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

                                FORM 10-K405/A
               [X] Annual Report Pursuant to Section 13 or 15(d)
              of the Securities Exchange Act of 1934 (Fee Required)

                  For the Fiscal Year Ended September 30, 1996
             [ ] Transition Report Pursuant to Section 13 or 15(d)
            of the Securities Exchange Act of 1934 (No Fee Required)

                  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    (I.R.S. 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 files 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. [X ]

        The aggregate market value of voting stock held by non-affiliates of the
registrant as of December 16, 1996 was approximately $3,245,349 based on the
$1.375 closing price for the Class A Common Stock as reported on Nasdaq on such
date and determined by subtracting from the number of shares outstanding on that
date the number of shares held by directors of the registrant.

        As of December 16, 1996, Weitzer Homebuilders Incorporated had 2,360,254
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 by certain of
the Company's public filings made pursuant to the Securities Exchange Act of
1934, including the Companys annual report on form 10-K for the year ended
September 30, 1995, the Company's quarterly reports on Form 10-Q for the
quarters ended March 31, 1995, June 30, 1995, December 31, 1995 and March 31,
1996, and the Company's registration statement on Form S-1 filed pursuant to the
Securities Exchange Act of 1933.

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

         Prior to May 3, 1995, substantially all of the Company's homebuilding
projects were conducted through the Weitzer Homebuilding Partnerships, in which
a subsidiary of the Company held a 50% general partnership interest, and the
Company accounted for its investment in the Weitzer Homebuilding Partnerships
under the equity method of accounting, whereby its initial investment was
recorded at cost, adjusted by its share of the Weitzer Homebuilding
Partnerships' operating results and reduced by distributions received. On May 3,
1995, the Company used a portion of the net proceeds of its initial public
offering to acquire the Financial Partner's interests in the Weitzer
Homebuilding Partnerships and now consolidates the operations of these former
partnerships with the financial statements of the Company. Accordingly, the
following discussion of the financial condition and results of operations of the
Company includes, in addition to a discussion of the results of operations of
the Company for the periods presented, a discussion of the results of operations
of the Weitzer Homebuilding Partnerships for the year ended September 30, 1995
compared to the Company's results of operations for the year ended September 30,
1996 and, a discussion of the results of operations of the Weitzer Homebuilding
Partnerships for the Year ended September 30, 1995 compared to the year ended
September 30, 1994.

         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 (including the Weitzer Homebuilding
Partnerships') 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 which
have been sold but not started. At September 30, 1996, approximately 61% of the
homes in backlog were under construction. The available lots for sale refer to
the number of lots the Company (including the Weitzer Homebuilding Partnerships)
has acquired which it plans to construct homes on and excludes 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 (including the Weitzer
Homebuilding Partnerships) has an option or a contract to acquire, but whose
acquisition has not closed. The available lots under option or contract reflect
the lots for projects which 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, 1996 was approximately 5%.

                                       2
<PAGE>
 
         Backlog of Homes, Available Lots for Sale and Available Lots 
         ------------------------------------------------------------
                           Under Option or Contract
                           ------------------------
<TABLE> 
<CAPTION> 

                                                                  September 30,
                                                 ---------------------------------------------
                                                       1996            1995          1994
                                                       ----            ----          ----
  <S>                                               <C>             <C>           <C>         
  Number of homes in backlog .................              282             157           173
  Aggregate sales value of homes in backlog...      $33,405,000     $19,201,000   $22,399,000
  Available lots for sale.....................              583           1,006           226
  Available lots under option or contract ....              943           1,125         1,810
</TABLE> 

Comparison of the Years Ended September 30, 1996 and 1995
---------------------------------------------------------

The Company as compared to Weitzer Homebuilding Partnerships

         The revenues from home sales decreased from approximately $37.7 million
for the year ended September 30, 1995 to approximately $37.4 million for the
year ended September 30, 1996. This change reflects a 4.9% decrease in the
average selling price of homes delivered (from $127,260 to $121,009) partially
offset by a 4.4% increase in the number of homes delivered (296 to 309).

         The following table represents the total revenues from home sales 
by project:

<TABLE>     
<CAPTION> 
                                              1996                  1995
                                              ----                  ---- 
  <S>                                         <C>                   <C> 
  Weitzer at Chapel Trail                      22%                   39%
  Weitzer at Serena Lakes II                   25%                   26%
  Serena Lakes Townhomes                       15%                   17%
  Weitzer at Harmony Lakes                     33%                    -
  Weitzer at Deerfield Beach                    3%                    -
  Other                                         2%                   18%
</TABLE>      
    
The Company expects the future profit margins on sales in the Harmony Lakes
project to be lower than the Company's historical profit margins due to the
higher borrowing and land development costs associated with this project. The
impact will be significant in fiscal 1997 and less significant in fiscal 1998 as
the volume of home sales declines due to reduced available inventory in the
project from one year to the next. The Company is unable to quantify with any
certainty.     

         Cost of homes sold increased from approximately $31.9 million for the
year ended September 30, 1995 to approximately $35.4 million for the year ended
September 30, 1996, primarily as a result of higher cost of sales for the
Harmony Lakes project. Cost of homes sold as a percentage of homes sales
increased from 84.6% during the year ended September 30, 1995 to 94.7% for the
year ended September 30, 1996. The increase was primarily attributable to the
overall lower profit margin being attained on the Harmony Lakes project because
of higher borrowing and land development costs. Cost of homes sold also includes
an impairment charge of 

                                       3
<PAGE>
     
$1,050,000 related to the Company's assessment of the recoverability of the
Harmony Lakes Project.         

         Selling, general and administrative ("SG&A") expenses increased from
approximately $3.5 million for the year ended September 30, 1995 to
approximately $4.8 million for the year ended September 30, 1996. SG&A expenses
as a percentage of total revenues increased from 9.3% for the year ended
September 30, 1995 to 12.7% for the year ended September 30, 1996. The increase
was primarily attributable to start-up selling expenses for certain projects for
which there were minimal home sales.

         Net income decreased from approximately $2.3 million for the year ended
September 30, 1995 to a loss of approximately $3.0 million for the year ended
September 30, 1996, primarily as a result of the lower margins and impairment
charge associated with the Harmony Lakes project.

The Company

         Sales of homes and total revenues increased from approximately $13.5
million and $14.3 million, respectively, for the year ended September 30, 1995
to approximately $37.4 million and $37.8 million, respectively, for the year
ended September 30, 1996, while the Company's equity in the earnings of the
Weitzer Homebuilding Partnerships decreased from approximately $687,000 for the
year ended September 30, 1995 to zero during the year ended September 30, 1996.
These changes are attributed to the Partnership Acquisition. Accordingly, the
results of operations for the Company for the 1996 fiscal year as compared to
the prior fiscal year may not be meaningful, as described herein.

         Total expenses increased from approximately $14.2 million for the year
ended September 30, 1995 to approximately $40.7 million for the year ended
September 30, 1996. The increase is attributed primarily to the change in
accounting for the investment in the Weitzer Homebuilding Partnerships resulting
from the Partnership Acquisition. SG&A expenses increased from approximately
$2.3 million for the year ended September 30, 1995 to approximately $4.8 million
for the year ended September 30, 1996. The increase in SG&A expenses is also
attributable to the change in accounting for the investment in the Weitzer
Homebuilding Partnerships resulting from the Partnership Acquisition.
Discontinued land acquisition costs of approximately $311,000 for the year ended
September 30, 1995 reflect the write-off of costs incurred in connection with
the proposed acquisition of the land for the Company's El Dorado project for
which the agreement to acquire the land expired and was not able to be extended
on terms satisfactory to the Company.

