>           <C>           <C>           <C> 
BALANCE SHEET DATA:
Land and construction-in progress   $      --     $30,167,295   $31,505,383   $39,181,888   $40,023,538
Total assets                          2,228,209    36,922,360    39,673,788    41,446,861    43,100,283
Total liabilities                     13,74,257    26,867,489    32,379,779    37,321,131    38,759,411
Shareholders' equity                    853,952    10,054,871     7,294,009     4,125,730     4,340,872
</TABLE> 

     (1) Equity in earnings of 50%-owned affiliated partnerships represents the
     Company's share of the income of the Weitzer Homebuilding Partnerships.
     Each partnership's income was allocated to the partners first as a
     preferred return on partners' capital, with the balance of income shared
     equally; all losses were shared equally. Selected combined financial
     information of the Weitzer Homebuilding Partnerships is set forth below.

     (2) 1994 pro forma net income includes a charge of approximately $262,000
     relating to the write-off of costs incurred in connection with a terminated
     merger agreement.

     (3) For 1994, based upon (i) 1,500,000 shares of Class B Common Stock
     presently outstanding, and (ii) 301,300 shares of Class A Common Stock
     (based on an initial public offering price of $6.50 per share and net of
     Class A Common Stock assumed to have been repurchased at such initial
     public offering price per share under the treasury stock method) assumed to
     be outstanding upon the exercise for $.10 per share of warrants then
     outstanding.

<PAGE>


     Selected Combined Financial Information of the Company and the Weitzer
     Homebuilding Partnerships

                                                 Years Ended September 30,
                                           ------------------------------------
                                                  1994                 1995
                                                  ----                 ----
                                                                    (unaudited)
     INCOME STATEMENT DATA:   
     Sales of homes                              $53,320,277        $37,669,019
     Cost of homes sold                           45,710,767         31,876,433
     Other costs and expenses                      3,497,209          3,531,052
     Net income                                    4,454,170          2,261,534
                              
     
                                               September 30,
                                            ------------------     
                                                 1994
                                                 ----
     BALANCE SHEET DATA/(1)/:
     Real estate inventories                    $16,802,444
     Total assets                                21,187,373
     Total liabilities                           14,594,117
     Partners' equity:
        Weitzer Entities                          1,089,911
        Financial Partner                         5,503,345

     (1)  Following the Partnership Acquisition in May 1995, the Company
          consolidates the operations of the Weitzer Homebuilding Partnerships
          with the consolidated financial statements of the Company.

     ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

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

     Results of Operations

     General
     -------

          Backlog and Available Lots for Sale or Under Option or Contract. The
     following table sets forth the Company's backlog, the available lots for
     sale and the available lots for construction for the periods presented. The
     backlog consists of homes under sales contracts and includes homes under
     construction, as well as homes that have been sold but not started. At
     September 30, 1998, approximately 75% of the homes in backlog were under
     construction. The available lots for sale refer to the number of lots the
     Company has acquired on which it plans to construct homes and


                                      16

<PAGE>
 
  exclude homes under sales contracts included in backlog. The available lots
  under option or contract refer to the number of lots as to which the Company
  has an option or a contract to acquire, but whose acquisition has not closed.
  The available lots under option or contract reflect the lots in projects that
  are currently being developed or are currently planned for future development.
  There can be no assurances that settlements of homes subject to sales
  contracts will occur or that all of the available lots for sale will be built
  on, or that the available lots under option or contract will be acquired or
  built on. The Company estimates that the cancellation rate on homes for which
  a sales contract was signed for the fiscal year ended September 30, 1998 was
  approximately 15% to 20%.

  Backlog of Homes, Available Lots for Sale and Available Lots Under Option or
  ----------------------------------------------------------------------------
  Contract
  --------

<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,
                                                       ------------------------------------
                                                               1998             1997
                                                               ----             ----
<S>                                                        <C>               <C>
Number of homes in backlog                                          237              239
Aggregate sales value of homes in backlog                   $30,652,000      $26,865,000
Available lots for sale                                             743              806
Available lots under option or contract                               0              375
</TABLE> 

Comparison of the Years Ended September 30, 1998 and 1997
---------------------------------------------------------

     Revenues from home sales decreased 9% from approximately $55.4 million for
  the year ended September 30, 1997 to approximately $50.6 million for the year
  ended September 30, 1998.   This change is directly attributable to a 9%
  decrease in the number of homes delivered, from 484 to 440.  The average
  selling price of homes delivered in fiscal 1998 of approximately $115,000 was
  equivalent to the average selling price in fiscal 1997.

     Cost of homes sold decreased from approximately $51.7 million for the year
  ended September 30, 1997 to approximately $44.5 million for the year ended
  September 30, 1998, primarily as a result of the decrease in the number of
  homes delivered.  Cost of homes sold, as a percentage of homes sales,
  decreased from 93.4% for the year ended September 30, 1997 to 87.8% for the
  year ended September 30, 1998.  The 5.6% decrease of cost of homes sold as a
  percentage of sales is primarily attributable to the inclusion of $2,652,000
  of impairment charges in the cost of homes sold for the year ended September
  30, 1997.  The impairment charges incurred related to the Company's assessment
  of the recoverability of certain project costs.

     Selling, general and administrative ("SG&A") expenses increased from
  approximately $6.2 million for the year ended September 30, 1997 to
  approximately $6.5 million for the year ended September 30, 1998.  SG&A
  expenses, as a percentage of total revenues, increased from 11.1% for the year
  ended September 30, 1997 to 12.7% for the year ended September 30, 1998.  The
  increase is primarily a result of additional loan fees incurred pursuant to a
  loan agreement.  Such additional loan fees have been eliminated for future
  periods due to the refinancing of the related loans, as discussed below in
  "Liquidity and Capital Resources".

                                       17
<PAGE>
 
     Total operating costs and expenses decreased from approximately $59.0
  million for the year ended September 30, 1997 to $51.7 million for the year
  ended September 30, 1998.   The decrease is attributed primarily to the
  decrease in the cost of homes sold as discussed above.

     Net loss decreased from approximately $3.2 million for the year ended
  September 30, 1997 to a loss of approximately $785,000 for the year ended
  September 30, 1998 primarily due to the inclusion of the aforementioned
  impairment charges in fiscal 1997.

  Comparison of the Years Ended September 30, 1997 and 1996
  ---------------------------------------------------------

     Revenues from home sales increased from approximately $37.4 million for the
  year ended September 30, 1996 to approximately $55.4 million for the year
  ended September 30, 1997.  This change reflects a 5.4% decrease in the average
  selling price of homes delivered (from $121,009 to $114,503) due to changes in
  product mix offset by a 56.6% increase in the number of homes delivered (from
  309 to 484).

     Cost of homes sold increased from approximately $35.4 million for the year
  ended September 30, 1996 to approximately $51.7 million for the year ended
  September 30, 1997, primarily as a result of the increase in the number of
  homes delivered.  Cost of homes sold as a percentage of homes sales decreased
  from 94.7% during the year ended September 30, 1996 to 93.4% for the year
  ended September 30, 1997.  Cost of homes sold also includes impairment charges
  of $2,652,000 in fiscal 1997 and $1,050,000 in fiscal 1996 related to the
  Company's assessment of the recoverability of certain costs of real estate
  projects performed in the respective year ends.

     Selling, general and administrative ("SG&A") expenses increased from
  approximately $4.8 million for the year ended September 30, 1996 to
  approximately $6.2 million for the year ended September 30, 1997 due to the
  increase in sales volume.  SG&A expenses as a percentage of total revenues
  decreased from 12.7% for the year ended September 30, 1996 to 11.1% for the
  year ended September 30, 1997.

     Total operating costs and expenses increased from approximately $40.7
  million for the year ended September 30, 1996 to approximately $59.0 million
  for the year ended September 30, 1997.  The increase is attributed primarily
  to the increase in the cost of homes sold as discussed above.  The increase
  also included a charge for the impairment of goodwill of approximately
  $331,000.  Based on a review performed at fiscal year end 1997, the Company
  determined that the goodwill had no continuing value and, accordingly,
  recorded an impairment charge.

     Net loss increased from approximately $3.0 million for the year ended
  September 30, 1996 to a loss of approximately $3.2 million for the year ended
  September 30, 1997, primarily as a result of the impairment charges previously
  discussed.

  LIQUIDITY AND CAPITAL RESOURCES

     As is typical in the homebuilding industry, the Company will require both
  short-term and long-term financing.  Such needs will depend upon the Company's
  construction volume, asset turnover 

                                       18
<PAGE>
 
  and land acquisitions. The Company's most significant sources of funds are
  proceeds realized from home closings; proceeds from acquisition, development
  and construction financing provided by financial institutions or other
  lenders; and seller financing for land purchases. The Company will continue
  seeking to procure additional outside financing in both the short-and long-
  term, as more fully described below, for its future projects and on-going
  capital requirements. There can be no assurance that the Company can obtain
  such additional financing.

     The proceeds of the financing described below were principally used to
  repay in August 1998 the then outstanding $3.75 million principal and accrued
  interest of the Company's 10% bonds ("10% Bonds") which upon repayment were
  cancelled.

