##### Table of Contents



FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   For Quarter Ended June 30, 2004 Commission File no. 2-64309 GOLF HOST RESORTS, INC.   Colorado
    
    84-0631130(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 36750 US 19 N., Palm Harbor, Florida
    
    34684(Address of principal executive offices)
    
    (Zip Code)
 (727) 942-2000   Indicate by check mark whether the registrant (1) has filed all reports required
to Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
twelve months, and (2) has been subject to the filing requirements for the past
90 days.  Yes [X]     No [ ] Issuer has no common stock subject to this report.




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TABLE OF CONTENTS PART I - FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II - OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity SecuritiesItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. Exhibits and Reports on Form 8-KSIGNATURESEXHIBITS31.1 Section 302 CEO Certification31.2 Section 302 Principal Financial Officer Certification32.1 Section 906 CEO Certification32.2 Section 906 Principal Financial Officer CertificationEX-31.1 302 Certification of CEOEX-31.2 302 Certification of CFOEX-32.1 906 Certification of CEOEX-32.2 906 Certification of CFO




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##### Table of Contents



PART I-FINANCIAL INFORMATION GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Host, Inc.)
CONSOLIDATED BALANCE SHEETS ASSETS
(Substantially all pledged) June 30,
    
    December 31,2004
    
    2003(unaudited)CURRENT ASSETS:Cash
    
    $
    
    
    
    $
    Restricted cash
    
    
    3,283,223
    
    
    
    2,489,761Accounts receivable, net
    
    
    1,411,859
    
    
    
    1,578,294Other receivables
    
    
    128,877
    
    
    
    120,966Inventories and supplies
    
    
    1,134,514
    
    
    
    1,348,526Prepaid expenses and other assets
    
    
    568,527
    
    
    
    350,161Total current assets
    
    
    6,527,000
    
    
    
    5,887,708INTANGIBLES, net
    
    
    11,171,299
    
    
    
    11,602,195PROPERTY AND EQUIPMENT, net
    
    
    36,838,251
    
    
    
    37,164,124OTHER ASSETS
    
    
    5,756,519
    
    
    
    6,279,340TOTAL ASSETS
    
    $
    60,293,069
    
    
    $
    60,933,367
 The accompanying notes are an integral part of these consolidated financial statements. Page 2




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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS DEFICIT June 30,
    
    December 31,2004
    
    2003(unaudited)CURRENT LIABILITIES:Debt due within one year
    
    $
    78,975,000
    
    
    $
    78,975,000Cash overdrafts
    
    
    116,632
    
    
    
    Accounts payable
    
    
    3,606,580
    
    
    
    4,501,132Accrued payroll costs
    
    
    990,632
    
    
    
    885,531Accrued interest
    
    
    28,312,136
    
    
    
    23,751,133Other payables and accrued expenses
    
    
    1,729,136
    
    
    
    2,541,365Deposits and deferred revenues
    
    
    1,784,896
    
    
    
    1,867,326Due to related parties
    
    
    2,398,097
    
    
    
    832,774Total current liabilities
    
    
    117,913,109
    
    
    
    113,354,261OTHER LONG-TERM LIABILITIES
    
    
    10,265,009
    
    
    
    10,265,009LONG TERM REFURBISHMENT
    
    
    6,960,748
    
    
    
    6,960,748DEFERRED INCOME TAXES
    
    
    1,255,000
    
    
    
    1,255,000Total liabilities
    
    
    136,393,866
    
    
    
    131,835,018SHAREHOLDERS DEFICITCommon stock, $1 par, 5,000 shares
authorized, issued, and outstanding
    
    
    5,000
    
    
    
    5,0005.6% cumulative preferred stock, $1 par,
4,577,000 shares authorized, issued,
and outstanding
    
    
    4,577,000
    
    
    
    4,577,000Paid-in capital
    
    
    (8,487,323
    )
    
    
    (8,487,323
    )Shareholder receivable
    
    
    (223,709
    )
    
    
    (223,709
    )Accumulated deficit
    
    
    (71,971,765
    )
    
    
    (66,772,619
    )Total shareholders deficit
    
    
    (76,100,797
    )
    
    
    (70,901,651
    )Total liabilities and shareholders
deficit
    
    $
    60,293,069
    
    
    $
    60,933,367
 The accompanying notes are an integral part of these consolidated financial statements. Page 3




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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Host, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS Quarter ended June 30,
    
    Six months ended June 30,2004
    
    2003
    
    2004
    
    2003(unaudited)
    
    
    
    
    
    (unaudited)REVENUES:Resort facilities
    
    $
    2,696,928
    
    
    $
    2,537,629
    
    
    $
    6,447,144
    
    
    $
    6,613,206Food and beverage
    
    
    2,471,455
    
    
    
    2,871,574
    
    
    
    5,696,248
    
    
    
    6,297,775Golf
    
    
    2,897,568
    
    
    
    2,869,517
    
    
    