         The Company's net income for the year ended September 30, 1995 was
approximately $69,000 compared to a net loss of $3.0 million for the year ended
September 30, 1996.

                                       4
<PAGE>
 
Comparison of the Years Ended September 30, 1995 and 1994
---------------------------------------------------------

Weitzer Homebuilding Partnerships

         Revenues from home sales decreased from approximately $53.3 million for
the year ended September 30, 1994 to approximately $37.7 million for the year
ended September 30, 1995 as a result of a decrease in the volume of home sales.
This change reflects a 27.3% decrease in the number of homes delivered (from 407
to 296) and 2.9% decrease in average selling price of homes delivered (from
$131,008 to $127,260). The large volume of home sales for the year ended
September 30, 1994 was primarily due to an unusually high level of backlog and
an increased demand for new homes which resulted from the effects of Hurricane
Andrew (which occurred in August 1992). The high level of backlog was caused by
delays in the Weitzer Homebuilding Partnerships' ability to deliver homes as a
result of shortages in, and increased costs of, labor and materials following
Hurricane Andrew. The increased costs of labor and materials also increased the
sales prices of the Weitzer Homebuilding Partnerships' homes. In addition, the
lower volume of home sales for the year ended September 30, 1995 reflects (i)
the completion of a number of homebuilding projects which were generating sales
during the year ended September 30, 1994, (ii) unrelenting bad weather in the
fourth quarter which delayed delivery of homes and home closings since
prospective home buyers were unable to obtain homeowners insurance during such
periods and (iii) the fact that the Company is in the early development stage of
certain new projects such as Weitzer at Harmony Lakes, The Hammocks at River
Glen and the future phases of Weitzer at Serena Lakes II and Serena Lakes
Townhomes which did not generate significant home closings during fiscal 1995.

         Cost of homes sold decreased from approximately $45.7 million for the
year ended September 30, 1994 to approximately $31.9 million for the year ended
September 30, 1995, primarily as a result of the decrease in the volume of home
sales. Cost of homes sold as a percentage of homes sales decreased from 85.7%
for the year ended September 30, 1994 to 84.6% for the year ended September 30,
1995. The decrease was primarily attributable to lower overall land costs
related to the homes being delivered during the 1995 period.

         SG&A expenses increased from approximately $3.4 million for the year
ended September 30, 1994 to approximately $3.5 million for the year ended
September 30, 1995. SG&A expenses as a percentage of total revenues increased
from 6.3% for the year ended September 30, 1994 to 9.3% for the year ended
September 30, 1995. The increase was primarily attributable to the decrease in
the volume of home sales, combined with start-up selling expenses of
approximately $395,000 for certain projects for which there were minimal or no
home sales.

         Net income of the Weitzer Homebuilding Partnerships decreased 49.2%
from approximately $4.5 million for the year ended September 30, 1994 to
approximately $2.3 million for the year ended September 30, 1995, primarily as a
result of the decrease in the volume of home sales.

                                       5
<PAGE>
 
The Company

         Sales of homes and total revenues increased from approximately $1.0
million and $2.9 million, respectively, for the year ended September 30, 1994 to
approximately $13.5 million and $14.3 million, respectively, for the year ended
September 30, 1995, while the Company's equity in the earnings of the Weitzer
Homebuilding Partnerships decreased from approximately $1.8 million for the year
ended September 30, 1994 to $687,000 for the year ended September 30, 1995.
These changes are attributed to the Partnership Acquisition. Sales of homes for
the year ended September 30, 1994 consist of sales made by a wholly-owned
subsidiary of the Company which was not affiliated with the Weitzer Homebuilding
Partnerships. There were no comparable sales of this type for the year ended
September 30, 1995.

         Total expenses increased from approximately $1.3 million for the year
ended September 30, 1994 to approximately $14.2 million for the year ended
September 30, 1995. The increase is attributed primarily to the change in
accounting for the investment in the Weitzer Homebuilding Partnerships resulting
from the Partnership Acquisition. For the year ended September 30, 1994, the
Company had approximately $770,000 of costs of homes sold resulting from home
sales made by a wholly-owned subsidiary of the Company which was not affiliated
with the Weitzer Homebuilding Partnerships. There were no comparable costs of
homes sold outside of the Weitzer Homebuilding Partnerships for the year ended
September 30, 1995. SG&A expenses increased from approximately $275,000 for the
year ended September 30, 1994 to approximately $2.3 million for the year ended
September 30, 1995. The increase in SG&A expenses is attributable to the change
in accounting for the investment in the Weitzer Homebuilding Partnerships
resulting from the Partnership Acquisition and to costs associated with the
Weitzer at Harmony Lakes and The Hammocks at River Glen projects. Discontinued
land acquisition costs of approximately $311,000 for the year ended September
30, 1995 reflect the write-off of costs incurred in connection with the proposed
acquisition of the land for the Company's El Dorado project for which the
agreement to acquire the land expired and was not able to be extended on terms
satisfactory to the Company.

         After giving effect to a pro forma provision for income taxes, the
Company's pro forma net income for the year ended September 30, 1994 was
approximately $967,000 compared to net income of $69,000 for the year ended
September 30, 1995. Pro forma net income per share decreased from $.54 for the
year ended September 30, 1994 to $.03 for the year ended September 30, 1995 as a
result of the decrease in net income and the increase in the average number of
common shares outstanding which resulted from the Company's initial public
offering and the exercise of warrants issued in a private placement.

Liquidity and Capital Resources

         General. The Company's financing needs depend upon its construction
volume, asset turnover and land acquisitions. The Company's and the Weitzer
Homebuilding Partnerships' most significant source of funds has been
acquisition, development and revolving construction loans provided by financial
institutions or other lenders and seller financing for land purchases. The
Company will continue to seek outside financing for its future projects,
including lender acquisition, development and construction loans, seller
financing for land purchases, equity 


                                       6
<PAGE>
 
financing or debt financing. On April 26, 1995, the Company raised $8,579,000 of
net proceeds from its initial public offering.

         Although the Company's Chairman of the Company's Board of Directors has
personally guaranteed the existing bank borrowings and certain other
indebtedness and obligations of the Company (including the Weitzer Homebuilding
Partnerships), there can be no assurance he will continue to guarantee new
borrowings or on what terms he would agree to guarantee new borrowings.
Effective September 30, 1994, the Company entered into an indemnification
agreement with Company's Chairman of the Company's Board of Directors pursuant
to which the Company will indemnify him against any expenses or costs he incurs
after such date, arising from the personal guaranty of any indebtedness of the
Company, any of its subsidiaries or any Weitzer Homebuilding Partnership.

         The principal amount of the 10% Bonds, together with accrued and unpaid
interest thereon, will become due and payable in full upon the receipt by the
Company of at least $12.0 million of gross proceeds from the public or private
sale of its equity securities (other than sales prior to October 7, 1994 or from
the sale of units in the Private Placement). As of September 30, 1996, the
Company will be required to repay the 10% Bonds upon any additional sales of
equity securities in excess of approximately $815,000. While the 10% Bonds are
outstanding, this prepayment obligation will materially adversely affect the
Company's ability to finance its activities through the sale of equity
securities.