     On July 28, 1998, the Company received subscriptions from Chai Capital,
  Ltd., a Florida limited partnership (the "Partnership") for an aggregate of $5
  million to purchase an aggregate $4 million principal amount of 14%
  Convertible Subordinated Debentures (the "Debentures") of the Company and
  1,785,714 shares of the Company's authorized and unissued Class A Common
  Stock, $.01 par value per share, valued at $.56 per share.  The Debentures are
  for a term of three years and bear interest at the rate of 14% per annum and
  are convertible at the option of the holder into shares of the Company's Class
  A Common Stock at a conversion price of $.56 per share.  The conversion price
  of the Debentures and the purchase price per share for the Company's Class A
  Common Stock was based upon a 30-day average of the market price of the
  Company's Class A Common Stock.  The proceeds of the financing were used by
  the Company primarily to repay the outstanding principal amount plus accrued
  interest of the Company's 10% Bonds.  The balance of the proceeds so raised
  was used by the Company for working capital purposes, including satisfaction
  of the expenses of the offering.  The private financing was effectuated in
  three tranches with the first tranche being consummated on July 29, 1998, the
  second tranche on July 30, 1998, and the third tranche on July 31, 1998.
  These securities were offered in accordance with the exemption from the
  registration requirements under the Securities Act of 1933, as amended,
  afforded by Section 4(2) under such Act.  The consummation of each tranche
  represented the date that the Company received cleared funds from the
  Partnership in accordance with the terms of the executed subscription for the
  investment described above.

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

     In the event dividends are declared by the Board of Directors of the
  Company on the current number of shares of Class A Common Stock outstanding,
  to the extent funds are legally available therefor, annual dividends
  approximate $1.35 million.  The Company's Board of Directors had determined
  that it is in the best interests of the Company and its shareholders to retain
  all earnings and to forego the cash dividend payments on its outstanding
  shares of Class A and Class B Common Stock since August 1996. The Company's
  determination to forego such payments was based in part, on the Board of
  Directors' continued determination that such cash was necessary to maintain
  the Company's then current level of operations and, would be better used to
  facilitate the Company's growth. Cash dividends on the Class A and Class B
  Common Stock are cumulative, and accordingly, 

                                       19
<PAGE>
 
  the amount of such dividends would inure for the benefit of the Company's
  shareholders. The Company accrues such dividends on its financial statements
  only if and when the Company's Board of Directors declares such dividends. The
  Company will continue to evaluate future cash dividend payments depending upon
  then current business conditions, opportunities for growth and on the then
  current financial condition of the Company. Accordingly, no assurance can be
  given as to when the Company plans on resuming, if at all, the declaration of
  such cash dividends and/or the payment of such cash dividends (see
  "Dividends"). As of September 30, 1998, dividends in arrears amounted to $1.87
  million. The Company would accrue such dividends on its financial statements
  only if and when declared by the Company's Board of Directors.

     At September 30, 1998, the Company had borrowings from banks and third
  parties aggregating approximately $32.3 million.  Scheduled and estimated
  maturities of the Company's borrowings for the years ended September 30, 1999,
  2000 and 2001 are expected to be approximately $9.6 million, $9.8 million and
  $12.9 million, respectively.  Included in the scheduled maturities is the $4
  million principal amount of Debentures which are convertible at the option of
  the holder into shares of the Company's Class A Common Stock.  The Company
  anticipates that within the next twelve months it will fund, in part, its debt
  and required expenditures relating to its existing communities, including
  certain development costs, primarily with cash flow from home sales and
  construction/development financing.  To the extent cash flow from operations
  is not sufficient to satisfy such obligations or maintain its current level of
  operations based on its current volume of home sales at such time, the Company
  will attempt to procure additional equity or debt financing; although, no
  assurance can be given that such financing can be obtained on terms deemed
  favorable to the Company.  To the extent the Company is unable to procure such
  financing on terms deemed favorable to the Company, the Company may be forced
  to curtail its then current level of operations.

     In August 1998, the Company consummated the refinancing of several of its
  land and construction loans with Ohio Savings Bank.  The Company consolidated
  all of its loans with another lender into one new facility with Ohio Savings
  Bank totaling approximately $32 million.  Ohio Savings Bank is an existing
  lender to the Company and the terms of the new loan facility are similar to
  those of preexisting loan agreements and contain certain affirmative, negative
  and/or restrictive covenants.

     In May 1998 the Company exercised its option to purchase the undeveloped
  land for Phase 2 of Malibu Bay which consists of 251 lots.  The purchase price
  of the land was $2.57 million.  Seller financing was obtained for $1.24
  million which is payable $7,000 per lot plus accrued interest when title to
  the constructed unit is transferred to the purchaser.  The purchase money
  mortgage, due on May 1, 2000, accrues interest at the prime interest rate and
  is secured by the property, although it is subordinated to the bank
  acquisition/development and construction loans.  The Company obtained a $4.1
  million acquisition and development loan and a $3.5 million construction loan
  from one of its existing lenders.  Both loans accrue interest at prime plus
  1.5% and are secured by the property.  The acquisition and development loan
  matures on May 5, 2000 and the construction loan matures on May 5, 2001.

     The Company is continually exploring opportunities to purchase parcels of
  land for its homebuilding operations and is, at any given time, in various
  stages of proposing, making offers for, 

                                       20
<PAGE>
 
  and negotiating the acquisition of various parcels, whether outright or
  through options. The closing of the contemplated purchases are, in most cases,
  subject to a number of conditions, including the Company's completion of a
  satisfactory due diligence investigation and obtaining certain required
  regulatory approvals for development, and procurement of necessary financing
  on terms deemed favorable by the Company.

     The Company's loan agreements require the Company to maintain certain
  financial ratios.  In order to satisfy certain of these covenants for fiscal
  1998 and 1999, the Company procured a waiver of compliance from the relevant
  lending institution.  At September 30, 1998, the Company was in compliance
  with its loan covenants, as modified.

     Year 2000 Compliance.  As the year 2000 approaches, an issue has
  generically emerged regarding how existing application software programs and
  operating systems can accommodate this date.  In brief, many existing
  application software products in the market place were designed only to
  accommodate a two-digit date position that represents the year (e.g., `97' is
  stored on the system and represents the year 1997).  As a result, the year
  1999 (i.e., `99') could be the maximum date value these systems will be able
  to accurately process.  Management is in the process of working with its
  software vendors and providers of service to the Company, such as banks and
  subcontractors, to ensure that the Company is prepared for the year 2000.
  Management does not anticipate that the Company will incur significant
  operating expenses or be required to invest heavily in computer system
  improvements to be year 2000 compliant.

     Cash Flows.  During the year ended September 30, 1998, the Company had
  approximately $1.5 million of net cash provided from operating activities,
  primarily resulting from an increased volume of construction-in-progress and
  an increase in accounts payable due to year-end accruals for which most
  related payments were made subsequent to year-end.  The Company opened and
  furnished new model centers at Fiesta, Lago del Sol, Los Castillos at Windsor
  Palms and Harmony Lakes during fiscal 1998, which required an investment of
  approximately $0.5 million.  Based on the timing of construction loan draws
  and the repayment of outstanding construction loans on sold homes during the
  fiscal year, the Company reduced construction financing by approximately $1.5
  million.  As described above, the Company consummated a private financing
  during fiscal 1998 pursuant to which the Company received subscriptions from
  Chai Capital, Ltd for an aggregate of $5 million to purchase an aggregate $4
  million principal amount of Debentures and 1,785,714 shares of the Company's
  Class A Common Stock.  The proceeds of the financing were used by the Company
  primarily to repay the $3.75 million outstanding principal amount plus accrued
  interest of the Company's 10% Bonds.  The balance of the proceeds so raised
  was used by the Company for working capital purposes, including satisfaction
  of the expenses of the offering.

     During the year ended September 30, 1997, the Company had 9.8 million of
  net cash used in operating activities, primarily as a result of the net loss
  from operations and an increase in construction in progress at Forest Lakes,
  Malibu Bay and Los Castillos at Windsor Palms. During that period the Company
  had net cash provided by financing activities of $5.0 primarily from the
  financing of the three aforementioned communities and partially offset by the
  repayment of the 5% debentures.  During the year ended September 30, 1996 the
  Company had $2.3 million of net cash used in operating activities primarily as
  a result of the net loss from operations and a decrease in 

                                       21
<PAGE>
 
  accounts payable and accrued liabilities. During that same period the Company
  had net cash provided by financing activities of $5.7 million arising
  principally from the financing for the Weitzer at Forest Lakes and Deerfield
  projects.

  VARIABILITY OF OPERATING RESULTS; FACTORS AFFECTING FUTURE RESULTS OF
  OPERATIONS AND LIQUIDITY

     The Company has experienced and expects to continue to experience,
significant variability in sales and net income as a result of, among other
things, the stage of development of its projects, the timing of home closings,
the cyclical nature of the homebuilding industry, changes in the costs of
materials and labor, and the changes in prevailing interest rates and other
economic factors.  The Company's new sales contracts and home closings typically
vary from period to period depending primarily on the stages of development of
its projects.  In the early stages of a project's development, the Company
incurs significant start-up costs associated with, among other things, project
design, land acquisition and development, zoning and permitting, construction
and marketing expenses.  Since revenues are recognized only upon the transfer of
title at the closing of a sale of a home, there are no revenues during the early
stages of a project.  During the later stages of a project, however, costs are
lower in relation to the revenues recognized.  Accordingly, the Company's
historical financial performance is not necessarily a meaningful indicator of
future results and, in general, management expects that financial results may
vary significantly from period to period.  The Company's results of operations
and liquidity could be affected by prevailing interest rates.  Lower interest
rates may result in increased demand for homes, increased sales, lower financing
costs and lower costs of homes sold, while higher interest rates may result in
lower demand for homes, lower sales, higher financing costs and higher costs of
homes sold and, subsequently, reduced profitability.  Although the Company has
not experienced a sharp decline in the demand for its homes during recent
periods in which interest rates have risen, any increases in interest rates
could result in such a decline and have a material adverse effect on the
Company's future results of operations and liquidity.