    6,868,855
    
    
    
    6,630,710Other
    
    
    1,369,718
    
    
    
    1,189,196
    
    
    
    2,864,688
    
    
    
    2,620,9299,435,669
    
    
    
    9,467,916
    
    
    
    21,876,935
    
    
    
    22,162,620COSTS AND
OPERATING EXPENSES:Resort facilities
    
    
    2,492,501
    
    
    
    2,146,932
    
    
    
    5,280,318
    
    
    
    5,243,711Food and beverage
    
    
    2,061,601
    
    
    
    2,041,635
    
    
    
    4,378,596
    
    
    
    4,301,900Golf
    
    
    1,977,147
    
    
    
    1,747,929
    
    
    
    3,850,192
    
    
    
    3,453,462Other
    
    
    2,232,431
    
    
    
    2,238,575
    
    
    
    4,577,016
    
    
    
    4,579,995General and administrative
    
    
    1,304,946
    
    
    
    1,065,098
    
    
    
    2,632,134
    
    
    
    2,296,634Depreciation and amortization
    
    
    702,198
    
    
    
    747,198
    
    
    
    1,494,396
    
    
    
    1,494,39610,770,824
    
    
    
    9,987,367
    
    
    
    22,212,652
    
    
    
    21,370,098OPERATING (LOSS)/INCOME
    
    
    (1,335,155
    )
    
    
    (519,451
    )
    
    
    (335,717
    )
    
    
    792,522INTEREST EXPENSE, NET
    
    
    2,351,421
    
    
    
    2,338,834
    
    
    
    4,735,275
    
    
    
    4,568,293LOSS BEFORE PREFERRED
STOCK DIVIDEND
    
    
    (3,686,576
    )
    
    
    (2,858,285
    )
    
    
    (5,070,992
    )
    
    
    (3,775,771
    )DIVIDEND REQUIREMENTS ON
PREFERRED STOCK
    
    
    64,077
    
    
    
    64,077
    
    
    
    128,154
    
    
    
    128,154LOSS
ATTRIBUTABLE
TO COMMON SHAREHOLDER
    
    $
    (3,750,653
    )
    
    $
    (2,922,362
    )
    
    $
    (5,199,146
    )
    
    $
    (3,903,925
    )
 The accompanying notes are an integral part of these consolidated financial statements. Page 4




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GOLF HOST RESORTS, INC AND SUBSIDIARY
(a wholly owned subsidiary of Golf Host, Inc.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT
(unaudited) $1 Par Value
    
    5.6% Cumulative
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    Preferred Stock
    
    Paid-In
    
    Shareholders
    
    Accumulated
    
    ShareholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Receivable
    
    Deficit
    
    DeficitBalance, December 31, 2003
    
    
    5,000
    
    
    $
    5,000
    
    
    
    4,577,000
    
    
    $
    4,577,000
    
    
    $
    (8,487,323
    )
    
    $
    (223,709
    )
    
    $
    (66,772,619
    )
    
    $
    (70,901,651
    )Loss
attributable to common
shareholder (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,199,146
    )
    
    
    (5,199,146
    )Balance, June 30, 2004
    
    
    5,000
    
    
    $
    5,000
    
    
    
    4,577,000
    
    
    $
    4,577,000
    
    
    $
    (8,487,323
    )
    
    $
    (223,709
    )
    
    $
    (71,971,765
    )
    
    $
    (76,100,797
    )
 The accompanying notes are an integral part of these consolidated financial statements. Page 5




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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Host, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(unaudited) 2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Loss before dividend requirements
on preferred stock
    
    $
    (5,070,992
    )
    
    $
    (3,775,771
    )Adjustments to reconcile net income to net cash
provided by operations:Depreciation and amortization
    
    
    1,494,396
    
    
    
    1,494,396Provision for bad debts
    
    
    54,052
    
    
    
    (75,520
    )Amortization of refurbishment costs
    
    
    522,831
    
    
    
    390,919Gain on disposal of capital lease
    
    
    
    
    
    
    (27,739
    )Changes in operating working capital
    
    
    3,737,343
    
    
    
    2,807,375Cash provided by operations
    
    
    737,630
    
    
    
    813,660CASH FLOWS FROM INVESTING ACTIVITIES:Decrease in other assets
    
    
    
    
    
    
    3,369Purchases of property and equipment
    
    
    (737,630
    )
    
    
    (627,492
    )Cash used in investing activities
    
    
    (737,630
    )
    
    
    (624,123
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of existing debt
    
    
    
    
    
    
    (62,245
    )Additional borrowings on existing debt
    
    
    
    
    
    
    132,600Cash used in financing activities
    
    
    
    
    
    
    70,355NET INCREASE IN CASH
    
    
    
    
    
    
    259,892CASH, BEGINNING OF PERIOD
    
    
    
    
    
    
    CASH, END OF PERIOD
    
    $
    
    
    