         Annual dividends on the outstanding shares of Class A Common Stock if,
when and as declared by the Board of Directors of the Company to the extent
funds are legally available therefor, will be approximately $767,000. Dividends
not paid will accumulate even though such dividends are not declared (See
Dividend).
    
         At September 30, 1996, the Company had borrowings from banks and third
parties aggregating approximately $28.1 million. Scheduled and estimated
maturities of the Company's borrowings for the years ended September 30, 1997,
1998 and 1999 are expected to be approximately $2.4 million, $9.3 million and
$13.2 million, respectively. The Company anticipates that within the next twelve
months it will fund the maturities of its debt and required expenditures
relating to its developments primarily with cash flow from home sales and
construction financing.     

         On June 30, 1995, the Company entered into a loan agreement with
Residential Funding Corporation ("RFC"), for a revolving credit facility (the
"RFC Credit Facility") of $25.0 million (which may be increased to $50.0 million
by the mutual consent of the parties) to be used by the Company for the
acquisition, development and construction of new residential projects. Each
project to be funded under the RFC Credit Facility will be subject to RFC's
approval in its sole discretion. The revolving credit loans will have a maturity
of no greater than 36 months from the date of the initial project closing and
bears interest at the prime rate plus 1.00% per annum. In addition, RFC will
receive an annual 0.5% commitment fee on the total RFC Credit Facility and a fee
of 1% to 2% of the gross sales price of each unit or lot sold for which funds
have been advanced from the RFC Credit Facility. The RFC Credit Facility is
collateralized by a first mortgage on all property for which funds have been
disbursed from the RFC Credit Facility. Simultaneously with 


                                       7
<PAGE>
     
the closing of the RFC Credit Facility, RFC approved a borrowing of $7.1 million
under the RFC Credit Facility to be used for the Weitzer at Deerfield Beach
community. The acquisition, development and construction loans payable of
Weitzer at Deerfield Beach, Inc. relate to the Company's acquisition, through a
subsidiary in May 1995, of land in Deerfield Beach, Florida, where it is
developing the Weitzer at Deerfield Beach community. As of September 30, 1996,
approximately $3.0 million remained available for the Deerfield Beach community
project. On January 24, 1996 the RFC Credit Facility was amended to include (a)
a maximum $1,000,000 promissory note for funding a portion of the initial escrow
requirements for the planned acquisition of land to be used for the Malibu Bay
at Chapel Trail project and (b) a $1,000,000 working capital note. As of
September 30, 1996 approximately $600,000 is available under the working capital
note. On February 28, 1996, RFC approved a borrowing of $5.5 million under the
RFC Credit Facility to be used for the Tesoro at Forest Lakes project. As of
September 30, 1996, approximately $3.3 million remained available for the Tesoro
at Forest Lakes project. On June 30, 1996, RFC approved a borrowing of $11.0
million under the RFC Credit Facility to be used for the Weitzer at Harmony
Lakes project. As of September 30, 1996, approximately $5.5 million remained
available for the Weitzer at Harmony Lakes project. In conjunction with the
Weitzer at Harmony Lakes approval the overall RFC Credit Facility was increased
to $25.6 million.         

         The acquisition, development and construction loans payable of Weitzer
Serena Lakes II, Inc. and Weitzer Serena Lakes Townhomes, Inc., wholly-owned
subsidiaries of the Company, relate to the acquisition in August 1995, of land
in Miami, Florida, where it is developing the Weitzer Serena Lakes II and
Weitzer Serena Lakes Townhomes projects. This loan consists of (i) a revolving
line of credit of $6.5 million to be used by such subsidiaries for the
acquisition and development of the Weitzer at Serena Lakes II project and Serena
Lakes Townhomes project (the "A&D Line of Credit"),(ii) a revolving line of
credit of $5.0 million to be used by such subsidiaries for the construction of
the Weitzer at Serena Lakes II project and Serena Lakes Townhomes project (the
"Construction Line of Credit") and (iii) a promissory note for $300,000 which
proceeds were used to purchase an adjoining parcel of land to the Weitzer at
Serena Lakes II project. The revolving acquisition and development loan has a
maturity of five years and bears interest at the prime rate plus 1.0% per annum,
while the construction loan has a maturity of five years and bears interest at
the prime rate plus 0.875% per annum. The promissory note matures on July 8,
1999 and bear interest at the prime rate plus 1.0% per annum. The lines of
credit and promissory note are collateralized by a first mortgage on all
properties for which funds have been disbursed. Both the Company and the
Company's Chairman of the Board and his wife have guaranteed the obligations of
the Company's subsidiaries under these loans. In addition, the Company will be
required to maintain a 25% equity position in the projects for which the
acquisition and development line of credit is to be used. At September 30, 1996,
approximately $3.7 million remained available under the acquisition and
development line of credit and $3.5 million remained available under the
construction line of credit.


           Land Acquisition and Construction Financing. 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, and negotiating the acquisition of various
parcels, whether outright or through options. The closing of the contemplated
purchases are, in most cases, 

                                       8
<PAGE>
 
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.

         The Company has options remaining to acquire the land for an aggregate
of 284 additional lots for the Serena Lakes Townhomes community which are
expected to be exercised pursuant to a takedown in January 1997. The purchase
price to close on the acquisition of the land underlying such option is expected
to be approximately $954,000, and will be funded along with the related
development costs with the A&D Line of Credit.

         In June 1995, the Company entered into agreements to acquire land for
500 townhomes in the Chapel Trail area of Southwest Broward County and 251
townhomes in the Forest Lakes area of Southwest Dade County. The Chapel Trail
property is expected to be purchased in two phases, and the aggregate purchase
price will be $9 million. The Forest Lakes property is being purchased in three
phases, and the aggregate purchase price will be $5.65 million.

         Debt Covenants. The RFC Credit Facility, the A&D Line of Credit and the
Construction Line of Credit require the Company to maintain certain financial
ratios. The Company was not in compliance with these covenants at September 30,
1996. The lenders have waived compliance with these covenants through fiscal
1997. If an event of default should occur under the bank loan agreements, the
RFC Credit Facility, the A& D Line of Credit or the Construction Line of Credit,
the applicable lender would have the immediate right to accelerate the affected
loan(s) and foreclose on the assets collateralizing such loans and there is no
assurance the Company would be able to repay or refinance such borrowings which
would have a material adverse effect on the Company.
    
         Cash Flows. During the year ended September 30, 1996, the Company had
$3.7 million of net cash used in operating activities, primarily as a result of
the net loss from operations and a decrease in accounts payable and accrued
liabilities. During that 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. During the year ended September
30, 1995, the Company had $17.0 million of net cash used in operating
activities, primarily as a result of the purchase of the land for the Weitzer at
Harmony Lakes project and the Hammocks at River Glen community project. During
that period, the Company had net cash provided by financing activities of $21.8
million, arising principally from the financing for the Weitzer at Harmony Lakes
project, the Hammocks at River Glen community project and the proceeds from the
Company's initial public offering. Net cash provided by operating activities of
the Weitzer Homebuilding Partnerships was approximately $16.2 million during
fiscal 1994. Despite the increase in net cash from operating activities for
fiscal 1994, cash decreased by approximately $366,000 during this period as the
cash provided by operating activities was offset by net cash used in financing
activities of approximately $16.3 million for the same period, primarily
reflecting increased payments on acquisition, development and construction loans
and distributions to partners.         

