**Exhibit 99.1**

**ITEM 1A. RISKFACTORS**

**Risks that mightDelay or Reduce our Liquidating Distributions**

We have recorded the value of the Resort and ourremaining golf courses and liabilities at our best estimates of fair value asof March 26, 2007; however, we can provide no assurance that theseestimates reflect the actual current market value for the applicable courses.As a result of our inability to provide any assurance regarding the estimatesof the fair value of our assets, including the probability of negotiating andclosing a sale of the Resort, at the present time, we do not believe that weare able to reliably project the amount of the total liquidating distributionswe will make to the holders of our common stock over the remainder of theliquidation period and the amounts may be significantly less than ourearlier projections. Further, while we have provided in this Report estimatedadjustments to net assets in liquidation based upon the sale of the Resort forapproximately $35.0 million and our interest in Parcel F for approximately $2.9million, there can be no assurances that (i) we will be able to close asale of the Resort for a price that will allow us to realize the estimatedproceeds for the Resort, if at all or, (ii) that the owner of Parcel Fwill be able to close on a sale of Parcel F for the current contracted purchaseprice allowing us to realize our interest in the proceeds from the sale ofParcel F. Further, in the event that we are unsuccessful in negotiating theterms of a new agreement which will allow us to repurchase all of AEW’s seriesA preferred stock for a price of $20,000,000 or less, or if we negotiate suchan agreement and are unable to repurchase AEW’s preferred stock for any reason,the assets available for distribution to the holders of our common stock, andthe ultimate liquidating distributions to the holders of our common stock, willbe reduced by the amount of any accrued dividends through the date that weredeem AEW’s shares. Even if we are able to successfully negotiate an agreementwith AEW which would allow us to repurchase AEW’s preferred stock at a pricethat excludes dividends on the preferred stock, we may either be unable to sellthe Resort at a time or under conditions which do not permit us to exercise ouroption. As a result of these factors, the estimated adjustments to net assetsin liquidation provided in this report may prove incorrect and theamounts, if any, that we ultimately distribute as liquidating distributionsmay be significantly less than estimated.

***Now that our Management Agreement with Westin isterminated, in addition to our obligation to pay termination fees to Westin, wewere required to find a third party to manage the Resort or manage the Resortourselves. We decided to manage the Resort ourselves.***

The Management Agreement provides that we shall pay toWestin, subject to the terms of the Management Agreement termination fee of atleast $5,500,000. As of October 31, 2006, the termination date of ourManagement Agreement with Westin, the termination fee is approximately$5,594,000. See disclosure of this obligation as accrued at December 31,2006 in Note 10 to our consolidated financial statements contained inPart II, Item 8 of this Annual Report. This fee must be paid to Westin upon the earlier of (i) a sale ofthe Resort or (ii) March 31, 2008. In the event that we are unable tosell the Resort by March 31, 2008 before this obligation becomes due, thepayment of this fee could cause us severe liquidity problems.

We have retained substantially all of the formerWestin on-site executive management team at the Resort, with the exception ofthe positions of general manager and controller which we have since filledthrough promotions of current Resort employees. Even with the former Westinon-site executive management team, we cannot guarantee that we will be assuccessful in managing the Resort as Westin has been because we do not have theWestin brand on the hotel and the synergies available to a global hotel chain.In the event that we prove less successful than Westin at managing the Resort,our results of operations and financial condition could be adversely affected.

***If we are not able to sell the Resort and our otherremaining golf property in a timely manner, obtain liquidity with respect to ourinterest in Parcel F, or obtain some form of additional financing, wemay experience severe liquidity problems, not be able to meet the demandsof our creditors, and ultimately become subject to involuntary bankruptcyproceedings.***

In the event that we are unable to sell the Resort andour other remaining golf property as planned, realize proceeds from ourinterest in Parcel F, or obtain some form of additional financing, we maybe 

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unable to pay ourobligations as they become due or upon demand. In addition, our ability to payour obligations may be compromised if either of (i) our chiefexecutive officer requires payment of outstanding performance milestonepayments owed by us to him or (ii) our counsel demands payment before weare able to realize net cash proceeds from asset sales or financing sufficientto discharge those obligations. As of March 26, 2007, we owedapproximately $1,647,000 and $107,000 in milestone payments plus accruedinterest to our chief executive officer and to our former chief financialofficer, respectively. We also owe a substantial sum in legal fees(approximately $3,101,000), including fees incurred in connection with thenegotiation of agreements providing for the sale of the Resort.