    $
    259,892NONCASH FINANCING AND INVESTING
ACTIVITIES:The Company
recorded its preferred
stock dividend liability to GHI
    
    $
    128,154
    
    
    $
    128,154
 The accompanying notes are an integral part of these consolidated financial statements. Page 6




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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)  (1)
    
    BASIS OF PRESENTATIONThe financial statements for December 31, 2003 were prepared assuming the Company will continue as a
going concern. As discussed in the notes to consolidated financial statements on Form 10-K dated
December 31, 2003, the Company has suffered recurring losses from operations, has negative working capital
and has a shareholders deficit. These issues raise substantial doubt about the Companys ability to continue
as a going concern. Managements plans in regard to these matters are also discussed in the footnotes.
Additionally, as described in Note 6 of the notes to consolidated financial statements on Form 10-K, the
Company has defaulted under the terms of its debt agreement and Golf Host, Inc.(GHI) (the Companys parent
company) is a defendant to a class action lawsuit. These financial statements do not include any adjustments
that might result from the outcome of these uncertainties.These financial statements and related notes are presented for interim periods in accordance with the
requirements of Form 10-Q and, consequently, do not include all disclosures normally provided in the
Companys Annual Report on Form 10-K. Accordingly, these financial statements and related notes
should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended
December 31, 2003.The accompanying consolidated balance sheets for June 30, 2004, and consolidated statements of
operations and cash flows for the periods ended June 30, 2004 and 2003, are unaudited but reflect all
adjustments which are, in the opinion of management, necessary for a fair presentation of the results for
the interim periods presented. All such adjustments are of a normal
recurring nature. Certain reclassifications have been made to the
June 30, 2003 financial statements to conform to June 30, 2004
presentation.The Companys business is seasonal. Therefore, the results of operations for the interim periods shown in
this report are not necessarily indicative of results to be expected
for the entire fiscal year.2)
    
    INTANGIBLE ASSETSThe Company recorded at closing in 1997, a resort intangible asset of approximately $30,400,000. This
intangible related to the purchase of the Innisbrook Resort, which contained an existing rental pool agreement
and a recently executed management agreement with Westin Hotels. The intangible is being amortized over
twenty years on a straight-line basis. Amortization expense for all intangible assets was approximately
$431,000 and $431,000 for the six months ended June 30, 2004 and June 30, 2003, respectively. Page 7




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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Host, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)  2)
    
    INTANGIBLE ASSETSDuring the six months ended June 30, 2004, the Company reviewed the carrying value of the
intangible asset and determined that further impairment had not
occurred. Advance bookings and rental pool participation had stabilized from a
historical perspective, and the pro forma cash flows, based upon advance bookings
indicate that no further deterioration in the carrying value should
be recognized in 2004.(3)
    
    DEBTDebt consists of the following: June 30,
    
    December 31,2004
    
    2003Participating mortgage note at varying pay
rates maturing in 2027 (in default)
    
    $
    69,975,000
    
    
    $
    69,975,000$9,000,000 participating mortgage
note credit facility maturing in 2007 (in default)
    
    
    9,000,000
    
    
    
    9,000,00078,975,000
    
    
    
    78,975,000Less current maturities
    
    
    (78,975,000
    )
    
    
    (78,975,000
    )$
    
    
    
    $
    
  (4)
    
    CONTINGENCIESThe Company, in the normal course of operations, is subject to claims and lawsuits. The Company does not
believe that the ultimate resolution of such matters will materially impair operations or have an adverse effect on
the Companys financial position and results of operations.GHI was named as a defendant in a consolidated class action lawsuit (class action lawsuit) whereby the
plaintiffs allege breaches of contract, including breaches in connection with the Rental Pool Master Lease
Agreement. The plaintiffs are seeking unspecified damages and declaratory judgment stating that the plaintiffs
are entitled to participate in the rental pool if one exists, a limitation of the total number of club memberships
and a limitation of golf course access to persons who are either condominium owners who are members, their
accompanied guests, or guests of the resort. Depositions of class members and others, including depositions
of prior executives of the Company, have been taken and additional discovery remains. The Court has
postponed the previously scheduled trial date of February 3, 2003; a new trial date has not yet been set. As
of December 31, 2003, the Court had decertified the class and denied the plaintiffs subsequent motion to permit
additional owners to intervene in the lawsuit. In addition, the plaintiffs filed a complaint seeking to pierce the
corporate veil. The court dismissed the veil piercing complaint with prejudice. The plaintiffs appealed the Page 8




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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Host, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)  (4)
    