                                       9
<PAGE>
 
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, further 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.

                                      10
<PAGE>
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO

         FINANCIAL STATEMENTS AND SCHEDULES
<TABLE> 
<CAPTION> 

---------------------------------------------------------------------------Page
<S>                                                                        <C> 
Report of Independent Accountants..........................................  12

Consolidated Balance Sheets as of September 30, 1996 and 1995..............  13

Consolidated Statements of Operations for the Years Ended
September 30, 1996, 1995 and 1994..........................................  14

Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended September 30, 1996, 1995 and 1994....................................  15

Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994 .........................................  16

Notes to Consolidated Financial Statements.................................  17

</TABLE> 

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

                                      11
<PAGE>
 
REPORT OF INDEPENDENT ACCOUNTANTS


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


We have audited the accompanying consolidated balance sheets of Weitzer 
Homebuilders Incorporated and Subsidiaries as of September 30, 1996 and 1995, 
and the related consolidated statements of income, shareholders' equity, and 
cash flows for each of the three years in the period ended September 30, 1996. 
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
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 audits provide 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, 1996 and 1995, 
and the consolidated results of their operations and their cash flows for each 
of the three years in the period ended September 30, 1996 in conformity with 
generally accepted accounting principles.


Coopers & Lybrand L.L.P.

/s/ Coopers & Lybrand L.L.P.

Miami, Florida
November 15, 1996, except for the last paragraph of 
  Note 3 as to which the date is January 13, 1997


                                      12

<PAGE>

               WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 1996 AND 1995

<TABLE> 
<CAPTION> 
                                                                         1996               1995
                                                                  -----------------   -----------------
<S>                                                             <C>                 <C> 
ASSETS
------
Cash                                                            $        1,521,799  $        1,622,882
Restricted escrow funds                                                  1,666,121           1,815,859
Advances for future projects                                             1,945,277             280,290
Construction-in-progress                                                31,505,383          30,167,295
Model furnishings, net of accumulated depreciation
  of $238,640 and $159,284, respectively                                   870,251             565,703
Deferred loan costs, net of accumulated amortization
  of $752,030 and $454,790, respectively                                   628,480             769,387
Goodwill, net of accumulated amortization of $40,552
  and $11,928, respectively                                                388,821             417,445
Other assets                                                             1,147,656           1,283,499
                                                                  -----------------   -----------------

                                                                $       39,673,788  $       36,922,360
                                                                  =================   =================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Customer deposits                                               $        1,666,121  $          965,659
Accounts payable and accrued liabilities                                 2,575,315           3,891,949
Acquisition, development and construction loans payable                 23,164,507          18,294,562
10% bonds payable, net of discount                                       3,371,650           3,155,450
5% debentures                                                            1,185,000             -
Notes and loans payable                                                    417,186             559,869
                                                                  -----------------   -----------------

                                                                        32,379,779          26,867,489
                                                                  -----------------   -----------------
Commitments and contingencies (Note 11)

Shareholders' equity:
  Preferred stock, $.01 par, 5,000,000 shares authorized,
    none issued and outstanding                                            -                   -
  Class A common stock, $.01 par, 40,000,000 shares authorized,
    2,360,254 and 2,032,663 shares issued and outstanding,
    repectively                                                             23,603              20,327
  Class B common stock, $.01 par, 1,500,000 shares authorized,
    issued and outstanding                                                  15,000              15,000
  Additional paid-in capital                                            10,330,950          10,133,042
  Accumulated deficit                                                   (3,075,544)           (113,498)
                                                                  -----------------   -----------------

                                                                         7,294,009          10,054,871
                                                                  -----------------   -----------------

                                                                $       39,673,788  $       36,922,360
                                                                  =================   =================
</TABLE> 

                 See notes to consolidated financial statements

                                       13
<PAGE>

              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

<TABLE> 
<CAPTION> 
                                                                    1996                1995               1994
                                                             ----------------    ----------------    ----------------
<S>                                                          <C>                 <C>                 <C> 
Revenues:
  Sales of homes                                             $    37,391,780     $    13,450,684     $       998,849
  Equity in earnings of affiliated partnerships                       -                  686,711           1,847,738
  Interest income                                                    149,459             130,664               7,055
  Other income                                                       231,858              63,967              -
                                                             ----------------    ----------------    ----------------

                                                                  37,773,097          14,332,026           2,853,642
                                                             ----------------    ----------------    ----------------
Operating costs and expenses:
  Costs of homes sold                                             35,425,713          11,403,230             769,561
  Selling expenses                                                 2,527,568           1,327,009              -
  General and administrative expenses                              2,234,404             922,637             275,062
  Depreciation and amortization                                      449,368             197,942              -
  Discontinued land acquisitions                                      32,254             310,686              -
  Interest expense                                                    65,836              64,708              -
                                                             ----------------    ----------------    ----------------

                                                                  40,735,143          14,226,212           1,044,623
                                                             ----------------    ----------------    ----------------

Income (loss) from operations                                     (2,962,046)            105,814           1,809,019
  Write-off of merger costs                                           -                   -                  261,870
                                                             ----------------    ----------------    ----------------

Income (loss) before income taxes                                 (2,962,046)            105,814           1,547,149

Income tax provision (benefit)                                        -                   37,000            (100,000)
                                                             ----------------    ----------------    ----------------

Net income (loss)                                            $    (2,962,046)    $        68,814     $     1,647,149
                                                             ================    ================    ================
Pro forma data (unaudited):
  Income before income taxes as reported above                                                       $     1,547,149
  Charge in lieu of income taxes                                                                             580,552
                                                                                                     ----------------

  Pro forma net income                                                                               $       966,597
                                                                                                     ================
Earnings (loss) per share:
  Net income (loss) per common share                         $         (0.81)    $          0.03
                                                             ================    ================

  Pro forma net income per common share                                                              $          0.54
                                                                                                     ================

  Weighted average number of common shares outstanding             3,649,204           2,277,950           1,801,300
                                                             ================    ================    ================
</TABLE> 


                See notes to consolidated financial statements

                                      14
<PAGE>

               WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994



<TABLE>
<CAPTION>
                                                       Class A Common Stock          Class B Common Stock     
                                                   ---------------------------    ---------------------------
                                                      Number                         Number                   
                                                     of shares     Amount           of shares        Amount   
                                                   ------------   ------------    -------------  ------------ 
<S>                                                  <C>          <C>               <C>         <C> 
Balance October 1, 1993                                    --     $       --        1,500,000   $     15,000  

Contributions                                              --             --             --             --    

Distributions                                              --             --             --             --    

Transfer of S-corporation undistributed earnings           --             --             --             --    

Net income                                                 --             --             --             --    
                                                   ------------   ------------   ------------   ------------  

Balance September 30, 1994                                 --             --        1,500,000         15,000  

Warrants issued in connection with
  private placement                                     432,663          4,327           --             --    

Issuance of common stock                              1,600,000         16,000           --             --    

Dividends - $0.08125 per share                             --             --             --             --    

Net income                                                 --             --             --             --    
                                                   ------------   ------------   ------------   ------------  