INFLATION

   The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of higher
land and construction costs.  In addition, higher mortgage interest rates may
significantly affect the affordability of permanent mortgage financing to
prospective purchasers.  Inflation also increases the Company's interest costs
and costs of labor and materials.  The Company attempts to pass through to its
homebuyers any increases in costs through increased selling prices and, for the
past three fiscal years, inflation has not had a material adverse effect on the
Company's results of operations.  There is no assurance, however, that inflation
will not have a material adverse impact on the Company's future results of
operations.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Not applicable.

                                       22
<PAGE>
 
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO
          FINANCIAL STATEMENTS AND SCHEDULES



Reports of Independent Accountants

Consolidated Balance Sheets at September 30, 1998 and 1997

Consolidated Statements of Operations for the Years Ended September 30, 1998,
1997 and 1996

Consolidated Statements of Shareholders' Equity for the Years Ended September
30, 1998, 1997 and 1996

Consolidated Statements of Cash Flows for the Years Ended September 30, 1998,
1997 and 1996

Notes to Consolidated Financial Statements






                                      23
<PAGE>
 
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Weitzer Homebuilders Incorporated:

We have audited the accompanying consolidated balance sheet of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1998, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1998, and the
consolidated results of their operations and their consolidated cash flows for
the year then ended in conformity with generally accepted accounting principles.

We have also audited Schedule II for the year ended September 30, 1998.  In our 
opinion, this schedule presents fairly, in all material respects, the 
information required to be set forth therein.


  McKEAN, PAUL, CHRYCY, FLETCHER & CO.

Miami, Florida
November 25, 1998



                                      24
<PAGE>
 
  REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
Weitzer Homebuilders Incorporated and Subsidiaries

We have audited the accompanying consolidated balance sheet of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1997, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the two years in the period ended September 30, 1997.  These
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Weitzer
Homebuilders Incorporated and Subsidiaries as of September 30, 1997, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended September 30, 1997, in conformity with generally
accepted accounting principles.

The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 6 to the
financial statements, the Company has bonds payable in the amount of $3.75
million, which have a scheduled maturity in June 1998.  Management's plans to
restructure or refinance the bonds payable are also discussed in Note 6.  If the
Company is unable to achieve any of the alternatives discussed in Note 6, there
is substantial doubt about the Company's ability to continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability of asset carrying amounts or the
amount of liabilities that might result should the Company be unable to continue
as a going concern.


PricewaterhouseCoopers LLP
Miami, Florida
December 12, 1997


                                      25
<PAGE>

               WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARES
                          CONSOLIDATED BALANCE SHEETS
                          SEPTEMBER 30, 1998 AND 1997
<TABLE> 
<CAPTION> 
                                                                      1998                       1997
                                                                      ----                       ----
     ASSETS
     ------
<S>                                                                 <C>                       <C> 
Cash                                                                $   482,879               $   236,523
Restricted escrow funds                                                      --                    82,105
Land and land development costs                                      22,773,115                23,348,773
Construction-in-progress                                             17,250,423                15,833,115
Model furnishings, net of accumulated
 depreciation of $573,352 and $246,806                                  695,031                   502,920
Deferred loan costs, net of accumulated
 amortization of $32,520 and $611,646
                                                                        690,352                   348,383
                                         Other assets                 1,208,483                 1,095,042
                                                                    -----------               -----------
                                                                    $43,100,283               $41,446,861
                                                                    ===========               ===========
</TABLE> 
     LIABILITIES AND SHAREHOLDERS' EQUITY
     ------------------------------------
<TABLE> 
<CAPTION> 
<S>                                                                <C>                       <C>  
Customer deposits                                                  $  1,334,428              $  1,173,742
Accounts payable and accrued liabilities                              5,189,413                 3,006,640
Acquisition, development, and construction
 loans payable                                                       27,814,542                29,170,513
10% bonds payable, net of discount of $68,657                                --                 3,681,343
14% convertible subordinated debentures                               4,000,000                        --
Notes and loans payable                                                 421,028                   288,893
                                                                   ------------              ------------
                                                                     38,759,411                37,321,131
                                                                   ------------              ------------
Commitments and contingencies (Note 10)

Shareholders' equity:
   Preferred Stock, $.01 par, 5,000,000
     shares authorized, none issued                                          --                        --
   Class A Common Stock, $.01 par, 40,000,000
     shares authorized, 4,145,968 and
     2,360,254 shares issued and outstanding
     in 1998 and 1997                                                    41,460                    23,603
   Class B Common Stock, $.01  par, 1,500,000
     shares authorized, issued and outstanding                           15,000                    15,000
   Additional paid-in capital                                        11,313,093                10,330,950
   Accumulated deficit                                               (7,028,681)               (6,243,823)
                                                                   ------------              ------------     
                                                                      4,340,872                 4,125,730
                                                                   ------------              ------------
                                                                   $ 43,100,283              $ 41,446,861
                                                                   ============              ============ 
</TABLE> 

The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                      26

<PAGE>

              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
<TABLE> 
<CAPTION> 
                                                     1998                      1997                     1996
                                                     ----                      ----                     ----
<S>                                              <C>                     <C>                     <C>   
Revenues:
  Sales of homes                                 $ 50,599,859            $ 55,419,763            $ 37,391,780
  Interest income                                     125,122                 159,142                 149,459
  Other income                                        235,285                 285,313                 231,858
                                                 ------------            ------------            ------------
                                                   50,960,266              55,864,218              37,773,097
                                                 ------------            ------------            ------------
Operating costs and expenses:
  Costs of homes sold                              44,451,097              51,743,605              35,425,713
  Selling expenses                                  4,352,620               4,349,641               2,527,568
  General and administrative expenses               2,107,037               1,825,403               2,234,404
  Depreciation and amortization                       776,432                 591,866                 449,368
  Goodwill write-off                                       --                 331,570                      --
  Discontinued land acquisition expense                    --                  92,215                  32,254
  Interest expense                                     57,938                  98,197                  65,836
                                                 ------------            ------------            ------------
                                                   51,745,124              59,032,497              40,735,143
                                                 ------------            ------------            ------------
Loss before income taxes                             (784,858)             (3,168,279)             (2,962,046)

Provision for income taxes                                 --                      --                      --
                                                 ------------            ------------            ------------
Net loss                                         $   (784,858)           $ (3,168,279)           $ (2,962,046)
                                                 ============            ============            ============ 
Net loss per common share                        $      (0.19)           $      (0.82)           $      (0.81)
                                                 ============            ============            ============ 
Weighted average number of common
   shares outstanding                               4,158,688               3,860,254               3,649,204
                                                 ============            ============            ============    
</TABLE> 

The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                      27

<PAGE>


              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
             FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
<TABLE> 
<CAPTION> 

                                         Class A Common Stock   Class B Common Stock     
                                         --------------------   --------------------      Additional  
                                         Number                 Number                    Paid-in      Accumulated
                                         of shares    Amount    of shares    Amount       Capital        Deficit        Total
                                       -----------------------------------------------------------------------------------------
<S>                                      <C>         <C>       <C>         <C>          <C>           <C>            <C> 
Balance at October 1, 1995               2,032,663   $ 20,327  1,500,000   $ 15,000     $ 10,133,042  $   (113,498)  $ 10,054,871

Conversion of 5% debentures                327,591      3,276         --         --          693,370            --        696,646

Dividends-$0.24375 per share                    --         --         --         --         (495,462)           --   
                                                                                                                         (495,462)

Net loss                                        --         --         --         --               --    (2,962,046)    (2,962,046)
                                         ---------   --------  ---------   --------     ------------  ------------   ------------
Balance at September 30, 1996            2,360,254     23,603  1,500,000     15,000       10,330,950    (3,075,544)     7,294,009

Net loss                                        --         --         --         --               --    (3,168,279)    (3,168,279)
                                         ---------   --------  ---------   --------     ------------  ------------   ------------
Balance at September 30, 1997            2,360,254     23,603  1,500,000     15,000       10,330,950    (6,243,823)     4,125,730

Proceeds from issuance of common 
   stock at $.56 per share               1,785,714     17,857         --         --          982,143            --      1,000,000

Net loss                                        --         --         --         --               --      (784,858)      (784,858)
                                         ---------   --------  ---------   --------     ------------  ------------   ------------
Balance at  September 30, 1998           4,145,968   $ 41,460  1,500,000   $ 15,000     $ 11,313,093  $ (7,028,681)  $  4,340,872
                                         =========   ========  =========   ========     ============  ============   ============
</TABLE> 



The accompanying notes to consolidated financial statements are an integral part
of these statements.