    CONTINGENCIES (continued)decertification of the class; the denial to intervene and the veil piercing dismissal to the Florida Court
of Appeals, Second District. The Court of Appeals has affirmed the lower courts decertification of
the class and has affirmed the lower courts dismissal with prejudice of the veil piercing case.
On July 29, 2004, the Circuit Court for the Sixth Judicial Court entered an order granting defendants motion for summary judgment.
No decision on the intervention appeal has been made.
The Company does not believe the resolution of this matter will have
a material adverse effect on the Companys financial condition
or results of operations.The Company has recorded a liability and related asset in the approximate amount of $6,961,000,
in recognition of the Master Lease Agreement refurbishment reimbursement program. The liability
will be settled in accordance with the terms of the agreement and the asset is being amortized on
a straight line basis over the period from the time each phase of the refurbishment is placed is
service through the completion of payment in 2009. The amortization expense for the period ending
June 30, 2004 and 2003 was approximately $523,000 and $391,000, respectively.As noted in the Companys 10-K filed as of December 31, 2003, the Company has defaulted on its
primary mortgage with Golf Trust of America ("GTA"). On July 15, 2004, the Company and GTA
entered into a Settlement Agreement wherein the Resort property,
three condominium units and a linen room located at the Innisbrook Resort,
the acquired interest in common stock and operating partnership units
of GTA held by the parent and all rights, title and interests of the
Company under existing contracts and agreements were transferred to
GTA. In addition, the Company provided a limited indemnity to defend
and hold harmless GTA (and its affiliates) from and against any and
all costs, liabilities, claims, losses, judgments, or damages
arising out of or in connection with the lawsuit known as the Class
Action Lawsuit as well as liabilities accruing on or before the
closing date relating to employee benefits and liabilities for
contracts or agreements not disclosed by the Company to GTA. In
return, GTA delivered a duly executed release. Page 9




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RENTAL POOL LEASE OPERATION The following unaudited financial statements of the Innisbrook Rental Pool Lease
Operation (the Rental Pool) are for the quarters ended June 30, 2004 and 2003. The operation of the Rental Pool is tied closely to that of Golf Host Resorts, Inc.
(the Company), and provides for distribution of a percentage of the Companys room
revenues, as defined in the Rental Pool Master Lease Agreements, to participating
condominium owners (Participants). The Innisbrook Rental Pool Operation is party to lease agreements with an affiliated
entity, whose ability to continue as a going concern is in substantial doubt.
The operation of the Rental Pool is more fully discussed in Form 10-K for the fiscal
year ended December 31, 2003 (file No. 2-64309). Page 10




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INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS Distribution Fund June 30,2004
    
    December 31,(unaudited)
    
    2003AssetsReceivable from Golf Host Resorts, Inc.
for distribution
    
    $
    975,210
    
    
    $
    1,040,282Interest receivable from Maintenance
Escrow Fund
    
    
    4,654
    
    
    
    6,489$
    979,864
    
    
    $
    1,046,771Liabilities and participants fund balancesDue to participants for distribution
    
    $
    725,395
    
    
    $
    788,162Due to Maintenance Escrow Fund
    
    
    254,469
    
    
    
    258,609$
    979,864
    
    
    $
    1,046,771Maintenance Escrow Fund AssetsCash and cash equivalents
    
    $
    125,623
    
    
    $
    246,192Short term investments
    
    
    1,520,000
    
    
    
    1,330,000Inventory
    
    
    4,494
    
    
    
    535Receivable from Distribution Fund
    
    
    254,469
    
    
    
    258,609Interest receivable
    
    
    4,716
    
    
    
    15,858$
    1,909,302
    
    
    $
    1,851,194Liabilities and Participants Fund BalancesAccounts payable
    
    $
    3,542
    
    
    $
    43,590Construction retainage
    
    
    5,344
    
    
    
    5,389Interest payable to Distribution Fund
    
    
    4,654
    
    
    
    6,489Carpet care payable
    
    
    18,796
    
    
    
    4,137Participants fund balances
    
    
    1,876,966
    
    
    
    1,791,589$
    1,909,302
    
    
    $
    1,851,194
 These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the
Rental Pool Operators, include all adjustments which are necessary for a fair presentation. Page 11




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INNSBROOK RENTAL POOL LEASE OPERATIONSTATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 30, 2004 AND 2003 Distribution Fund
(unaudited) Current quarter
    
    Year-to-Date2004
    
    2003
    
    2004
    
    2003Gross Revenues
    
    $
    2,636,067
    
    
    $
    2,485,774
    
    
    $
    6,325,161
    
    
    $
    6,498,035Deductions:Agents commissions
    
    
    122,967
    
    
    
    82,033
    
    
    
    271,597
    
    
    
    260,468Credit card fees
    
    
    62,182
    
    
    
    58,723
    
    
    
    151,854
    
    
    
    153,920Audit fees
    
    
    6,250
    
    
    
    5,387
    
    
    
    12,500
    
    
    
    10,774Uncollectable room rents
    
    
    390
    
    
    
    
    
    
    
    2,459
    
    
    
    2,119Linen replacements
    
    
    16,877
    
    
    
    21,290
    
    
    
    74,679
    
    
    
    74,197Rental pool complimentary fees
    
    
    1,183
    
    
    
    654
    
    
    
    2,634
    
    
    
    1,629209,849
    
    
    
    168,087
    
    
    