Balance September 30, 1995                            2,032,663         20,327      1,500,000         15,000  

Conversion of 5% debentures                             327,591          3,276           --             --    

Dividends - $0.24375 per share                             --             --             --             --    

Net loss                                                   --             --             --             --    
                                                   ------------   ------------   ------------   ------------  

Balance September 30, 1996                            2,360,254   $     23,603      1,500,000   $     15,000  
                                                   ============   ============   ============   ============  

<CAPTION>

                                                      Additional 
                                                        Paid-in      Accumulated
                                                        Capital        Deficit           Total
                                                     ------------  -------------    -------------


Balance October 1, 1993                             $  1,466,536    $   (274,497)   $  1,207,039

Contributions                                             10,385            --            10,385

Distributions                                           (800,313)     (1,210,308)     (2,010,621)

Transfer of S-corporation undistributed earnings         344,656        (344,656)           --

Net income                                                  --         1,647,149       1,647,149
                                                    ------------    ------------    ------------

Balance September 30, 1994                             1,021,264        (182,312)        853,952

Warrants issued in connection with
  private placement                                      714,344            --           718,671

Issuance of common stock                               8,562,588            --         8,578,588

Dividends - $0.08125 per share                          (165,154)           --          (165,154)

Net income                                                                68,814          68,814
                                                    ------------    ------------    ------------

Balance September 30, 1995                            10,133,042        (113,498)     10,054,871

Conversion of 5% debentures                              693,370            --           696,646

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

Net loss                                                    --        (2,962,046)     (2,962,046)
                                                    ------------    ------------    ------------

Balance September 30, 1996                          $ 10,330,950    $ (3,075,544)   $  7,294,009
                                                    ============    ============    ============
</TABLE>

                See notes to consolidated financial statements

                                      15

<PAGE>

              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE> 
<CAPTION> 
                                                                    1996            1995            1994
                                                                ------------    ------------    ------------
<S>                                                             <C>             <C>             <C> 
Cash flows from operating activities:
  Net income (loss)                                             $ (2,962,046)   $     68,814    $  1,647,149
  Adjustments to reconcile net income (loss)
      to net cash provided by (used in)
      operating activities:
    Equity in earnings of affiliated
      partnerships                                                      --          (686,711)     (1,847,738)
    Current distribution of income from
      partnerships                                                      --            42,614       1,162,664
    Depreciation, amortization and other non-cash charges            607,747         197,942            --
    Write-off of merger costs                                           --              --           261,870
    Deferred income taxes                                               --            37,000        (100,000)
    Changes in assets and liabilities, net of acqusition:
      Restricted escrow funds                                        149,738        (931,187)           --
      Construction-in-progress                                      (888,720)    (17,688,606)        289,265
      Other assets                                                    51,242        (783,673)         (3,735)
      Customer deposits                                              700,462          80,987        (536,778)
      Accounts payable and accrued liabilities                    (1,316,634)      2,694,734         149,111
                                                                ------------    ------------    ------------
        Net cash provided by (used in)
          operating activities                                    (3,658,211)    (16,968,086)      1,021,808
                                                                ------------    ------------    ------------

Cash flows from investing activities:
  Distributions from affiliated partnerships                            --              --           854,762
  Contributions to affiliated partnerships                              --              --           (72,783)
  Purchase of affiliated partnerships, net of cash acquired             --        (4,056,370)           --
  Purchase of model furnishings                                     (461,254)       (362,031)           --
  Advances for future projects                                    (1,664,987)      1,118,619        (684,480)
                                                                ------------    ------------    ------------

        Net cash provided by (used in)
          investing activities                                    (2,126,241)     (3,299,782)         97,499
                                                                ------------    ------------    ------------

Cash flows from financing activities:
  Loan from shareholder                                                 --            70,000         570,219
  Acquisition, development and construction loan borrowings       39,433,675      14,136,364            --
  Payments on acquisition, development and construction loans    (34,683,730)     (3,582,984)           --
  Payment of loan from shareholder                                      --          (640,219)           --
  Capital contributions by shareholder                                  --              --            10,385
  Note payable borrowings                                             58,976         619,500         500,000
  Payments on notes payable                                         (201,659)       (634,215)           --
  10% bonds payable borrowing                                           --         3,750,000            --
  Loan, deferred registration and
    terminated merger costs                                         (251,882)       (159,002)       (540,786)
  Proceeds from 5% debentures                                      1,743,451            --              --
  Proceeds from issuance of common stock and warrants,
    net of issuance costs                                               --         8,443,243            --
  Dividends and distributions to shareholders                       (495,462)       (165,154)     (2,010,621)
                                                                ------------    ------------    ------------

        Net cash provided by (used in)
          financing activities                                     5,683,369      21,837,533      (1,470,803)
                                                                ------------    ------------    ------------

Net increase (decrease) in cash                                     (101,083)      1,569,665        (351,496)

Cash, begining of period                                           1,622,882          53,217         404,713
                                                                ------------    ------------    ------------

Cash, end of period                                             $  1,521,799    $  1,622,882    $     53,217
                                                                ============    ============    ============

Cash paid during the period for interest, net of
  amounts capitalized                                           $    103,336    $     27,208    $       --
                                                                ============    ============    ============
</TABLE> 

                 See notes to consolidated financial statements

                                       16
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

         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 Southeast Florida.

         On September 30, 1994, the Company acquired all the outstanding shares
of certain entities in exchange (the "Weitzer Entities Exchange") for issuing
Class B Common Stock to the Company's Chairman of the Board. This transaction
was treated as a combination of entities under common control, and was accounted
for similar to a pooling of interests. These entities served as general partners
of partnerships (the "Weitzer Homebuilding Partnerships") which were engaged in
the above mentioned homebuilding activities.

         On May 3, 1995, the Company acquired the remaining partner interests in
the Weitzer Homebuilding Partnerships from affiliates of an unrelated entity
(the "Financial Partner") which previously provided funding for real estate
acquisition, development and construction. The purchase of these interests was
accounted for by the Company under the purchase method of accounting for
business combinations. Accordingly, the results of operations of the Weitzer
Homebuilding Partnerships have been included in the Company's consolidated
financial statements since the date of this acquisition.

         The following is a summary of the Company's 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. Prior to May 3, 1995 the Company
used the equity method of accounting for its significant investments in the
Weitzer Homebuilding Partnerships. Under this method, the Company's initial
investment was recorded at cost, and adjusted by its share of each partnerships
operating results.

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.

                                       17
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Cash, Restricted Escrow Funds and Customer Deposits

         The Company maintains its cash in bank accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company's restricted escrow funds are comprised of customer
deposits. Contracts with customers generally require deposits of 5-10% of the
purchase price of the property before construction commences.

Construction-in-Progress

         Construction-in-progress is 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 relative sales values. 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 1996, 1995 and 1994 amounted to $2,020,985,
$1,554,633 and $0, respectively.
    
         The Company periodically evaluates the carrying value of individual
real estate projects based on estimated fair value less costs 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 fourth quarter of fiscal 1996, the Company
recorded an impairment loss of $1,050,000.      

Model Furnishings

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

Advances for Future Projects

         Advances for future projects represent deposits made by the Company on
contracts to purchase land for future development which may be refundable under
certain circumstances.