                                      28

<PAGE>


               WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

<TABLE> 
<CAPTION> 

                                                                                      1998             1997               1996
                                                                                      ----             ----               ----
<S>                                                                              <C>                <C>                <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                      $   (784,858)      $ (3,168,279)      $ (2,962,046)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
   Depreciation and amortization and other non cash charges                           776,432            821,341            607,747
Changes in assets and liabilities:
     Restricted escrow funds                                                           82,105            206,767          1,526,987
     Land, land development costs, and construction-in-progress                      (841,605)        (7,676,505)          (888,720)
     Other assets                                                                     (44,784)            57,175             51,242
     Customer deposits                                                                160,686           (492,379)           700,462
     Accounts payable and accrued liabilities                                       2,182,773            431,325         (1,316,634)
                                                                                 ------------       ------------       ------------
                                                                                    2,315,562         (6,652,276)           681,084
                                                                                 ------------       ------------       ------------
Net cash provided by (used in) operating activities                                 1,530,704         (9,820,555)        (2,280,962)
                                                                                 ------------       ------------       ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                                  (1,404)          (148,780)              --
   Proceeds from sale (purchase of) model furnishings                                (586,236)           359,128           (461,254)
   Advances of future projects                                                           --            1,945,277         (1,664,987)
Net cash provided by (used in) investing activities                                  (587,640)         2,155,625         (2,126,241)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Acquisition, development, and construction loan borrowings                      54,595,585         47,399,418         39,433,675
   Payments on acquisition, development, and construction loans                   (55,951,556)       (41,393,413)       (34,563,730)
   10% bonds payable borrowings                                                          --              309,693               --
   Payments of 10% bonds payable                                                   (3,750,000)              --                 --
   Payment on 5% debentures                                                              --           (1,185,000)              --
   Proceeds from issuance of 5% debentures                                               --                 --            1,743,451
   Deferred loan cost payments                                                       (722,873)              --             (291,882)
   Proceeds from issuance of common stock                                           1,000,000               --                 --
   Proceeds from issuance of 14% debentures                                         4,000,000               --                 --
   Notes payable borrowings                                                           425,000             99,002             58,976
   Payments on notes payable borrowings                                              (292,864)          (227,295)          (201,659)
   Dividends and distributions to shareholders                                           --                 --             (495,462)
                                                                                 ------------       ------------       ------------
Net cash provided by (used in) financing activities                                  (696,708)         5,002,405          5,683,369
                                                                                 ------------       ------------       ------------

NET INCREASE (DECREASE) IN CASH                                                       246,356         (2,662,525)         1,276,166

CASH BEGINNING OF PERIOD                                                              236,523          2,899,048          1,622,882
                                                                                 ------------       ------------       ------------
CASH END OF PERIOD                                                               $    482,879       $    236,523       $  2,899,048
                                                                                 ============       ============       ============
Supplemental disclosures:
  Cash paid for interest, net of amounts capitalized                             $     57,938       $     98,197       $    103,336
                                                                                 ============       ============       ============
</TABLE> 


The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   NATURE OF BUSINESS

     Weitzer Homebuilders Incorporated ("the Company") was incorporated under
     the laws of the State of Florida in June 1994, and engages, through its
     wholly-owned subsidiaries, in the design, construction and sale of
     moderately-priced single-family residences and townhouses in Dade and
     Broward counties in South Florida.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Consolidation
     -------------

     The consolidated financial statements include the accounts of the Company
     and all of its wholly owned subsidiaries.  All significant intercompany
     transactions and balances have been eliminated.

     Accounting Estimates
     --------------------

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reported period.  Actual results could differ from those
     estimates.

     Revenue Recognition
     -------------------

     Sales of homes and all related costs are recognized as revenue and costs of
     homes sold, respectively, when title is transferred at closing.

     Restricted Escrow Funds
     -----------------------

     The Company's restricted escrow funds at September 30, 1997 are comprised
     of customer deposits not eligible for use by the Company.  There were no
     restricted escrow funds at September 30, 1998.

     Land and Construction-in-Progress
     ---------------------------------

     Land and construction-in-progress are stated at the lower of cost or
     estimated net realizable value and consists of land and land development
     costs, direct construction costs, and other costs.  Land and land
     development costs are allocated to housing units based on their 
     anticipated relative sales value.  Direct construction costs are assigned
     to housing units based on specific identification.  All other costs are
     allocated to housing units based on a pro rata basis.  The Company
     capitalizes interest, real estate taxes and similar development costs
     incurred during the development and construction period.  Interest
     capitalized during fiscal

                                      30
<PAGE>
 
     year 1998, 1997 and 1996 amounted to $3,472,035, $2,522,984 and $2,020,985,
     respectively.

     The Company periodically evaluates the carrying value of individual real
     estate projects based on estimated fair value less cost to complete and
     sell. Certain of the key assumptions used in the evaluation include sales
     price history, absorption history and cost of construction, which includes
     estimates and an interest factor. During the fiscal years ending September
     30, 1997 and 1996, the Company recorded an adjustment to carrying value of
     approximately $2,652,000 and $1,050,000, respectively. These amounts have
     been included in costs of homes sold in the accompanying consolidated
     financial statements.

     Model Furnishings
     -----------------

     Model furnishings are stated at cost.  Depreciation is being provided on
     the straight-line method over the estimated useful lives of the
     furnishings.

     Deferred Loan Costs
     -------------------

     Costs incurred in connection with borrowings and the issuance of bonds and
     debentures of the Company are deferred and amortized over the term of the
     related debt.

     Goodwill
     --------

     Based on a review performed at September 30, 1997, the Company determined
     that goodwill could not be realized and, accordingly, recorded a charge for
     the remaining balance of $331,570.

     Fair Value of Financial Instruments
     -----------------------------------

     Carrying amounts of certain of the Company's financial instruments
     including cash, accrued payroll, accrued liabilities, and borrowings
     approximate fair value because of their short term maturities or adjustable
     rates fixed to market rates for borrowings.  The Company has not obtained
     an independent valuation of its 10% bonds.

     Warranties
     ----------

     The Company subcontracts virtually all segments of construction to others
     and its contracts require the subcontractors to repair or replace any
     deficient items related to their trade.  Accordingly, no warranty accrual
     has been provided.

     Income Taxes
     ------------

     Deferred tax assets and liabilities are recorded based on the differences
     between financial statement and income tax bases of the Company's assets
     and liabilities using enacted tax rates in effect for the year in which
     these differences are expected to reverse.  The Company establishes
     valuation allowances against its deferred tax asset accounts, when


                                      31
<PAGE>
 
     necessary, to more accurately reflect tax benefits that are expected to be
     realized by the Company in the future.

     Loss Per Share
     --------------

     Basic loss per common share is computed by dividing net loss attributable
     to common stockholders by the weighted average number of shares of common
     stock outstanding during the year.  Diluted loss per share, which assumes
     that the stock options and warrants (see Note 8) are exercised, is not
     presented because the effect would be anti-dilutive.  The Company's
     reported loss per share for 1997 and 1996 have been revised to comply with
     the new earnings per share requirements of SFAS No. 128; however, there was
     no change to the amount previously reported.  The weighted average shares
     outstanding used in the computation of net loss attributable to common
     shares are as follows:


                                    Weighted Average Shares Outstanding
                                            For the Years Ended
                                       ------------------------------
<TABLE>
<CAPTION>
                                            1998             1997             1996
                                            ----             ----             ----
<S>                                         <C>              <C>              <C>
Class A Common Stock                        2,658,688        2,360,254        2,149,204
Class B Common Stock                        1,500,000        1,500,000        1,500,000   
                                            ---------        ---------        ---------
                                            4,158,688        3,860,254        3,649,204   
                                            =========        =========        =========
</TABLE>

     Recent Accounting Pronouncements
     --------------------------------

     In June 1997, the FASB issued Statement No. 130, ("SFAS No.103") "Reporting
     Comprehensive Income", which establishes standards for reporting and
     display of comprehensive income and its components (revenue, expenses,
     gains, and losses) in a full set of general-purpose financial statements.
     SFAS No. 130 is effective for fiscal years beginning after December 15,
     1997.  The Company will adopt this statement in fiscal year 1999.

     In June 1997, the FASB issued Statement No. 131, ("SFAS No. 131")
     "Disclosures about Segments of an Enterprise and Related Information",
     which establishes standards for reporting information about a company's
     operating segments and related disclosures about its products, services,
     geographic areas and major customers in annual and interim financial
     statement, SFAS No. 131 is effective for fiscal years beginning after
     December 15, 1997.  The Company will adopt this statement in fiscal year
     1999.  The adoption of this statement will not impact the Company's results
     of operations, cash flows or financial position.


                                      32
<PAGE>

3.   CONSTRUCTION IN PROGRESS

     Construction in progress consists of the following at September 30, 1998
     and 1997:

                                                   1998            1997
                                                   ----            ----

     Direct construction costs                   $11,839,713       9,162,547
     Construction period interest, property
       taxes, overhead and other
                                                   5,410,710      6, 670,568
                                                 -----------     -----------
                                                 $17,250,423     $15,833,115
                                                 ===========     ===========

4.   ACQUISITION, DEVELOPMENT, AND CONSTRUCTION LOANS PAYABLE

     Acquisition, development, and construction loans payable consist of the
     following at September 30, 1998 and 1997:

<TABLE> 
<CAPTION> 

                                                                                1998          1997
                                                                                ----          ----
<S>                                                                         <C>             <C> 
     Land acquisition and development loans with specified
     principal payments due as underlying lots, which 
     collateralize the loans, are sold:

       Required principal payments aggregating $5,790,000 through March
       1999 and $8,960,000 through September 1999, interest payable
       monthly at prime plus 1%, remaining principal due August 2000.        $10,403,401    $         -

       Interest payable monthly at prime plus 1%, paid in August 1998.                 -     10,438,529

       Interest payable monthly at prime plus 1.5%, remaining principal
       due January 2000.                                                       3,006,116      3,026,949

       Interest payable monthly at prime plus 1%, remaining principal
       due May 2000.                                                           2,120,992              -

       Interest payable monthly at prime plus 1%, remaining principal
       due July 2000.                                                          1,701,260      1,385,850

