OPERATIONS OVERVIEW

We are primarily engaged in real estate land sales and development, reinvestment of land sales proceeds into income properties, and golf course operations. We own approximately 11,200 acres in Florida, of which approximately 10,200 are located within and form a substantial portion of the western boundary of The City of Daytona Beach. Our lands are well-located in the central Florida Interstate-4 and Interstate-95 corridors, providing an excellent opportunity for reasonably stable land sales in future years.

With our substantial land holdings in Daytona Beach, we have parcels available for the entire spectrum of real estate uses. Along with land sales, we selectively develop parcels primarily for commercial uses. Although pricing levels and changes by us and our immediate competitors can affect sales, we generally enjoy a competitive edge due to low costs associated with long-time land ownership and a significant ownership position in the immediate market. As a general policy we do not discount sales prices to accelerate land sales.

Until the dramatic downturn in the national and local economies in 2008, sales activity on Company owned lands had been strong over the last several years. Development activities on and around Company owned lands continued relatively strong throughout 2008 with the commencement and completion of projects planned or in process before the downturn. Sales and development activities over the last several years included the sale of 120 acres of land to Florida Hospital for the construction of a new hospital, which is scheduled to open mid-year 2009; the expansion of the Daytona Beach Auto Mall; the opening of a second office building in the Cornerstone Office Park; continued development within the 250-acre Gateway Commerce Park (where a 32,000 square-foot industrial building was completed in early 2009) and the 60-acre Interstate Commerce Park, both adjacent to Interstate 95 and the sale of approximately 100 acres of land west of Interstate 95 on which a private high school was constructed and opened in August 2008. In early 2009, the City of Daytona Beach police headquarters, located adjacent to Gateway Commerce Park, was completed and occupied. In the first half of 2008, development also commenced on a 288-unit apartment complex, a medical office building, and a townhouse residential community on the east side of Interstate 95. During the first quarter of 2009, construction commenced on an upscale restaurant on property the Company sold during the fourth quarter of 2008 on a parcel adjacent to the Interstate 95 and LPGA Boulevard interchange. On the west side of the interstate, development has commenced on a fire station, a hotel, an elementary school, and a 59,000 square-foot furniture retail store in the Interstate Commerce Park.

These commercial and residential development activities tend to create additional buyer interest and sales opportunities, although weak economic conditions have led us to enter 2009 with a relatively small backlog of contracts, with a portion of these contracts subject to contingencies.

In 2000, we initiated a strategy of investing in income properties utilizing the proceeds of agricultural land sales qualifying for income tax deferral through like-kind exchange treatment for tax purposes. As of March 31, 2009, we have invested approximately $120 million in twenty-six income properties through this process. With this investment base in income properties, lease revenue of approximately $9.3 million is projected to be generated annually. This income, along with income from additional net-lease income property investments, will decrease earnings volatility in future years and add to overall financial performance. This has enabled us to enter into the business of building, leasing, and holding in our portfolio select income properties that are strategically located on our lands.

We currently have two self-developed projects in process. The first project is a two-building 31,000 square-foot flex office space complex located within Gateway Commerce Park. Construction of these buildings was completed in 2008. As of March 31, 2009, there were no tenants under lease. Also under development is a 12 acre, 4-lot commercial complex, located at the corner of LPGA and Williamson Boulevards in Daytona Beach, Florida. The parcel includes a 23,000 square-foot "Class A" office building. With the exception of tenant improvements, construction of the building was completed in the first quarter of 2009. Approximately 75% of the building is under lease to two tenants with lease payments to commence in the third quarter of 2009 upon completion of the tenant improvements.

Golf operations consist of the operation of two golf courses, a clubhouse facility, and food and beverage activities within the LPGA International mixed-use residential community on the west side of Interstate 95, south and east of LPGA Boulevard. The Champions course was designed by Rees Jones and the Legends course was designed by Arthur Hills.