Further, given that the Resort’s only source of cashis from operations of the Resort, and that the operational cash flow capacityof the Resort will likely not permit the Resort to maintain positive cash flowthrough-out 2007, we may be required to seek to provide additional capitalto the Resort. We made intercompany advances to the Resort to support workingcapital needs in the amounts of $2,000,000, $400,000, $650,000, $600,000 and$120,000 in July 2004, September 2005, November 2005, October 2006 and February2007 respectively. We also funded approximately $203,000 and $33,000 for thebeginning phase of the technological infrastructure capital investment inOctober 2006 and November 2006, respectively. The $120,000 and the $33,000funded in February 2007 and November 2006, respectively, were repaid to usfrom Resort operations in early March 2007. While current Resort cash flowprojections for 2007 indicate that the Resort may be in a breakeven cashsituation by year-end, a shortfall is anticipated by late summer to early falldue to certain obligations that the Resort must pay in August 2007, includingobligations of approximately $1,060,000 for the quarterly rental pooldistribution and $412,000 for the rental pool refurbishment payment. Therefore,a cash infusion of up to approximately $1,000,000 in the aggregate may benecessary to fund the short-fall. If we are unable to either improve the Resort’soperating cash flows or otherwise obtain liquidity, then the Resort may beunable to continue as a going concern. Further, the Resort’s credit capacity islimited. There are no assurances that additional intercompany advances will notbe necessary prior to the consummation of a sale of the Resort. In the eventthat we must advance additional capital to fund operations at the Resort or ourother operations, we may be required to seek financing (which we arecurrently pursuing) or raise further capital in order to meet our obligationswhen they come due. Further, we may also be required to use proceeds fromthe sale of our other assets to fund our operations and the operations of theResort. There is no assurance that we will be able to obtain liquidity through(i) additional financing, (ii) our interest in a potential near termsale of Parcel F by its owner, or (iii) raise further capital or that we willhave sufficient proceeds from assets sales from which to draw,  any funding that we receive will not containrestrictive covenants or other onerous terms. Additionally, we expect that thecash flow that we receive from the net operating income of the Stonehenge golfcourses, if any, will not be substantial.

We are currently negotiating the terms of a three yearnon-revolving credit facility with a Tampa community bank for approximately$1,200,000. The proceeds of which would be used to finance renovations at theResort restaurants, information technology infrastructure upgrades and otherproperty improvements  at the Resort andto cover short-term working capital shortfalls. The three condominium unitsthat we own at the Resort will serve as collateral for this loan. We are alsoseeking to obtain a revolving accounts receivable line of credit for at least$500,000. However, there can be no assurance that the Company will enter intothis loan facility or that we will be able to obtain an accounts receivablecredit line.

In the event we are not able to sell our remainingassets within a reasonable period of time and for reasonable amounts, obtainliquidity with respect to our interest in Parcel F, or close on the  additional financing discussed above, or if ourexpenses exceed our estimates, we may experience severe liquidity problemsand not be able to meet our financial obligations to our creditors. If wecannot meet our obligations to our creditors, we could ultimately becomesubject to bankruptcy proceedings.

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***Our estimate of the Resort’s fair value, as recordedon our books for accounting purposes, is based on forward-looking estimateswhich are subject to change. We might sell the Resort for an amount less thanour current estimate of its fair value, which could significantly reduce ourliquidating distributions to holders of our common stock.***

We donot believe we are able at this time to project the amount of the totalliquidating distributions we will make to the holders of our common stock overthe remainder of the liquidating period. The factors giving rise to thisuncertainty include, without limitation, the following:

·        improvement in the financialperformance of the Resort that we have observed since we took title inJuly 2004 may not continue;

·        our Settlement Agreement with ourformer borrower and related agreements that we entered with Westinmay prove less successful than anticipated, and the performance of theparties to the Settlement Agreement may fall short of our expectations;

·        historical uncertainty surroundingthe future of the Resort and as of October 31, 2006, the absence of Westin asmanager of the Resort may create uncertainty for corporate meetingplanners contracting for large corporate groups, and any such uncertaintymay be used as a competitive advantage against us by our competitors whenmarketing their hotels against the Resort; and

·        uncertainty about our ability toclose the transactions contemplated in any asset purchase agreement wemay execute and the transactions costs therewith.