    515,723
    
    
    
    503,107Adjusted Gross Revenues
    
    
    2,426,218
    
    
    
    2,317,687
    
    
    
    5,809,438
    
    
    
    5,994,928Management Fee
    
    
    (1,455,730
    )
    
    
    (1,390,575
    )
    
    
    (3,485,662
    )
    
    
    (3,596,867
    )Gross Income Distribution
    
    
    970,488
    
    
    
    927,112
    
    
    
    2,323,776
    
    
    
    2,398,061Adjustments to Gross Income
Distribution:General pooled expense
    
    
    (1,195
    )
    
    
    (21
    )
    
    
    (3,240
    )
    
    
    (45
    )Corporate complimentary occupancy fees
    
    
    5,470
    
    
    
    5,040
    
    
    
    9,340
    
    
    
    7,802Interest expense
    
    
    (3,183
    )
    
    
    (3,183
    )
    
    
    (6,366
    )
    
    
    (6,366
    )Gtd MLA guaranteed payment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,592Occupancy fees
    
    
    (279,601
    )
    
    
    (264,162
    )
    
    
    (575,551
    )
    
    
    (571,531
    )Advisory Committee expenses
    
    
    (43,585
    )
    
    
    (54,143
    )
    
    
    (94,503
    )
    
    
    (101,537
    )Life-safety reimbursement
    
    
    
    
    
    
    (46,284
    )
    
    
    
    
    
    
    (134,827
    )Net Income Distribution
    
    
    648,394
    
    
    
    564,359
    
    
    
    1,653,456
    
    
    
    1,593,149Adjustments to Net Income Distribution:Occupancy fees
    
    
    279,601
    
    
    
    264,162
    
    
    
    575,551
    
    
    
    571,531Hospitality suite fees
    
    
    2,282
    
    
    
    2,424
    
    
    
    4,207
    
    
    
    3,864Westin Associate room fees
    
    
    44,933
    
    
    
    15,288
    
    
    
    80,409
    
    
    
    39,444Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,890Amount available for Distribution
to Participants
    
    $
    975,210
    
    
    $
    846,233
    
    
    $
    2,313,623
    
    
    $
    2,210,878
 These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the
Rental Pool Operators, include all adjustments which are necessary for a fair presentation. Page 12




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INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS FUND BALANCES
FOR THE QUARTERS ENDED JUNE 30, 2004 AND 2003 Distribution Fund
(unaudited) Current Quarter
    
    Year-to-date2004
    
    2003
    
    2004
    
    2003Balance, beginning of period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Additions:Amount available for distribution
    
    
    975,210
    
    
    
    846,233
    
    
    
    2,313,623
    
    
    
    2,210,878Interest received or receivable from
Maintenance Escrow Fund
    
    
    4,654
    
    
    
    14,068
    
    
    
    9,655
    
    
    
    25,040Reductions:Amounts withheld for Maintenance Escrow Fund
    
    
    (254,469
    )
    
    
    (237,746
    )
    
    
    (520,825
    )
    
    
    (514,698
    )Amounts accrued or paid to participants
    
    
    (725,395
    )
    
    
    (622,555
    )
    
    
    (1,802,453
    )
    
    
    (1,721,220
    )Balance, end of period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Maintenance Escrow FundBalance, beginning of period
    
    $
    1,831,463
    
    
    $
    4,568,662
    
    
    
    1,791,589
    
    
    
    3,444,280Additions:Amounts withheld from occupancy fees
    
    
    254,469
    
    
    
    237,746
    
    
    
    520,825
    
    
    
    514,698Interest earned
    
    
    4,654
    
    
    
    14,068
    
    
    
    9,655
    
    
    
    25,040Charges to participants to establish
or restore escrow balances
    
    
    103,578
    
    
    
    249,203
    
    
    
    123,603
    
    
    
    1,788,521Reductions:Maintenance charges
    
    
    (261,606
    )
    
    
    (188,829
    )
    
    
    (472,699
    )
    
    
    (438,815
    )Refurbishment Phase II
    
    
    
    
    
    
    (1,611,768
    )
    
    
    
    
    
    
    (2,012,025
    )Carpet care reserve deposit
    
    
    (16,964
    )
    
    
    (13,208
    )
    
    
    (34,720
    )
    
    
    (28,576
    )Interest accrued or paid to Distribution Fund
    
    
    (4,654
    )
    
    
    (14,068
    )
    
    
    (9,655
    )
    
    
    (25,040
    )Refunds to participants as prescribed by
the master lease agreements
    
    
    (33,974
    )
    
    
    (161,819
    )
    
    
    (51,632
    )
    
    
    (188,096
    )Balance, end of period
    
    $
    1,876,966
    
    
    $
    3,079,987
    
    
    $
    1,876,966
    
    
    $
    3,079,987
 These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the
Rental Pool Operators, include all adjustments which are necessary for a fair presentation. Page 13