Deferred Loan Costs

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

Goodwill

         The acquisition of the interests of the affiliates of the Financial
Partner of the Weitzer Homebuilding Partnerships (the "Financial Partner
Interests") resulted in a purchase price in excess of the fair value of net
assets acquired in the amount of $429,373. Such amount is reflected in the
accompanying balance sheet at September 30, 1996, net of accumulated
amortization. The amount is being amortized on a straight-line basis over 7
years prospectively. The realizabilty of goodwill is evaluated periodically as
events or circumstances indicate a possible inability to recover its carrying
amount. Such evaluation is based on various analyses including cash flow and
profitability projections of the Company's various development projects. Based
on its review, the Company does not believe that an impairment of its goodwill
has occurred.

                                       18
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Fair Value of Financial Instruments

         The carrying amounts of the Company's borrowings under its acquisition,
development and construction loans payable approximate fair value due to the
short term nature of the borrowings or their adjustable rates fixed to market
conditions. The 5% debentures approximate fair value based on comparison with
market values established on settlement of the obligation within three months
subsequent to September 30, 1996. The Company has not evaluated the carrying
amount of the 10% bonds due to the difficulty in establishing a fair market
value for the instrument and excessive costs involved in developing a model
valuation of obtaining and independent valuation.

Warranties

         The Company provides an accrual for future warranty costs based upon
the Company's past experience of the amount of claims actually made.

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

Earnings Per Share

         Net income and pro forma net income per share are based on the weighted
average number of shares of Common Stock outstanding during each year, after
giving effect to stock splits and warrants. Pro forma net income and pro forma
net income per share amounts assume that the Company was subject to federal
income taxes and taxed as a C-corporation at the effective tax rates in
existence for the periods.

NOTE 2 - CONSTRUCTION-IN-PROGRESS

Construction-in-progress consists of the following at September 30, 1996 and
1995:

<TABLE> 
<CAPTION> 
                                                                           1996                 1995
                                                                    ------------------    -----------------
 <S>                                                              <C>                   <C> 
 Land and land development                                        $        21,193,750   $       21,259,277

 Direct construction costs                                                  6,230,021            6,262,260

 Construction period interest, property taxes, overhead and
 other                                                                      4,081,612            2,645,758
                                                                    ------------------    -----------------
                                                                  $        31,505,383   $       30,167,295
                                                                    ==================    =================
</TABLE> 

                                       19
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - ACQUISITION, DEVELOPMENT AND CONSTRUCTION LOANS PAYABLE

         Acquisition, development and construction loans payable consist of
loans of the following subsidiaries at September 30, 1996 and 1995:

<TABLE> 
<CAPTION> 
                                                                         1996                1995
                                                                   ----------------    -----------------
   <S>                                                           <C>                 <C>  
   Weitzer Homebuilding Partnerships                             $         780,217   $        4,380,264
                                                              
   Weitzer Serena Lakes Homes II, Inc. and Weitzer Serena     
     Lakes Townhomes, Inc.                                               4,591,955            2,902,930
                                                              
   Weitzer at Harmony Lakes, Inc.                                       10,073,326            9,413,606
                                                              
   Weitzer at Deerfield Beach, Inc.                                      4,111,916            1,597,762
                                                               
   Weitzer at Forest Lakes, Inc.                                         2,207,093                -
                                                             
   Weitzer Homebuilders Incorporated                                     1,400,000                -
                                                                   ----------------    -----------------
                                                                 $      23,164,507   $       18,294,562
                                                                   ================    =================
</TABLE> 

         The Company has entered into a loan agreement with Residential Funding
Corporation ("RFC") for a revolving credit facility (the "RFC Credit Facility")
of $25.6 million (which may be increased to $50.0 million by the mutual consent
of the parties) to be used for the acquisition, development and construction of
new residential projects. RFC has approved the following borrowings: (i) Weitzer
at Harmony Lakes, Inc. - $11.0 million, (ii) Weitzer at Deerfield Beach, Inc. -
$7.1 million, (iii) Weitzer at Forest Lakes, Inc. - $5.5 million and (iv)
Weitzer Homebuilders Incorporated - $2.0 million. Each borrowing under the RFC
facility has a maturity of no greater than 36 months from the date of initial
project closing and bears interest at the prime rate plus 1.0%. RFC also
receives a fee of 1.0% to 2.0% of the gross sales price of each unit or lot sold
financed through the RFC Credit Facility. The RFC Credit Facility is
collateralized by a first mortgage on all property for which funds have been
disbursed from the RFC Credit Facility. Under the terms of the RFC Credit
Facility, the Company may not declare or pay any dividend or make any other
distribution on any shares of capital stock of the Company (other than for
dividends on Class A Common Stock and Class B Common Stock as discussed in Note
10) in an amount which exceeds 50% of the previous fiscal year's audited pretax
profits.

         Weitzer Homebuilding Partnerships. These loans require mandatory
repayments of principal from the net proceeds from the sales of homes and mature
from October 1996 to March 1997. Interest rates range from 1.0% to 1.5% over the
prime rate (9.25% to 9.75% as of September 30, 1996) and interest is payable
monthly. These loans are collateralized by substantially all of the assets of
the respective development and are guaranteed by the Company's Chairman of the
Board.

         Weitzer Serena Lakes Homes II, Inc. and Weitzer Serena Lakes Townhomes,
Inc. Consists of (i) a $6.5 million line of credit for land acquisition and
development which matures August, 2000 and bears interest at the prime rate plus
1.0%, (ii) a $5.0 million line of credit for

                                       20
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

construction which matures August, 2000 and bears interest at the prime rate
plus 0.875% and (iii) a $300,000 promissory note for miscellaneous land
acquisition which matures July, 1999 and bears interest at the prime rate plus
1.0%. As of September 30, 1996, approximately $3.7 million and $3.5 million was
available under the lines of credit for land acquisition and development and
construction, respectively. These loans are collateralized by a first mortgage
on all properties for which funds have been disbursed and are guaranteed by the
Company and the Company's Chairman of the Board.

         Weitzer at Harmony Lakes, Inc. Consists of (i) a $12.6 million
revolving mortgage note for the financing of developed lots and unit
construction which matures October, 1998 and bears interest at the prime rate
plus 1.5% and (ii) a $11.0 million borrowing under the RFC Credit Facility for
debt refinancing which matures June 1999. As of September 30, 1996,
approximately $8.0 million and $5.5 million was available under the revolving
mortgage note and revolving facility, respectively. The revolving mortgage note
is collateralized by a first mortgage on all properties for which funds have
been disbursed and is guaranteed by the Company. The Weitzer at Harmony Lakes,
Inc. revolving mortgage note requires the Company to maintain a minimum tangible
net worth. The Company was not in compliance with this covenants at September
30, 1996; however, on January 13, 1997 the lender has modified the covenant so
that the Company was in compliance at September 30, 1996 and expects to be in
compliance through October 1, 1997.

         The 1995 debt amount represents a loan payable to a company affiliated
with a director of the Company which was scheduled to mature April 1998. This
loan was repaid with a portion of the proceeds from the $11.0 million borrowing
under the RFC Credit Facility.

         Weitzer at Deerfield Beach, Inc. Represents a $7.1 million borrowing
under the RFC Credit Facility of which $3.0 million is available as of September
30, 1996. This borrowing matures June 1998.