       Interest payable monthly at prime plus 1%, remaining principal
       due July 1999.                                                            300,000        300,000

       Other                                                                     125,594        126,686
                                                                              ----------     ----------
                                                                              17,657,363     15,278,014
                                                                              ----------     ----------
</TABLE> 

                                      33
<PAGE>



     Revolving construction loans with principal payments equal to the
     outstanding loan balance of each dwelling unit due when sold,
     collateralized by the dwelling unit and related lot:

<TABLE> 

        <S>                                                                      <C>               <C> 
        Interest payable monthly at prime plus 1%, remaining principal
        due August 2001.                                                           7,403,518                 -


        Interest payable monthly at prime plus 1%, paid in August 1998.                    -        11,335.228

        Interest payable monthly at prime plus .875%, remaining principal
        due July 2000.                                                             1,174,228                 -

        Interest payable monthly at prime plus 1.5%, remaining principal
        due January 2000.                                                            262,652           942,069
                                                                                 -----------       -----------
                                                                                   8,840,398        12,277,297
                                                                                 -----------       -----------
     Purchase money mortgage note, principal payments of $7,000 due as
     each underlying lots is sold, interest added monthly to the
     principal balance of the loan at prime, remaining principal due May
     2000. The note is secured by a second mortgage on the property.               1,316,781                 -

     Revolving mortgage note, interest payable monthly at prime plus
     1.5%, collateralize by a first mortgage on all properties for which
     funds have been disbursed, paid in August 1998.                                       -         1,215,202

     Revolving line of credit, paid in August 1998                                         -           400,000
                                                                                 -----------       -----------
                                                                                 $27,814,542       $29,170,513
                                                                                 ===========       ===========
</TABLE> 
     Until August 1998, the Company maintained loan agreements with one of its
     lenders that included a revolving credit facility of $50 million used for
     the acquisition, development, and construction of certain residential
     projects, including a revolving line of credit for working capital
     purposes. In August 1998, the Company consummated a refinancing of the
     loans under new credit facilities, repaid the outstanding balance and
     terminated the credit facility. The Company's new credit facilities include
     a land acquisition and development loan, and a revolving construction loan.

     During May 1998, the Company entered into a $3.5 million revolving
     construction loan that matures on May 5, 2001 and bears interest at prime
     plus 1%. There were no outstanding borrowings under this loan at September
     30, 1998.

                                      34
<PAGE>


     The following are the scheduled and estimated maturities of acquisition,
     development and construction loan payable at September 30, 1998:

                          1999        $   9,385,594
                          2000            9,582,030
                          2001            8,846,918
                                      -------------
                                      $  27,814,542
                                      =============  
     One of the loan agreements require the Company to maintain a minimum
     tangible net worth, and a certain ratio of liabilities to shareholders'
     equity. In order to satisfy certain of these covenants for fiscal years
     1997 and 1998, the Company procured waivers of compliance from the relevant
     lending institution through September 30, 1999. At September 30, 1998, the
     Company was in compliance with its loan covenants, as modified. In
     addition, the loan agreements restrict the Company from declaring or paying
     any dividends or make any other distributions on any shares of capital
     stock of the Company.

5.   NOTES AND LOANS PAYABLE

     Notes and loans payable consist of the following at September 30, 1998 and
     1997:

<TABLE> 
<CAPTION> 
                                                                                     1998            1997
                                                                                     ----            ----
     <S>                                                                            <C>            <C>     
     Capital lease obligation with interest imputed at 9.5%, payments of
     $13,515 due monthly through December 2000, collateralized by certain
     furnishings.                                                                   $330,556       $    -

     Notes payable to bank, bearing interest at prime rate plus 1%,
     principal payments of $4,000 due monthly with interest through
     January 2000.                                                                    63,107      143,495

     Notes payable to bank, bearing interest at 8.25%, principal and
     interest payments of $1,108 due monthly through April 2000,
     collateralized by vehicles.                                                      27,365       37,476

     Capital lease obligation with interest imputed at 13.44%, payments
     of $8,857 due monthly through August 1998 with a balloon payment of
     $29,024 due September 1998, collateralized by certain furnishings.                    -       94,467

     Other                                                                                 -       13,455
                                                                                    --------     --------
                                                                                    $421,028     $288,893
                                                                                    ========     ========
</TABLE> 


                                      35
<PAGE>


     The following are the scheduled maturities of notes and loans payable as of
     September 30, 1998.

                   1999                $196,014
                   2000                 177,688
                   2001                  47,326
                                       ---------
                                       $421,028
                                       =========
6.   14% COVERTIBLE SUBORDINATED DEBENTURES AND 10% BONDS PAYABLE

     On July 28, 1998, the Company sold $4,000,000 of 14% Convertible
     Subordinated Debentures ("the Debentures") and 1,784,714 shares of the
     Company's authorized and unissued $.01 par value per share Class A Common
     Stock at $.56 per share ($1,000,000 in aggregate) to a Florida limited
     partnership, of which the President of the Company is among the limited
     partners. In addition, the President contributed 1,500,000 shares of Class
     B Common Stock of the Company (which he owned) to the partnership. The
     Debentures are due in July 2001 and are convertible at the option of the
     holder into shares of the Company's Class A Common Stock at a conversion
     price of $ .56 per share, and are subordinate to any senior debt of the
     Company. The proceeds of the financing were used by the Company primarily
     to repay the outstanding principal amount plus accrued interest of the
     Company's outstanding 10% bonds in June 1998. In addition, pursuant to the
     terms of the Debentures, the Company may not incur any new debt in excess
     of $200,000 per annum and may not issue any securities in the future (other
     than securities issuable upon exercise and/or conversion of currently
     outstanding derivative securities) without the prior consent of the
     Partnership.

     At September 30, 1997, the Company had bonds payable of $3,681,343
     ($3,750,000 principal amount of 10% bonds due on June 30, 1998, net of
     $68,657 original issue discount). During fiscal 1997, the Company was
     exploring alternatives related to the repayment of the 10% bonds. There was
     no assurance that the Company's efforts to repay or refinance such
     obligations at maturity would be successful. Under these circumstances, the
     Company's ability to continue as a going concern depended upon the
     successful restructuring or refinancing of the bond obligations in fiscal
     1998. The consolidated financial statements at September 30, 1997 did not
     include any adjustments that might have resulted from the outcome of this
     uncertainty. As described above, the 10% bonds were repaid during fiscal
     1998.

                                      36
<PAGE>

7.   INCOME TAXES

     The components of net deferred taxes at September 30, 1998 and 1997 are as
     follows:

<TABLE> 
<CAPTION> 
                                                    1998                    1997
                                                    ----                    ----
          <S>                                    <C>                    <C> 
          Deferred tax  assets                                    
            Net operating loss carryfowards      $ 2,148,000           $ 1,092,500
            Accrued expenses                          56,000                56,000
            Deferred writedown of assets             459,000             1,219,500
            Deferred contributions                     8,500                 8,500
                                                 -----------           -----------
                                                   2,671,500             2,376,500
                Less valuation allowance          (2,671,500)           (2,376,500)
                                                 -----------           -----------
          Net deferred tax  assets               $         -           $         -
                                                 ===========           ===========
</TABLE> 

     Reconciliation of the differences between income taxes (benefit) computed
     at federal statutory tax rates and the Company's recorded provision
     (benefit) for income taxes are as follows: 

<TABLE> 
<CAPTION> 
                                                              1998      1997        1996 
                                                              ----      ----        ---- 
          <S>                                               <C>        <C>        <C> 
          Expected tax benefit at Federal statutory rate    (34.0)%    (34.0)%    (34.0)%
          State income tax (benefit), net                   ( 3.6)%    ( 3.6)%    ( 3.6)%
          Valuation allowance                                37.6 %     37.6 %     37.6 %
                                                             ----       ----       ----
                Income tax expense (benefit)                  0.0 %      0.0 %      0.0 %
                                                             ====       ====       ====
</TABLE> 

     As of September 30, 1998, the Company had net operating losses of
     approximately $5,700,000, which have been offset by a valuation allowance.
     Due to the convertibility feature of certain debt and common stock issued
     during fiscal year 1998, the net operating losses incurred through July
     1998 could be limited in the future. The carryforwards will expire through
     the year 2013. During the year ended September 30, 1998, the Company
     recorded an additional valuation allowance of $295,000 on the deferred tax
     assets to reduce the total to an amount that management believes will
     ultimately be realized. SFAS No. 109 requires a valuation allowance be
     recorded against tax assets which are not likely to be realized. Based upon
     past performance and the uncertain nature of their ultimate realization,
     the Company established a valuation allowance against these carryforward
     items and will be recognizing the benefits only as reassessment
     demonstrates they are realizable.

8.   STOCK-BASED COMPENSATION

     In connection with its initial public offering, the Company sold to certain
     lead underwriters, for nominal consideration, warrants to purchase from the
     Company's 160,000 shares of Class A Common Stock. The warrants are
     exercisable at a price of $7.80 per share of Class A Common Stock through
     April 26, 2000. The warrants also provide for adjustment in the number of
     shares of Class A Common Stock issuable upon the exercise thereof as a
     result of certain subdivisions and combinations of the Class A 

                                      37
<PAGE>


     Common Stock. The warrants grant to the holders thereof certain rights of
     registration of the securities issuable upon the exercise of the warrants.

