On February 24, 1996, about 1425 central standard time, a homebuilt Kitfox II, N915PK, registered to a private individual, collided with a ditch while landing at the Panama City-Bay County International Airport, Panama City, Florida. Visual meteorological conditions prevailed at the time and no flight plan was filed for the 14 CFR Part 91 instructional flight. The airplane was substantially damaged and the certified flight instructor (CFI) sustained serious injuries. The student pilot/owner sustained minor injuries. The flight originated about 1415 from the Panama City Airport. The CFI stated that he listened to the ATIS before giving about 1 hour of dual taxiing instruction to the student. He did not again listen to the ATIS before takeoff from runway 32, and during the initial climb, both observed that the airspeed indicator was inoperative. The CFI elected to return and landed hard, then bounced. The airplane drifted off the right side of the runway and he applied power to go-around but the airplane collided with a ditch about 150 feet off the right side of the runway. The CFI and student pilot/owner both stated that there was no preimpact failure or malfunction of the engine or of the airframe. The CFI further stated that if he had applied power sooner the accident could have been avoided. A weather observation taken at the airport about 1 minute after the accident indicates that the wind was from 220 degrees at 8 knots. A weather observation taken at the airport about 38 minutes before the accident indicates that the wind was from 250 degrees at 5 knots. The airport has runway 23 that was available. No determination was made as to the reason for the inoperative airspeed indicator.