Our agricultural operations consist of growing, managing, and selling timber and hay on approximately 10,700 acres of land on the west side of Daytona Beach, Florida. We are currently in the process of converting a significant portion of our timberlands to hay production.

SUMMARY OF 2009 OPERATING RESULTS

During the first quarter of 2009, net income of $322,206, equivalent to $.06 per share, was earned. This net income was earned despite no real estate sale closings during the period. The earnings were generated on strong profits from income properties and improved results from golf operations. Net income of $156,124, equivalent to $.03 per share, was posted in the first quarter of 2008.

We also use Earnings before Depreciation, Amortization, and Deferred Taxes (EBDDT) as a performance measure. Our strategy of investing in income properties through the deferred tax like-kind exchange process produces significant amounts of depreciation and deferred taxes.

The following is the calculation of EBDDT:

                                                                    Three Months Ended
                                                                 March 31,      March 31,
                                                                    2009           2008
Net Income                                                       $  322,206     $  156,124
Add Back:
Depreciation and Amortization                                       682,887        624,930
Deferred Taxes                                                     (146,768 )     (433,017 )
Earnings before Depreciation, Amortization, and Deferred Taxes   $  858,325     $  348,037

EBDDT is calculated by adding depreciation, amortization, and the change in deferred income tax to net income, as they represent non-cash charges. EBDDT is not a measure of operating results or cash flows from operating activities as defined by U.S. generally accepted accounting principles. Further, EBDDT is not necessarily indicative of cash availability to fund cash needs and should not be considered as an alternative to cash flow as a measure of liquidity. We believe, however, that EBDDT provides relevant information about operations and is useful, along with net income, for an understanding of our operating results.

EBDDT totaled $858,325 for the quarter ended March 31, 2009. This EBDDT represented a significant increase from EBDDT of $348,037 posted for 2008's first fiscal quarter. The improvement was the result of the increased net income coupled with a lower reduction for deferred taxes. During both periods the add-back for deferred taxes was negative as income taxes previously deferred on gains from real estate transactions became currently due when the Company received funds held by the intermediary. The like-kind exchange process utilizing these funds was not completed, as reinvestment property which met the Company's criteria could not be identified.

REAL ESTATE OPERATIONS

REAL ESTATE SALES
Real estate operations reported a loss of $238,035 during the first quarter of 2009. This loss represents a 31% improvement over the loss of $342,934 in 2008's same period. The losses during both periods came as the result of no real estate closings during the periods. Real estate costs and expenses during the first quarter of 2009 decreased 42% when compared to the prior year. The decline in expenses was due to lower real estate taxes, compensation and agriculture harvesting costs. Revenues of $6,093 and $74,844 were realized in the first quarter of 2009 and 2008, respectively, and were primarily associated with oil royalties received.

INCOME PROPERTIES

During the first three month period of 2009, income properties produced a profit of $1,846,674 on revenues totaling $2,338,970. These profits and revenues compared favorably to the profits of $1,744,230 realized on revenues amounting to $2,173,473 realized in 2008's same period. The 8% improvement in revenues and 6% rise in profit from income properties were the result of the acquisition in April 2008 of the Harris Teeter supermarket property located in Charlotte, North Carolina.

GOLF OPERATIONS

Losses from golf operations totaled $144,427 in 2009's first three-month period. This loss represents a 39% improvement over the loss of $237,417 recognized in 2008's same period. The improvement was realized on a 3% rise in revenues to $1,422,767. Revenues during 2008's first quarter totaled $1,379,551. The revenue gain was generated from both golf and food and beverage activities, with revenues from golf activities and food and beverage activities increasing 2% and 7%, respectively. These gains were generated on a 43% increase in the number of rounds played during the period, while the average rate per round played declined 27%. Golf operations costs and expenses decreased 3% during the quarter due to lower salaries and wages and golf course maintenance expenses. Golf operations costs and expenses totaled $1,567,194 and $1,616,968 for the quarters ended March 31, 2009 and 2008, respectively.