         Weitzer at Forest Lakes, Inc. Represents a $5.5 million borrowing under
the RFC Credit Facility of which $3.3 million is available as of September 30,
1996. This borrowing matures February 1999.

         Weitzer Homebuilders Incorporated. Consists of (i) a $1.0 million
borrowing under the RFC Credit Facility for land acquisition which matures
January 1997 and (ii) a $1.0 million working capital note under the RFC Credit
Facility of which approximately $600,000 is available as of September 30, 1996.
The working capital note is required to be maintained at a zero balance for a
five day period on a semi-annual basis.

                                       21
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The following are the scheduled maturities of acquisition, development
and construction loans payable as of September 30, 1996:

<TABLE> 
               <S>                  <C> 
               1997                 $         2,180,217
               1998                           4,111,916
               1999                          12,580,419
               2000                           4,291,955
                                     -------------------
                                    $        23,164,507
                                     ===================
</TABLE> 

         Debt Covenants. The RFC Credit Facility requires the Company to
maintain a minimum tangible net worth. The Company was not in compliance with
this covenant at September 30, 1996; however, on January 13, 1997 the lender
waived the non-compliance at September 30, 1996 and modified the covenant so
that the Company expects to be in compliance through December 30, 1997. The
Weitzer Serena Lakes loans require the Company to maintain minimum tangible net
worth levels and earning ratios. The Company was not in compliance with these
covenants at September 30, 1996; however, On January 13, 1997 the lender has
waived compliance as of September 30, 1996 and modified the covenant so that the
Company expects to be in compliance through October 1, 1997. The Weitzer at
Harmony Lakes, Inc. revolving mortgage note requires the Company to maintain a
minimum tangible net worth. The Company was not in compliance with this
covenants at September 30, 1996; however, on January 13, 1997 the lender has
modified the covenant so that the Company was in compliance at September 30,
1996 and expects to be in compliance through October 1, 1997.

                                       22
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - NOTES AND LOANS PAYABLE

         Notes and loans payable consist of the following at September 30, 1996
and 1995:

<TABLE> 
<CAPTION> 
                                                                                        1996            1995   
                                                                                    ------------    ------------   
 <S>                                                                               <C>             <C> 
 Note payable to bank, bearing interest at prime rate plus 1%, principal                                           
 payments of $4,000 due monthly with interest through January 2000, personally                                     
 guaranteed by the Company's Chairman of the Board of Directors                    $     160,000   $     208,000   
                                                                                                                   
 Finance agreement payable for insurance, bearing interest at 9.24%, principal                                     
 and interest payment of $7,907 through January 1996 and $6,032 through April                                      
 1996                                                                                      -              41,817   
                                                                                                                   
 Note payable to bank, bearing interest at 8.5%, principal and interest payments                                   
 of $1,673 due monthly through June 1998, collateralized by certain office                                         
 equipment                                                                                33,305          49,785   
                                                                                                                   
 Note payable to bank, bearing interest at 8.0%, principal and interest payments                                   
 of $823 due monthly through April 2000, collateralized by a vehicle                      29,367           -   
                                                                                                                   
 Capital lease payable with interest imputed at 13.44%, payment of $8,857 due                                      
 monthly through August 1998 with a balloon payment of $29,024 due September                                       
 1998, collateralized by certain model furnishings                                       180,430         260,267   
                                                                                                                   
 Capital lease payable with interest imputed at 10.00%, payment of $908 due                                        
 monthly through September 1998, collateralized by certain field equipment                14,084           -       
                                                                                    ------------    ------------   
                                                                                   $     417,186   $     559,869   
                                                                                    ============    ============   
</TABLE> 

                                       23
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The following are the scheduled maturities of notes and loans payable
as of September 30, 1996:

<TABLE> 
                       <S>          <C>  
                       1997         $     170,793  
                       1998               170,948  
                       1999                57,153  
                       2000                18,292  
                                     ------------- 
                                    $     417,186  
                                     ============= 
</TABLE> 

NOTE 5 - 10% BONDS PAYABLE

         Bonds payable, net of discount, consists of the following at 
September 30, 1996 and 1995:

<TABLE> 
<CAPTION> 
                                    1996               1995
                               ----------------   ----------------
  <S>                          <C>                <C>  
  10% bonds with a scheduled                      
  maturity in June 1998;            $3,750,000         $3,750,000
    interest due quarterly                        
  Original issue discount             (378,350)          (594,550)
                               ----------------   ----------------
                                    $3,371,650         $3,155,450
                               ================   ================
</TABLE> 

         On October 7, 1994, the Company completed a private placement of 75
Units at $50,000 per Unit ( the "Private Placement"). Each Unit consisted of (i)
a 10% bond due June 30, 1998 in the principal amount of $50,000, and (ii) a
warrant, exercisable at a price of $.10 per share, to purchase such number of
shares of common stock of the Company as shall equal $37,500 in value. The
Company received net proceeds of $3,105,600 ($3,750,000 gross proceeds less
$644,400 of issuance costs) which were allocated, based on relative fair value,
to the bonds and the warrants in the amount of $2,939,250 and $810,750,
respectively. The original issue discount is being amortized over the term of
the bonds and serves to create an effective interest rate of 17.8%. The net
proceeds were used by Weitzer at Harmony Lakes, Inc., a subsidiary of the
Company, to purchase and develop the real property for the Weitzer at Harmony
Lakes residential community. The bonds are collateralized by the issued and
outstanding capital stock of Weitzer at Harmony Lakes, Inc.

         The principal amount of the bonds are due and payable in full upon the
receipt by the Company of at least $12,000,000 of gross proceeds from a public
or private sale of equity securities. As of September 30, 1996, the Company will
be required to repay the bonds upon additional sales of equity securities in
excess of approximately $815,000.

                                       24
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The warrants issued in the Private Placement became exercisable in
April 26, 1995 following the Company's initial public offering. These warrants
were exercised on July 21, 1995 and 432,663 shares of Class A Common Stock were
issued by the Company on such date.

         Under the terms of the bonds, the Company may not declare or pay any
dividend or make any other distribution on any equity securities of the Company
(except dividends or distributions payable in equity securities of the Company),
if, upon giving effect to such dividend or distribution, the net worth of the
Company would be reduced to less than an amount equal to 120% of the remaining
indebtedness outstanding under the bonds.

NOTE 6 - 5% DEBENTURES

         During fiscal 1996, the Company issued a total of $1,970,000, 5%, two
year redeemable convertible debenture ("Debentures") resulting in net proceeds
of $1,743,000. The Debentures were convertible, commencing 45 days after
issuance, into shares of Class A Common Stock of the Company at the lesser of
10% below the average closing bid price of the Class A Common Stock for the five
days immediately preceding the date of issuance or 21% below the average closing
bid price of the Class A Common Stock for the five business days immediately
preceding the date of conversion and are redeemable under certain circumstances.
As of September 30, 1996, the Company has converted a total of $785,000 of the
Debentures into 327,591 shares of the Company's Class A Common Stock. In August
1996, the Company notified outstanding Debenture holders that any and all
conversions into shares of the Company's Class A Common Stock have been
suspended indefinitely. As a result, two of the debenture holders brought suit
against the Company. Subsequent to September 30, 1996, the Company has redeemed
$900,000 of outstanding debentures for $1,010,000, including accrued interest.
Part of the payment was in settlement of the lawsuit previously discussed. As of
December 16, 1996, no further litigation has commenced by the remaining
debenture holder. During the fourth quarter of fiscal 1996, the Company recorded
a charge of $150,000 for the settlement of these debenture matters.