     In March 1995 the Company granted, to the Company's President, options to
     purchase 150,000 shares of Class A Common Stock exercisable at $7.80 per
     share for a period of four years commencing April 26, 1996. In February
     1997, the Company granted to directors and certain employees options to
     purchase 620,000 shares of Class A Common Stock exercisable at $1.75 per
     share for a period of 10 years. The options vest ratably over a 5 year
     period except for options to purchase 65,000 shares, which vested
     immediately.

     In October 1995, SFAS No. 123 was issued by the FASB and, if fully adopted,
     changes the methods for recognition of compensation expense for stock-based
     compensation. Adoption of SFAS No. 123 is optional with respect to
     stock-based awards of employees; however, SFAS No. 123 requires pro forma
     disclosures as if the Company adopted the cost recognition principles. Had
     compensation cost been determined based on the fair market value at the
     grant dates for awards consistent with the methods prescribed by SFAS No.
     123, the Company's net loss and net loss per share per in fiscal 1998 and
     1997 would have been increased to the pro forma amounts indicated below:

                                         1998          1997
                                         ----          ----
       Pro forma net loss:
           As reported               $(784,858)    $(3,168,279)
                                     =========     ===========
           Pro forma                 $(916,378)    $(3,281,532)
                                     =========     ===========

       Pro forma loss per share:
           As reported                 $ (0.19)        $ (0.82)
                                       =======         =======
           Pro forma                   $ (0.22)        $ (0.85)
                                       =======         =======

     The fair value of the fiscal year 1997 option grants was estimated on the
     date of grant using the Black-Scholes option-pricing model with the
     following assumptions: risk free interest rates of 6.75%, dividend yield of
     0%, expected lives of 0 years and volatility of 78%. The weighted average
     fair value of options granted was $1.37.

     A summary of the status of the Company's stock-based option awards during
     September 30, 1998, 1997 and 1996, and changes during the years ending on
     those dates is presented below:

<TABLE> 
<CAPTION> 

                                              1998               1997               1996
                                            Weighted           Weighted           Weighted
                                            Average             Average            Average
                                            Exercise           Exercise           Exercise
                                         Options   Price    Options   Price    Options   Price
                                         -------   -----    -------   -----    -------   -----
     <S>                                 <C>       <C>      <C>       <C>      <C>       <C> 
     Outstanding at beginning of year    905,000    3.82    310,000    7.80    310,000    7.80
     Granted                                   -       -    620,000    1.75          -       -
     Exercised                                 -       -          -       -          -       -
     Forfeited                           (55,000)  (1.75)   (25,000)  (1.75)         -       -
                                         -------   -----    -------   -----    -------   -----
     Outstanding at year end             850,000    3.95    905,000    3.82    310,000    7.80
                                         =======   =====    =======   =====    =======   =====
     Exercisable at end of year          475,000            375,000            310,000
                                         =======            =======            =======
</TABLE> 

                                      38
<PAGE>
 
9.   CAPITAL STOCK

     The Class A Common Stock and the Class B Common Stock vote together as a
     single class and are entitled to one vote per share.

     Prior to the Company having earned an aggregate of $7.5 million of adjusted
     operating income (as defined), the holders of Common Stock are entitled to
     receive dividends, to the extent funds are legally available, at the rate
     of $0.325 per share per annum for Class A Common Stock and $0.001 per share
     per annum for Class B Common Stock, payable on a quarterly basis.  Since
     August 1996, the Board of Directors of the Company has elected to forego
     the regularly scheduled cash dividend payments on its outstanding shares of
     Class A Common Stock and Class B Common Stock.  Cash dividends on the Class
     A and Class B Common Stock are cumulative, and accordingly, the amount of
     such dividends would inure for the benefit of the Company's shareholders.
     The Company accrues such dividends on its financial statements only if and
     when the Company's Board of Directors declares such dividends (see Note 4
     for restrictions on dividends). As of September 30, 1998, dividends in
     arrears amounted to approximately $1,874,000.

     Each share of Class B Common Stock can be converted into one share of Class
     A Common Stock if the Earnings Achievements Date (as defined) has occurred
     and all accumulated and unpaid dividends on the Class A Common Stock have
     been declared and paid in full.

10.  COMMITMENTS AND CONTINGENCIES

     Performance Bonds
     -----------------

     In accordance with certain governmental requirements, the Company has
     caused performance bonds and letters of credit aggregating $1,645,000, to
     be issued to governmental agencies for certain of the projects to secure
     the completion of required improvements as of September 30, 1998.

     Litigation
     ----------

     The Company is involved from time to time in litigation arising in the
     ordinary course of its business none of which is expected to have a
     material adverse effect on the Company's consolidated financial position or
     results of operations.

11.  RELATED PARTY TRANSACTION

                                       39
<PAGE>

     In fiscal year 1997, a director of the Company was also the managing
     director of a company ("the Consulting Company") that provided financial
     services to the Company. During fiscal year 1997, the Consulting Company
     was paid a fee of $163,000 and received 200,000 warrants to purchase stock
     at $2.25 per share and 150,000 stock appreciation rights relating to the
     potential conversion of Class B Common Stock into Class A Common Stock. The
     warrants and stock appreciation rights were cancelled in 1998 when the
     director resigned.



                 WEITZER HOMEBUILDER INCORPORTED AND SUBSIDIARES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE> 
<CAPTION> 
                                          Balance at    Charged to   Charged to 
                                          Beginning     Cost and     Other                       Balance at
                                          of Year       Expenses     Accounts     Deduction      End of Year
                                          ----------    ----------   ----------   ----------     -----------
<S>                                       <C>           <C>          <C>          <C>            <C> 
YEAR ENDED SEPTEMBER 30, 1998
 Allowances deducted from assets for 
   Deferred taxes                          2,376,500    $  295,000    $      -    $        -     $2,671,500
                                           =========    ==========    ========    ==========     ==========
YEAR ENDED SEPTEMBER 30, 1997
 Allowances deducted from assets for
   Deferred taxes                         $1,130,400    $1,246,100    $      -    $        -     $2,376,500
                                           =========    ==========    ========    ==========     ==========
</TABLE> 


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     As previously reported by the Company on Form 8-K, filed on October 7,
1998, effective October 5, 1998, the Company engaged McKean, Paul, Chrycy,
Fletcher & Co. as the independent accountants to audit the financial statements
of the Company and its subsidiaries for the fiscal year ended September 30,
1998, replacing PricewaterhouseCoopers LLP (formerly Coopers & Lybrand LLP), who
was dismissed as of October 5, 1998.

     In connection with the audits of the Company's financial statements for
each of the two fiscal years ended September 30, 1997 and 1996, respectively,
and in the subsequent interim periods preceding PricewaterhouseCoopers LLP's
dismissal, there were no disagreements on any matters of accounting principles
or practices, financial statement disclosure or auditing scope or procedure
which, if not resolved to their satisfaction, would have caused them to make
reference to the matter in their report.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<PAGE>


     The information regarding the Company's Directors and Executive Officers is
     included in Part I under "Directors and Executive Officers of the
     Registrant."

ITEM 11.        EXECUTIVE COMPENSATION

      The following table sets forth certain summary information concerning all
cash and noncash compensation paid or accrued for services rendered to the
Company during the fiscal years ended September 30, 1996, 1997 and 1998 to the
Company's Chief Executive Officer and each of the Company's other most highly
compensated executive officers. All executive officers of the Company are
currently employees of an employee leasing company, Paychex Business Solutions,
Inc., which has an Agreement for Services with the Company.

<TABLE> 
<CAPTION> 

Summary Compensation Table (1)

                                                                                                 Long Term Compensation
                                                                                ----------------------------------------------------
                                             Annual Compensation                           Awards                   Payouts
                             -------------------------------------------------  --------------------------  ------------------------

                                                                      Other      Restricted    Securities                 All
                                                                     Annual        Stock       Underlying     LTIP       Other
                               Fiscal    Salary        Bonus      Compensation     Awards       Options/    Payouts   Compensation
Name and Principal Position     Year       ($)          ($)           ($)            (#)        SARs (#)      ($)          ($)
---------------------------  ---------- ----------   ----------   ------------  -------------  -----------  -------- --------------
<S>                          <C>        <C>          <C>          <C>           <C>            <C>          <C>      <C> 

Harry Weitzer                   1998     323,000              0              0              0           0         0              0
Chairman of the Board and       1997     319,000              0              0              0     250,000         0              0
Chief Executive Officer         1996     295,000              0              0              0     150,000         0              0
                                                                                                                                  
Peter Kleinerman(2)             1998     174,000         25,000              0              0           0         0              0
Executive Vice President and    1997     105,000              0              0              0     125,000         0              0
Chief Operating Officer         1996           0              0              0              0           0         0              0
                                                                                                                                  
James Rosewater                 1998     120,000              0              0              0           0         0              0
Vice President-Marketing        1997     110,000              0              0              0      50,000         0              0
                                1996      95,000              0              0              0           0         0              0
                                                                                                                                  
Leigh Feldsteen (3)             1998      94,000              0              0              0           0         0              0
Vice President-Sales            1997     131,000              0              0              0      50,000         0              0
                                1996      12,000              0              0              0           0         0              0
                                                                                                                                  
Harry Speizer(2) (3)            1998     149,000         25,000              0              0           0         0               
Vice President-Real Estate      1997      92,000              0              0              0     100,000         0              0
                                1996           0              0              0              0           0         0              0
                                                                                                                                 
</TABLE> 

     (1)  The amounts reflected in the above table do not include any amounts
          for perquisites and other personal benefits extended to the named
          executive officers. All of the personnel of the Company are leased to
          the Company through Paychex Business Solutions, Inc., which has an
          agreement for services with the Company.