GENERAL, CORPORATE, AND OTHER

Interest and other income decreased 78% for the first quarter of 2009, when compared to the prior year's same period. The decline resulted from lower investment interest earned on decreased investment securities, lower interest earned on mortgage notes receivable due to the non-accrual of interest on delinquent notes and lower interest on funds held for reinvestment through the like-kind exchange process.

For the first three-month period of 2009, general and administrative expenses decreased 16%, when compared to the 2008's same period. This decline was primarily due to lower stock option expenses, due to the lower price of Company stock, in addition to lower compensation costs. Somewhat offsetting the decrease in general and administrative expenses were higher legal and other costs related to shareholder relations. General and administrative expenses totaled $1,025,417 and $1,221,000 for the quarters ended March 31, 2009 and 2008, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2009, cash and investment securities totaled $5,451,822, a decrease of $661,000 from the balance of $6,112,420 held at year-end 2008. There were no funds being held for reinvestment through the like-kind exchange process by our intermediary as of the end of the period. In addition to the decrease in cash and investment securities during the quarter notes payable rose $2,295,000 with $4,384,554 outstanding on the Company's $20,000,000 revolving line of credit at March 31, 2009.

The uses of these funds during the quarter primarily consisted of construction and development activities, the continuation of our hay conversion program, payment of income taxes and the payment of dividends. Construction and development activities approximated $960,000 and included the construction of a road on our core lands adjacent to LPGA Boulevard and construction of the 23,000 square-foot "Class A" office building. Dividends of $572,793, equivalent to $.10 per share, were paid during the period with an additional $1,020,462 paid for income taxes.

During the fourth quarter of 2008, our Board of Directors authorized a program to repurchase shares of our common stock having an aggregate value of up to $8,000,000. The authorization permits us to effect the repurchases from time to time through a variety of methods including open market repurchases and privately negotiated transactions. The repurchase plan is intended to be funded through reduced dividend payments in the future. We have no plans to increase debt to fund the repurchase plan. Through May 1, 2009, 4,660 shares had been repurchased at a total cost of $104,648.

Capital expenditures for the remainder of 2009 are projected to approximate $7.3 million, net of reimbursements from development partners. These expenditures include the completion of road construction and the "Class A" office building tenant improvements, and the continuation of the conversion of timber lands to hay. Also included in capital requirements during 2009 is the acquisition of property through Internal Revenue Code Section 1033 involuntary conversion under threat of condemnation tax deferral provisions. We plan to reinvest $8.5 million by year-end 2009 through this process.

At the end of 2008, the Company focused its efforts on obtaining federal stimulus dollars to extend Dunn Avenue, a major east west thoroughfare bridging Interstate 95, and provide improved access to Company lands. Subsequent to year end, the Company reached a conceptual agreement with the City of Daytona Beach and the County of Volusia on a cost sharing agreement that will allow the use of federal funds to build this road project. This cost sharing agreement will reduce capital expenditures that the Company, as well as the City of Daytona Beach and the County of Volusia, might have otherwise been required to make to construct Dunn Avenue.

Capital to fund the planned expenditures in 2009 is expected to be provided from cash and investment securities (as they mature), operating activities, and financing sources that are currently in place, including the $20 million revolving line of credit, which matures on March 29, 2010.

We also believe that we have the ability to borrow on a non-recourse basis against our existing income properties, which are all free of debt as of the date of this filing. As additional funds become available through qualified sales, we expect to invest in additional real estate opportunities.