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GOLF HOST RESORTS, INC. 
 Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations Selected
Operational Information Current quarter
    
    Year-to-Date2004
    
    2003
    
    2004
    
    2003Average daily distribution
    
    $
    18.06
    
    
    $
    15.85
    
    
    $
    21.71
    
    
    $
    21.00Average room rate
    
    $
    119.39
    
    
    $
    119.74
    
    
    $
    138.16
    
    
    $
    143.32Occupied room nights
    
    
    22,080
    
    
    
    20,760
    
    
    
    45,783
    
    
    
    45,339Available room nights
    
    
    54,009
    
    
    
    53,379
    
    
    
    106,565
    
    
    
    105,286Occupancy percentage
    
    
    40.9
    %
    
    
    38.9
    %
    
    
    43.0
    %
    
    
    43.1
    %Average number of available units
    
    
    594
    
    
    
    587
    
    
    
    586
    
    
    
    582
 Quarter ended June 30, 2004 During the second quarter of 2004, the Companys results of operations
continued to reflect the soft trend in the hospitality industry and the
destination golf resort segment of that industry. Occupied room nights at the
Innisbrook resort were 6.4% greater than the same three-month period for the
prior year. Total room nights were up 1,320 for the period ended June 30, 2004
as compared to the three months ended June 30, 2003. Group room nights were
down 1,824 or 12.1% while transient rooms increased by 3,144 room nights or
55.0%, as compared to the same period last year. Total revenue per room night
decreased by 6.3% or $28.73 over the prior year. Gross revenue per room night
for the three months ended June 30, 2004 was $427.34 as compared
to $456.07 for
the three months ended June 2003. These net increases in room nights offset
with the decrease in room night spending levels produced a net
decrease in
gross revenue of approximately $32,000 or 0.3%. Expenses are being managed in response to the reduced demand in the market
place, including the day-to-day maintenance costs of the four golf courses.
Operating expenses, before depreciation and amortization, increased for the
comparative three month period ended June 30, 2004 by
approximately $828,000 or
9.0%. Approximately $357,000 of this variance is a result of
cost of living raises that were not issued in 2003, in the approximate amount of
$52,000, increased workmans compensation costs of
approximately $145,000 as a result of an increase in
premiums and deductibles, increased health, dental and disability
premiums in the approximate amount of $96,000 and an aggregate
increase in other employee benefit costs such as 401K matching,
Federal and State employment taxes in the approximate amount of
$64,000. The remaining increase in operating expenses is a result of
increased utilization in contract labor in the approximate amount of
$21,000 necessitated by short term operational needs, an
increase in the allocation expenses of the parent company in the
approximate amount of $64,000, an increase in personnel recruiting,
relocation and training expenses due to the hiring of replacement
operational personnel by Westin, in the approximate amount of
$55,000, an increase in promotional marketing costs as a result of
new collateral material production in the approximate amount of
$18,000, increased referral expenses as a result of improved guest
referral programs in the approximate amount of $29,000, increases in
security, sewer and water costs in the approximate amount of $101,000 and an aggregate
increase in all other operational expenses of approximately $183,000. The increase in revenue combined with the net increases in operating expenses
and depreciation and amortization noted above, produced a net reduction in the
comparative three-month operating income of approximately $816,000. Operating
loss, before interest expense and preferred dividend requirements, was
approximately $1,335,000 versus a loss of approximately $519,000 for the three
months ended June 30, 2004 and June 30, 2003, respectively. Interest expense, net of interest income, which approximated $2,351,000 and
$2,339,000 for the three months ended June 30, 2004 and June 30, 2003
respectively, reflects the continued accrual of the Companys GTA mortgage
interest obligations. Capital expenditure reserves in the amount of approximately $627,000 were
set-aside during the quarter ended June 30, 2004. During the quarter
approximately $149,000 was used to fund lease payments on the new telephone
switch, approximately $37,000 was invested in Heating and Air-conditioning
systems of the resort facilities and approximately $172,000 was disbursed to
fund golf cart leases, golf course equipment leases and miscellaneous deferred
maintenance capital items. Page 14