     (2)  Mr. Kleinerman and Mr. Speizer joined the Company in March 1997.

     (3)  Mr. Speizer and Mr. Feldsteen left the employ of the Company in
          October 1998 and May 1998, respectively. Mr. Speizer and the Company
          entered into a consulting agreement for real estate consulting
          services through February 28, 1999, as described below.


                                      41
<PAGE>



Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE> 
<CAPTION> 
                        Shares
                       Acquired                Number of Securities Underlying          Value of Unexercised
                          on          Value       Unexercised Options/SARs            In-the-Money Options/SARs
Name(2)                Exercise     Received      at September 30, 1998(#)           at September 30, 1998($)(1)
-------                --------     --------      ------------------------           ---------------------------
                                                Exercisable     Unexercisable       Exercisable     Unexercisable
                                                -----------     -------------       -----------     -------------
<S>                    <C>          <C>         <C>             <C>                 <C>             <C>   
Harry Weitzer             -             -         200,000          200,000                -                -
Peter Kleinerman          -             -          50,000           75,000                -                -
Harry Speizer             -             -          40,000                0                -                -
Jim Rosewater             -             -          10,000           40,000                -                -
</TABLE> 

(1)  The closing price for the Class A Common Stock as reported by the OTC
     Bulletin Board on September 30, 1998 was $0.406, which is less than the
     option exercise price at the Company's fiscal year end.

(2)  Does not include Leigh Feldsteen, who left the employ of the Company in May
     1998, and who does not own any options at September 30, 1998.

Compensation of Directors

      Directors who are not employees and who do not otherwise receive
compensation from the Company are entitled to $2,000 per Board meeting attended
in addition to the reimbursement of reasonable expenses incurred in attending
meetings. Directors who are officers or employees of the Company receive no
additional compensation for service as directors, other than reimbursement of
reasonable expenses incurred in attending meetings. During the fiscal year ended
September 30, 1998, the Company made no other payments to directors with respect
to participation on Board committees. See "Certain Relationships and Related
Transactions" for compensation paid by the Company to certain directors for
consulting services and relationships of several directors with Chai Capital,
Ltd, an affiliate of the Company.

Employment Contracts and Termination of Employment and Change in Control 
Arrangements

     Effective as of November 1, 1995, the Company entered into a five-year
employment agreement (the "Employment Agreement") with Harry Weitzer, its
Chairman, President and Chief Executive Officer, whereby he agreed to devote
substantially all of his business time to the affairs of the Company. The
Employment Agreement provides for a salary of $300,000, with annual cost of
living adjustments. In addition, the Employment Agreement provides for bonuses,
reimbursement of business expenses, provision of an automobile, health insurance
and related benefits. The Employment Agreement provides that if Mr. Weitzer is
terminated other than for "cause" (which is defined as gross negligence in the
performance of his duties, fraud, embezzlement or breach of trust), dissolution
of the Company or his death, he will be entitled to receive the scheduled
compensation for the full remaining term of the Employment Agreement. Any
bonuses or other forms of compensation that Mr. Weitzer may receive in the
future fiscal


                                      42
<PAGE>
 
years will be determined by the Compensation Committee of the Board of Directors
based on criteria established by the Committee.

  Effective as of March 1, 1997, the Company entered into a two-year employment
agreement (the "Kleinerman Agreement") with Peter Kleinerman, the Company's
Executive Vice President and Chief Operating officer, whereby Mr. Kleinerman
agreed to devote substantially all of his business time to the affairs of the
Company.  The Kleinerman Agreement provides for an annual salary of $175,000.
In addition, the Kleinerman Agreement provides for bonuses, reimbursement of
business expenses, provision of an automobile, health insurance and related
benefits.  The Kleinerman Agreement provides that if Mr. Kleinerman is
terminated other than for "cause" (which is defined as gross negligence in the
performance of his duties, fraud, embezzlement or breach of trust), dissolution
of the company or his death, he will be entitled to receive the scheduled
compensation for a period of nine months.  Any bonuses or other forms of
compensation that Mr. Kleinerman may receive in the future fiscal years will be
determined by the Compensation Committee of the Board of Directors based on
criteria established by the Committee.

  Effective as of March 1, 1997, the Company entered into a two-year employment
agreement (the "Speizer Agreement") with Harry Speizer, the Company's Senior
Vice President of Real Estate, whereby Mr. Speizer agreed to devote
substantially all of his business time to the affairs of the Company.  The
Speizer Agreement provides for an annual salary of $150,000.  In addition, the
Speizer Agreement provides for bonuses, reimbursement of business expenses,
provision of an automobile, health insurance and related benefits.  The Speizer
Agreement provides that if Mr. Speizer is terminated other than for "cause"
(which is defined as gross negligence in the performance of his duties, fraud,
embezzlement or breach of trust), dissolution of the Company or his death, he
will be entitled to receive the scheduled compensation for a period of nine
months.  Any bonuses or other forms of compensation that Mr. Speizer may receive
in the future fiscal years will be determined by the Compensation Committee of
the Board of Directors based on criteria established by the Committee. The
Speizer Agreement was terminated in October 1998 and the Company entered into a
consulting agreement with Mr. Speizer for real estate consulting services, at a
monthly fee of $12,500, through February 28, 1999.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

  The Company's executive compensation for the fiscal year ended September 30,
1998 consisted of three primary components: base salary, bonus and grants of
stock options.  Fiscal 1998 salary and bonus for the Company's executive
officers was determined by the Compensation Committee and approved by the
Company's Board of Directors.

  The components of the Company's Executive Compensation (salary, bonus and
stock options) are designed to facilitate fulfillment of the compensation
objectives of the Company, which objectives include (i) attracting and retaining
competent management, (ii) rewarding management for short and long term
accomplishments, (iii) aligning the interests of management with those of the
Company's shareholders, and (iv) relating management compensation to the
achievement of Company goals and the Company's performance.

                                       43
<PAGE>
 
  The Board's determination of fiscal 1998 salary for the Company's executive
officers was made after reviewing and considering a number of factors, including
job responsibility, level of performance, achievement of Company goals, Company
performance, compensation levels at competitive companies and the Company's
historical compensation levels. Although Company performance was one of the
factors considered, the Board's compensation decisions were based upon an
overall review of the relevant factors and compensation was not tied to Company
performance by any specific relationship or formula.

  The determination of fiscal 1998 salary for Harry Weitzer, the Chairman of the
Board, President and Chief Executive Officer of the Company, was based upon his
existing employment agreement and a stock option agreement between the Company
and Mr. Weitzer.

                                              Joseph Rose, Chairman
                                              Larry Hellring

PERFORMANCE GRAPH

  The graph below compares the cumulative total returns of the Class A Common
Stock with the companies in the NASDAQ Stock Market (U.S.) Index and with six
peer group companies which include Engle Homes, Inc, Oriole Homes Corp.,
Rottlund Homes Inc., Sundance Homes, Inc., Washington Homes, Inc. and Zaring
Homes, Inc. (the "Peer Group").  The Peer Group consists of Homebuilders who
either (i) concentrate their operations primarily within one geographical area
of the country and have a market capitalization of less than $50 million, or
(ii) concentrate their operations primarily in Florida and have a market
capitalization of less than $100 million.  The comparison covers a period from
April 26, 1995 to September 30, 1998, and is based on an assumed $100 investment
on April 26, 1995 (the date of the initial public offering of Class A Common
Stock) in the Nasdaq Stock Market (U.S.) Index, the Peer Group and in the Class
A Common Stock.  Comparison with the Nasdaq Stock Market is included to be
consistent with the Company's previous filings, although the Company's Class A
Common Stock is currently traded on the OTC Bulletin Board.  See "Item 5  Market
for Registrant's Common Equity and Related Stockholder Matters."

                           [LINE GRAPH APPEARS HERE]

                                            Cumulative Total Return
                                     --------------------------------------
                                     4/26/95   9/95    9/96    9/97    9/98
                                                                    
WEITZER HOMEBUILDERS INCORPORATED    $100.00 $101.25 $ 33.01 $ 16.51 $  6.71
PEER GROUP                            100.00  115.34  119.51  120.42  107.83
NASDAQ STOCK MARKET (U.S.)            100.00  125.35  148.71  204.13  208.65

                 *$100 INVESTED ON 4/26/95 IN STOCK OR INDEX-
                  INCLUDING REINVESTMENT OF DIVIDENDS.
                  FISCAL YEAR ENDING SEPTEMBER 30.

                                       44
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN 
         BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth as of December 16, 1998, the number and
     percentage of outstanding shares of Common Stock owned beneficially by (i)
     each shareholder known by the Company to own more than 5% of the
     outstanding shares of Class A Common Stock or Class B Common Stock; (ii)
     each director of the Company; (iii) each executive officer named in the
     Summary Compensation Table under "Executive Compensation" and (iv) all
     directors and executive officers as a group.