Our Board of Directors and management continually review the allocation of any excess capital with the goal of providing the highest return for all shareholders over the long term. The reviews consider various alternatives, including increasing or decreasing regular dividends, declaring special dividends, repurchasing stock, and retaining funds for reinvestment, including road development and hay conversion of timber lands. The Board of Directors has reaffirmed its support for the continuation of the 1031 tax- deferred exchange strategy for reinvestment of agricultural land sales proceeds, self-development of income properties, and development of infrastructure on company owned lands.
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CRITICAL ACCOUNTING POLICIES

The profit on sales of real estate is accounted for in accordance with the provisions of SFAS No. 66, "Accounting for Sales of Real Estate" ("SFAS No. 66"). We recognize revenue from the sale of real estate at the time the sale is consummated unless the property is sold on a deferred payment plan and the initial payment does not meet criteria established under SFAS No. 66, or we retain continuing involvement with the property. A majority of our land sales contracts contain an anti-speculation clause. This clause requires the buyer to begin construction of their project within a specified period of time. If this requirement is not met, we have the right, but not the obligation, to repurchase the property at its original sales price.

We acquire income properties with long-term leases in place, upon acquisition, the portion of the purchase price which represents the market value associated with the lease is allocated to an intangible asset. The amount of the intangible asset represents the cost of replacing the tenant should the lease be discontinued. Factors such as vacancy period, tenant improvements, and lease commissions, among others, are considered in calculating the intangible asset. The intangible asset is amortized over the remaining life of the lease at the time of acquisition. At March 31, 2009, the intangible asset associated with the income properties totaled $4,904,524, net of amortization of $1,692,013.

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," we have reviewed the recoverability of long-lived assets, including real estate development, income properties, and other property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may or may not be recoverable. Long-lived assets are evaluated for impairment by using an undiscounted cash flow approach which considers future estimated capital expenditures. Impairment on long-lived assets is measured at fair value by estimating discounted future operating cash flow and sales price, less cost to sell. There has been no impairment of long-lived assets reflected in the consolidated financial statements.

At the time our debt was refinanced in 2002, we entered into an interest rate swap agreement. This swap arrangement changes the variable-rate cash flow exposure on the debt obligations to fixed cash flows so that we can manage fluctuations in cash flows resulting from interest rate risk. This swap arrangement essentially creates the equivalent of fixed-rate debt. The above referenced transaction is accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Certain Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of SFAS No. 133." The accounting requires the derivative to be recognized on the balance sheet at its fair value and the changes in fair value to be accounted for as other comprehensive income or loss.

We measure the ineffectiveness of the interest rate swap derivative by comparing the present value of the cumulative change in the expected future cash flows on the variable leg of the swap with the present value of the cumulative change in the expected future interest cash flows on the floating rate liability. This measure resulted in no ineffectiveness for the periods ended March 31, 2009 and March 31, 2008. A liability in the amount of $915,054 at March 31, 2009, has been established on our balance sheet. The change in fair value, net of applicable taxes, in the cumulative amount of $562,072 at March 31, 2009, has been recorded as accumulated other comprehensive loss, a component of shareholders' equity.

We maintain a stock option plan pursuant to which 500,000 shares of our common stock may be issued. The current Plan was approved at the April 25, 2001 Shareholders' meeting. Under the Plan, the option exercise price equals the stock market price on the date of grant. The options generally vest over five years and all expire after ten years. The Plan provides for the grant of
(1) incentive stock options, which satisfy the requirements of Internal Revenue Code (IRC) Section 422, and (2) non-qualified options, which are not entitled to favorable tax treatment under IRC Section 422. No optionee may exercise incentive stock options in any calendar year for shares of common stock having a total market value of more than $100,000 on the date of grant (subject to certain carryover provisions).

In connection with the grant of non-qualified options, a stock appreciation right for each share covered by the option may also be granted. The stock appreciation right will entitle the optionee to receive a supplemental payment, which may be paid in whole or in part in cash or in shares of common stock equal to a portion of the spread between the exercise price and the fair market value of the underlying shares at the time of exercise. All options granted to date have been non-qualified options.

Both our stock options and stock appreciation rights are liability classified awards under SFAS No. 123R and are required to be remeasured to fair value at each balance sheet date until the award is settled.