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Six months ended June 30, 2004 During the six months ended June 30, 2004, the Companys results of operations
continued to reflect the soft trend in the hospitality industry and the
destination golf resort segment of that industry. Occupied room nights at the
Innisbrook resort were 1.0% greater than the same six-month period for the
prior year. Total room nights were up 444 for the six-month period ended June
30, 2004 as compared to the six-months ended June 30, 2003. Group room nights
were down 4,918 or 14.8% while transient rooms increased by 5,362 room nights
or 44.5%, as compared to the same period last year. Total revenue per room
night decreased by 2.2% or $10.98 from the prior year. Gross revenue per room
night for the six months ended June 30, 2004 was $477.84 as
compared to $488.82
for the six months ended June 30, 2003. These net increases in room nights
offset with the decrease in room night spending levels produced net decreases
in gross revenue of approximately $286,000 or 1.3%. Expenses continue to be managed in response to the reduced demand in the market
place, including the day-to-day maintenance costs of the four golf courses.
Operating expenses, before depreciation and amortization, increased for the
comparative six month period ended June 30, 2004 by
approximately $842,000
or 4.2%. Approximately $572,000 of this variance is a result of
increased employee costs associated primarily with cost of living raises that were not issued in 2003
in the approximate amount of
$292,000, increased workmans compensation costs of
approximately $75,000 primarily as a result of an increase in
premiums and deductibles, increased health, dental and disability
premiums in the approximate amount of $97,000 and an aggregate
increase in other employee benefit costs such as 401K matching,
Federal and State employment taxes in the approximate amount of
$108,000. The remaining increase in operating expenses is a result of
increased utilization in contract labor in the approximate amount of
$66,000 necessitated by short term operational needs, an increase in
costs of goods sold in the approximate amount of $83,000 as a result
of approximately a 2.7% increase in the number of meals served, an
increase in the allocation expenses of the parent company in the
approximate amount of $18,000, an increase in personnel recruiting,
relocation and training expenses due to the hiring of replacement
operational personnel by Westin, in the approximate amount of
$85,000, an increase in promotional marketing costs as a result of
new collateral material production in the approximate amount of
$59,000, increased referral expenses as a result of improved guest
referral programs in the approximate amount of $78,000, increases in
security, sewer and water costs of $241,000 and an aggregate reduction
in all other operational expenses of approximately $360,000. The decrease in revenue combined with the net increases in operating expenses
and depreciation and amortization noted above, produced a net reduction in the
comparative six-month operating income of approximately $1,128,000. Operating
loss, before interest expense and preferred dividend requirements, was
approximately $336,000 versus income of approximately $792,000 for the six
months ended June 30, 2004 and June 30, 2003, respectively. Interest expense, net of interest income, which approximated $4,735,000 and
$4,568,000 for the six months ended June 30, 2004 and June 30, 2003
respectively, reflects the continued accrual of the Companys GTA mortgage
interest obligations of approximately $760,000 per month plus interest related
to capital leases in the approximate amount of $162,000 during the six-month
period ended June 30, 2004. Capital expenditure reserves in the amount of approximately $1,254,000 were
set-aside during the six months ended June 30, 2004. During the quarter
approximately $572,000 was used to fund the acquisition and initial lease
payments on the new telephone switch, approximately $168,000 was disbursed to
fund golf cart leases, golf course equipment leases and other property leases
and approximately $198,000 was expended for deferred maintenance capital items. The following information may contain forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of the Exchange
Act. Such statements may be identified by the inclusion of terms such as
believe, expect, hope or may. Although the Company believes that such
forward-looking statements are based upon sound and reasonable assumptions,
given the circumstances in which the statements are made, the actual results
could differ significantly from those described in the forward-looking
statements. Page 15




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Certain factors that might cause such a difference include the following:
changes in general economic conditions that may influence group conferences and
guests vacations plans; changes in travel patterns; changes in consumer tastes in destinations or accommodations for group
conferences and vacations; changes in rental pool participation by the current
condominium owners; settlement of the Class Action Lawsuit; the ability of the Company to
continue to operate the Innisbrook property under its management contracts; and
the resale of condominiums to owners who elect neither to participate in the
rental pool nor to become Club members. Given these uncertainties, readers are
cautioned not to put undue reliance on such statements. Liquidity and Capital Resources The Companys working capital position has decreased to a deficit of
approximately $111,386,000. This is a reduction of approximately $3,919,000 in
working capital from the December 31, 2003 deficit of approximately
$107,467,000. The Company continues to experience seasonal fluctuations in its net working
capital position. These fluctuations have been managed in the past by
utilizing the funding for capital expenditures as a revolving credit
line, as approved by GTA, through negotiated payment plans with
excess revenues.  In addition, working capital needs have been funded
with advances from the parent company. The Company was informed by GTA on November 29, 2001 that the Company is in
default on the $78,975,000 mortgage and accrued interest, arising from the
Companys failure to pay the October 2001 interest and all subsequent monthly
installments. GTA has asserted its right to accelerate payment of the total
outstanding principal and interest amounts. The Company continues to accrue
interest on the GTA participating mortgage of approximately $760,000 per month. On
July 15, 2004, the Company, GHI and GTA entered into a Settlement
Agreement wherein the Resort property, three condominium units and
linen storage closet located at the Innisbrook Resort, the acquired interest in
common stock and partnership operating units of GTA held by the
parent and all rights, title and interests in and liabilities related
to the Company under
existing contracts and agreements were transferred to GTA. In
addition, GTA assumed all liabilities of the Company
except for the Due to GHI and the Company provided a limited indemnity to defend and hold
harmless GTA (and its affiliates) from and against any and all costs,
liabilities, claims, losses, judgments, or damages arising out of or
in connection with the Class Action Lawsuit as
well as liabilities accruing on or before the closing date relating
to employee benefits and liabilities for contracts or agreements not
disclosed by the Company to GTA. In return, GTA delivered to GHI, a duly
executed release of the Company from the liabilities owed to GTA. Concurrent
with the transfer of the Resort property to GTA, all inter-company
receivables and payables between the Company, Golf Hosts, Inc., and
Golf Host Holdings, Inc. were forgiven by the respective
Companies. The balances forgiven were in the approximate amounts of
$1,476,000 owed by the Company to Golf Hosts, Inc. and $1,468,000
owed by the Company to Golf Host Holdings, Inc. As described in Note 4 of the notes to consolidated financial statements on the
Companys Form 10-K for December 31, 2003, management had determined that due
to declining demand in the hotel golf resort business and related rental pool
participation, which led to declines in operating results, impairment of the
intangible asset had occurred. At December 31, 2000, an impairment charge of
$7,441,000 was recorded. As a result of the continued decline in destination
golf resort business during 2001 and the events of September 11, 2001, the
Company had determined that further impairment had occurred and consequently
recorded an additional $3,000,000 impairment charge during the quarter ended
September 30, 2001. The Company feels that the market has stabilized
and therefore no further impairment has been recognized subsequent to
the period ended September 30, 2001. Page 16