<TABLE> 
<CAPTION> 
                                                        Class A Common Stock      Class B Common Stock
                                                        --------------------      --------------------
                                                        Amount and                Amount and
                                                         Nature of                 Nature of
Name and Address                                        Beneficial    Percent      Beneficial    Percent
of Beneficial Owner                                     Ownership(1)  of Class     Ownership(1)  of Class
------------------                                      ------------  --------     ------------  --------
<S>                                     <C>             <C>           <C>          <C>           <C> 
Harry Weitzer                           (2) (6)             400,000       8.8%           --            --
5901 N.W. 151st Street,                                                        
Suite 120, Miami Lakes, FL 33014                                               
Larry Hellring                              (3)              15,000       (11)           --            --
Joseph B. Rose                              (4)              15,000       (11)           --            --
Mike Ambrosio                           (5) (6)               5,000       (11)           --            --
Alan Litt                                                        --        --            --            --
Peter Kleinerman                            (7)             125,000       2.9%           --            --
Harry Speizer                               (8)              40,000       (11)           --            --
James Rosewater                             (9)              51,000       1.2%           --            --
All directors and executive                                                      
Officers as a group (9 persons)                             651,000      13.6%           --            --

Chai Capital, Ltd.                     (6) (10)           8,928,571      79.1%      1,500,000       100.0%
11900 Biscayne Blvd., Suite 801                                       
Miami, FL 33181
</TABLE> 

(1)  Unless otherwise indicated, the ownership reflected in this table is direct
     and beneficial.
(2)  Includes 150,000 shares of Class A Common Stock issuable upon the exercise
     of a like number of options at an exercise price of $7.80 which expire
     April 20, 2000 and 250,000 shares of Class A Common Stock issuable upon the
     exercise of a like number of options at an exercise price of $1.75 which
     expire March 12, 2006.
(3)  Includes 5,000 shares of Class A Common Stock issuable upon the exercise of
     a like number of options at an exercise price of $1.75 and which options
     expire March 12, 2006.
(4)  Includes 5,000 shares of Class A Common Stock issuable upon the exercise of
     a like number of options at an exercise price of $1.75 and which options
     expire March 12, 2006.
(5)  Includes 5,000 shares of Class A Common Stock issuable upon the exercise of
     a like number of options at an exercise price of $1.75 and which options
     expire March 12, 2006.

                                      45
<PAGE>
 
(6)  Includes 1,785,714 shares of Class A Common Stock owned and 7,142,857
     shares of Class A Common Stock issuable upon conversion of $4 million of
     the Company's Convertible Subordinated Debentures at a conversion price of
     $.56 per share. Among the limited partners of Chai Capital, Ltd.
     ("Partnership") are Harry Weitzer and a trust ("Trust") for the benefit of
     the wife of Michael Ambrosio. Mr. Ambrosio disclaims beneficial ownership
     of the limited partnership interest held by the Trust. In addition, Mr.
     Weitzer contributed 1.5 million shares of the Company's Class B Common
     Stock owned of record by him to Chai Capital, Ltd. The general partner of
     the Partnership is Chai Capital Corp. of which Messrs. Weitzer and Ambrosio
     are officers and directors. Mr. Weitzer owns 49.5% and the Trust owns 1% of
     the issued and outstanding shares of the capital stock of Chai Capital
     Corp.
(7)  Includes 125,000 shares of Class A Common Stock issuable upon the exercise
     of a like number of options at an exercise price of $1.75 and which options
     expire March 1, 2007.
(8)  Includes 40,000 shares of Class A Common Stock issuable upon the exercise
     of a like number of options at an exercise price of $1.75 and which options
     expire October 31, 1999. Mr. Speizer left the employ of the Company in
     October 1998 and entered into a consulting agreement with the Company for
     real estate consulting services through February 28, 1999.
(9)  Includes 50,000 shares of Class A Common Stock issuable upon the exercise
     of a like number of options at an exercise price of $1.75 and which options
     expire March 12, 2006.
(10) Each share of Class B Common Stock can be converted into one share of Class
     A Common Stock if the Earnings Achievement Date (as defined) has occurred
     and all accumulated and unpaid dividends on the Class A Common Stock have
     been declared and paid in full.
(11) Represents less than one percent.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Michael Ambrosio, a Director of the Company, entered into an agreement with
the Company in September 1998 to furnish consulting services.  The agreement
provides that Mr. Ambrosio will be paid a monthly fee of $3,000, on a month-to-
month basis, cancelable at any time by either party.  For the fiscal year ended
September 30, 1998, Mr. Ambrosio was paid $3,000.  A trust for the benefit of
Mr. Ambrosio's wife is a limited partner of Chai Capital, Ltd.  Mr. Ambrosio is
an officer and director of Chai Capital Corp., the general partner of Chai
Capital, Ltd.

  Harry Weitzer and Alan Litt are limited partners of Chai Capital, Ltd. and Mr.
Weitzer is an officer and director of Chai Capital Corp., the general partner of
Chai Capital, Ltd.

PART IV
-------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT
          SCHEDULES AND REPORTS ON FORM 8-K

     (a)  The following documents are filed as a part of this report:

          1.   The following exhibits, including those incorporated by
               reference.


EXHIBIT
NUMBER      DESCRIPTION
            -----------

3.1**       Amended and Restated Articles of Incorporation of the Company

3.2*        By-Laws of the Company

                                       46
<PAGE>
 
4.1***        Loan Agreement dated as of June 30, 1995, between the Company and
              Residential Funding Corporation

4.2***        Construction Loan Agreement dated as of June 30, 1995, between
              Weitzer at Deerfield Beach, Inc., and Residential Funding
              Corporation and related Promissory Note and Guaranty of the
              Company

4.3*****      First Amendment Agreement dated as of January 24, 1996 by and
              between the Company, Residential Funding Corporation and Webster
              Grant Land Company

4.4******     Construction Loan Agreement dated February 28, 1996, between
              Weitzer Forest Lakes Villas, Inc. and Residential Funding
              Corporation and related Promissory Note and Guaranty of the
              Company

4.4******     Construction Mortgage, Security Agreement and Fixture Filing with
              Assignment of Rents, Proceeds and Agreements dated as of February
              28, 1996 between Weitzer Forest Lakes Villas, Inc. and Residential
              Funding Corporation

10.1*         Employment Agreement dated as of November 1, 1994, between the
              Company and Harry Weitzer

10.2*         Indemnification Agreement dated as of September 30, 1994, between
              the Company and Harry Weitzer

10.3*         Option Agreement for the Purchase of Common Stock dated as of
              March 22, 1994 between the Company and Harry Weitzer

10.4*         Letter Agreement dated January 31, 1995, among the Company, Harry
              Weitzer, Weitzer Chapel Trail Homes, Inc., and Ohio Savings Bank

10.5*         Pledge Agreement dated as of October 25, 1994, between the Company
              and Josephthal, as agent on behalf of the holders of the 10%
              Bonds, of the stock of Weitzer at Harmony Lakes, Inc. relating to
              the Company's October 1994 private placement

10.6*         Agreement dated as of January 30, 1992, between Broward Management
              Company and Webster Grant Land Company, as amended

10.7***       Agreement for Purchase and Sale dated June 14, 1995, between Dade
              Residential Developers, Inc. and Webster Grant Land Company

10.8****      Agreement for Services dated as of November 30, 1995, between the
              Company and Paychex Business Solutions, Inc.

10.9          First Amendment To First Amended And Restated Agreement For
              Purchase And Sale dated January 30, 1998 between Chapel Trail
              Associates, Ltd. and Webster Grant Land Company.

10.10*******  Form of 14% Convertible Subordinated Debenture

                                       47
<PAGE>
 
10.11         Unconditional And Continuing Guaranty Agreement And Indemnity
              Agreement dated May 6, 1998 between Weitzer Homebuilders
              Incorporated and Ohio Savings Bank

10.12         Unconditional And Continuing Guaranty Agreement And Indemnity
              Agreement dated August 20, 1998 between Weitzer Homebuilders
              Incorporated and Ohio Savings Bank

21.1****      Subsidiaries of the Company


*       Incorporated herein by reference to the exhibit bearing the same number
        and filed as a part of the Company's Registration Statement on Form S-1
        filed on April 26, 1995 (File No. 33-89076).

**      Incorporated herein by reference to the exhibit filed as a part of the
        Company's report on Form 10-Q for the three months ended March 31, 1996.

***     Incorporated herein by reference to the exhibit filed as a part of the
        Company's report on Form 10-Q for the three months ended June 30, 1996.

****    Incorporated herein by reference to the exhibit filed as a part of the
        Company's report on Form 10-K for the fiscal year ended September 30,
        1996.

*****   Incorporated herein by reference to the exhibit filed as a part of the
        Company's report on Form 10-Q for the three months ended December 31,
        1996.

******  Incorporated herein by reference to the exhibit filed as a part of the
        Company's report on Form 10-Q for the three months ended March 31, 1997.

******* Incorporated herein by reference to the exhibit filed as a part of the
        Company's report on Form 8-K filed on August 3, 1998.

                                       48
<PAGE>
 
SIGNATURES



  Pursuant to the requirements of Section 13 or 15(d) 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, as of the 17th day of
  December, 1998.

                            WEITZER HOMEBUILDERS INCORPORATED

                            By:  S\HARRY WEITZER
                                 ---------------
                                 Harry Weitzer
                                 Chairman of the Board, and Chief Executive
                                 Officer (Principal Executive Officer)

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
  report has been signed by the following persons on behalf of the registrant
  and in the capacities and on the dates indicated.

    Signature                      Title                           Date
    ---------                      -----                           ----


  S\SHERYL RICE
  -------------
  Sheryl Rice                 Vice President / Controller   December 17, 1998
                              (Principal Financial and
                              Accounting Officer)

  S\JOSEPH ROSE
  -------------
  Joseph Rose                 Director                      December 17, 1998


  S\LARRY HELLRING
  ----------------
  Larry Hellring              Director                      December 17, 1998


  S\MICHAEL AMBROSIO
  ------------------
  Michael Ambrosio            Director                      December 17, 1998


  S\ALAN LITT
  -----------
  Alan Litt                   Director                      December 17, 1998


                                      49