NOTE 7 - INCOME TAXES

         No income tax expense or benefit was recorded in fiscal 1996. The
Company recorded deferred income tax expense (benefit) of $37,000 and $(100,000)
in fiscal 1995 and 1994, respectively.

                                       25
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


          Net deferred taxes consist of the following components as of 
September 30, 1996 and 1995:

<TABLE> 
<CAPTION> 
                                              1996             1995
                                              ----             ----
  <S>                                   <C>                 <C> 
  Deferred tax assets:                                    
    Loss carryforwards                           $738,000         $63,000
    Accrued expenses                               56,000  
    Non-deductible writedown of assets            395,000  
    Non-deductible contributions                    4,400  
    Less: valuation allowance                 ($1,130,400)  
                                        ------------------  --------------
                                                   63,000          63,000
                                        ------------------  --------------
  Deferred tax liabilities                                
                                        ------------------  --------------
  Net deferred tax asset                           
  (included in other assets)                       63,000          63,000
                                        ==================  ==============
</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> 
                                       1996           1995         1994
                                       ----           ----         ----
  <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)%
  Surtax exemption                                    (2.6)%
  Valuation allowance                  37.6 %
                                   ------------    -----------  -----------
                                        0.0 %         35.0 %      (37.6)%
                                   ============    ===========  ===========
</TABLE> 
                     
         As of September 30, 1996, the Company had net operating losses of
$1,960,000 which have been offset by a valuation allowance. These carryforwards
will expire through the year 2011.

         During the year ended September 30, 1996, the Company recorded a
valuation allowance of $1,130,400 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.

                                       26
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - BENEFIT PLANS

         In June 1994, a Performance Incentive Plan (the "Incentive Plan") was
adopted by the Company's Board of Directors and approved by its sole
shareholder. Pursuant to the Incentive Plan stock options, stock appreciation
rights ("SARs"), and restricted stock may be granted to eligible persons. The
Incentive Plan provides that, at any given time, the maximum number of shares of
common stock with respect to which stock options or SARs may be granted or which
may be issued pursuant to restricted stock awards will be 125,000. At September
30, 1996, no stock options, SARs or restricted stock awards have been granted
pursuant to the Incentive Plan.

         In March 1995, the Company granted to the Company's Chairman of the
Board of Directors 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.

NOTE 9 - INVESTMENTS IN AFFILIATED PARTNERSHIPS

         The following table presents summarized combined financial information
for the Weitzer Homebuilding Partnerships for the periods from October 1, 1994
through May 3, 1995 and for the year ended September 30, 1994.

<TABLE> 
<CAPTION> 
                                          October 1,          Year Ended
                                         through 1994        September 30,
                                         May 3, 1995             1994
                                        ----------------   ---------------
 <S>                                   <C>                <C> 
 Revenues                              $      3,395,996   $    53,662,146
 Costs of homes sold                         (2,852,187)      (45,710,767)
 Selling and other expenses                    (402,564)       (3,497,209)
                                        ----------------   ---------------
 Net income                            $        141,245   $     4,454,170
                                        ================   ===============
</TABLE> 

         In accordance with the partnership agreements, the income for each of
the Weitzer Homebuilding Partnerships was allocated to the general partners
first to provide a 10% preferred return on invested capital (which was
principally contributed by the Financial Partner) with the balance of the income
shared equally; all losses were shared equally.

                                       27
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10- REVERSE STOCK SPLITS; INITIAL PUBLIC OFFERING, PURCHASE OF FINANCIAL 
PARTNER'S INTERESTS, AND WARRANTS

         On December 28, 1994, the Company effected a 1 for 2.16922 reverse
stock split. On March 23, 1995, the Company effected a 1 for 1.383333 reverse
stock split. All shares and share amounts have been restated to reflect the
December 28, 1994 and March 23, 1995 stock splits.

         On April 11, 1995, the Company's Articles of Incorporation were amended
to create two classes of common stock, $.01 par value - Class A Common Stock and
Class B Common 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
$0.323 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. In August 1996,
the Company elected to forego the regularly scheduled cash dividend payment on
its outstanding shares of Class A Common Stock. Cash dividends on the Class A
Common Stock are cumulative, and accordingly, the amount of such dividends
accrues for the benefit of the Company's shareholders. As of September 30, 1996,
dividends in arrears amounted to $191,771.

         On April 26, 1995, The Company completed its initial public offering of
1,600,000 shares of Class A Common Stock at a price of $6.50 per share. The
Company realized $8,578,588 of net proceeds from the offering and used
$6,537,711 to acquire the Financial Partner's interests in the Weitzer
Homebuilding Partnerships. The following unaudited consolidated pro forma
financial information for the year ended September 30, 1995 gives effect to the
purchase of the Financial Partner's interests in the Weitzer Homebuilding
Partnerships with the net proceeds of the Company's initial public offering of
Class A Common Stock as if the transactions had occurred on October 1, 1994:

<TABLE> 
 <S>                                                           <C> 
 Revenues                                                      $    37,924,941
 Costs of homes sold                                                31,891,433
 Selling and other expenses                                          4,844,151
                                                                ---------------
 Income before income taxes                                          1,189,357
 Provision for income taxes and charge in lieu of 
 income taxes                                                          416,241
                                                                ---------------
 Net income                                                    $       773,116
                                                                ===============
 Net income per share                                          $          0.24
                                                                ===============
 Weighted average number of shares                                   3,186,940
                                                                ===============
</TABLE> 

                                       28
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         In connection with its initial public offering, the Company sold to
certain lead underwriters , for nominal consideration, warrants to purchase from
the Company 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 Common Stock. The warrants grant to
the holders thereof certain rights of registration for the securities issuable
upon the exercise of the warrants.
    
         The Company acquired the remaining interests in its affiliated
partnerships for $6,537,711, inclusive of $2,481,372 of cash acquired (net
$4,056,370). In conjunction with the acquisition, liabilities were assumed as
follows:      

<TABLE>     
<S>                                         <C> 
Fair value of assets acquired               $16,431,578
Cash paid                                     6,537,711
                                            -----------
Liabilities assumed                         $ 9,893,867
                                            ===========
</TABLE>      

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Performance Bonds

         In accordance with certain governmental requirements, the Company have
caused performance bonds and letters of credit aggregating $1,568,000, to be
issued for certain of the projects to provide for the completion of required
improvements as of September 30, 1996.

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.

                                       29
<PAGE>
 
              WEITZER HOMEBUILDERS INCORPORATED AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - RISKS AND UNCERTAINTIES

         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
customers any increases in its costs through increased selling prices and, to
date, inflation has not had a material adverse effect on the Company's results
of operations. However, there is no assurance that inflation will not have a
material adverse impact on the Company's future results of operation. However,
there is no assurance that inflation will not have a material adverse impact on
the Company's future results of operation.

         The Company's operations are interest rate sensitive. Overall housing
demand is adversely affected by increase in interest costs. If mortgage interest
rate increase significantly, this may negatively impact the ability of a
homebuyer to secure adequate financing. Such results of higher interest rates
may result in adversely affecting the Company's revenues, gross margins and net
income.

                                       30