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##### Table of Contents



GOLF HOST RESORTS, INC. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Registrant does not have significant market risk with respect to foreign currency exchanges or
other market rates. The Registrants debt has a fixed contractual interest rate through the year
2027 and, accordingly, fluctuations in interest rates are not expected to affect financial results. 
 Item 4. Controls and Procedures Within the 90 days prior to the date of this report, the Registrants management, including the Chief
Executive Officer and the Principal Financial Officer carried out an evaluation of the effectiveness of the design and operation of
the disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the
evaluation, the Registrants Chief Executive Officer and the Principal Financial Officer concluded that
the Registrants disclosure controls and procedures are effective in timely alerting them to material
information to be included in the Registrants periodic SEC filings. There have been no significant changes in the Registrants internal controls or in other factors that
could significantly affect internal controls subsequent to the date the Chief Executive Officer and the
Principal Financial Officer carried out this evaluation. 
 PART II - OTHER INFORMATION 
 Item 1. Legal Proceedings The Company, in the normal course of operations, is subject to claims and lawsuits. The Company
does not believe that the ultimate resolution of such matters will materially impair operations or have
an adverse effect on the Companys financial position and results of operations. GHI was named as a defendant in a consolidated class action lawsuit (class action lawsuit)
whereby the plaintiffs allege breaches of contract, including breaches in connection with the Rental
Pool Lease Agreement. The plaintiffs are seeking unspecified damages and a declaratory judgment
stating that the plaintiffs are entitled to participate in the rental pool if one exists, a limitation of the
total number of club memberships and a limitation of golf course access to persons who are either
condominium owners who are members, their accompanied guests, or guests of the resort.
Depositions of class members and others, including depositions of prior executives of the
Company, have been taken and additional discovery remains. The Court has postponed the
previously scheduled trial date of February 3, 2003; a new trial date has not yet been set. As of
December 31, 2003, the Court had decertified the class and denied the plaintiffs subsequent motion to
permit additional owners to intervene in the lawsuit. In addition, the plaintiffs filed a complaint
seeking to pierce the corporate veil. The court dismissed the veil piercing complaint with
prejudice. The plaintiffs appealed the decertification of the class; the denial to intervene and the Page 17




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##### Table of Contents



Item 1. Legal Proceedings continued veil piercing dismissal to the Florida Court of Appeals, Second District. The Court of Appeals has
affirmed the lower courts decertification of the class and has affirmed the lower courts dismissal
with prejudice of the veil piercing case. On July 29, 2004, the Circuit Court for the Sixth Judicial Circuit entered an order
granting defendants motion for summary judgment. No decision on the
intervention appeal has been made. The Company does not believe the resolution of
this matter will have a material adverse effect on the Companys financial condition or
results of operations. 
 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities Not applicable. 
 Item 3. Defaults Upon Senior Securities Not applicable 
 Item 4. Submission of Matters to a Vote of Security Holders Not applicable 
 Item 5. Other Information Pursuant to an agreement with the SEC staff, included in the 10-Q filing are unaudited financial statements
of the Innisbrook Rental Pool Lease Operation for the quarters ended June 30, 2004 and 2003. 
 Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are included in this Form 10-Q: 31.1 President Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002. 31.2 Principal Financial Officer Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002. 32.1 President Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002. 32.2 Principal Financial Officer Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (b) The Registrant did not file Form 8-K during the three months ended June 30, 2004. Page 18




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized. GOLF HOST RESORTS, INC.Date: September 24, 2004
    By:
    /s/ Merrick KleemanMerrick KleemanPresident Date: September 24, 2004
    By:
    /s/ R. Keith WiltR. Keith WiltVice President and Treasurer
(Principal Financial Officer) Page 19