As aresult of the foregoing, at the present time we will refrain from either makingany adjustments (positive or negative) to any earlier reported range ofdistributions or proposing a new range. We may, however, be able to do so infuture periods in the event that the quality and reliability of all informationnecessary to make estimates of cash flow and, correspondingly, value becomemore reliable. You should not assume that the liquidating distributions havenot declined, perhaps in material amounts, from the historical projections weprovided in earlier filings.

Ourefforts to preserve the value of the Resort until we are able to consummate itssale may be unsuccessful, and we might ultimately sell our interest in theResort for significantly less than our last estimate of its fair value.Accordingly, our assessment of the Resort’s fair value may change at somefuture date, perhaps in a material adverse manner, based on facts andcircumstances at that time, and the Resort’s value may again bewritten-down.

***The conclusion of the Company’s negotiations with AEWwhich will allow us to repurchase all of AEW’s series A preferred stock plusaccrued dividends for a price of $20 million or less is pending evidence orconfirmation to AEW of a sale to demonstrate our ability to close on thetransaction to repurchase all of the series A preferred stock from AEW.  As a result of our assumption that thesenegotiations will lead to an executed agreement, we have not recorded in ournet assets a liability for the accrual of preferred dividends payable for thequarter beginning July 1, 2001 or for subsequent quarters. We can provide no assurance, however, that a finalagreement will be executed with AEW. Further, even if we successfully execute such an agreement with AEW, wemay be unable to negotiate a financing arrangement through our existing lenderrelationships or otherwise procure sufficient funding to permit us to exercisethat repurchase right and close the repurchase prior to its expiration. In the event that either we are unable to reach an agreement with AEW, or weare unable to exercise any repurchase right and close the repurchase under anyagreement we may reach with AEW, we may be required to pay AEW all or a portionof the preferred dividends for which we have not recorded a liability, reducingour liquidating distributions to holders of our common stock.***

OnApril 12, 2006, we executed an Option Agreement with AEW, the holder of all ofour series A preferred stock, in which AEW granted us an option to purchase, onor before June 30, 2006, the 800,000 shares of our series A preferred stockheld by AEW, including, without limitation, all of AEW’s

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rights to due and unpaid principal, accrued and unpaiddividends and liquidation preferences. The exercise price of this option wasapproximately $20 million, and excluded dividends that would accrue to theseries A preferred stock pursuant to existing contractual obligations. Aspreviously reported, this option expired by its terms on June 30, 2006.

Theconclusion of our negotiations with AEW which will allow us to repurchase allof AEW’s series A preferred stock plus accrued dividends for a price of $20million or less is pending evidence or confirmation of a sale to demonstrateour ability to close on the transaction to repurchase all of the series Apreferred stock.

As aresult of our assumption that these negotiations will lead to an executedagreement, we have not recorded in our net assets for the year ended December31, 2006 either (i) a liability of $12,522,000 for the accrual of quarterlypreferred dividends for the period July 1, 2001 to December 31, 2006 or (ii)additional dividend accruals of $625,000 for each subsequent quarter throughthe date that the exit transaction is ultimately consummated and liquidationpayments are made to AEW.   Absent either an agreement by a thirdparty to assume all or a portion of our accrued preferred dividend obligationor an agreement by AEW to forgive all or a portion of our preferred dividendobligations, (neither of which have occurred), we will be required toaccrue, and ultimately pay in liquidating distributions to AEW, these preferreddividends.  Any preferred dividends whichwe are required to pay to AEW ultimately would reduce the net assets availableto stockholders in liquidation and correspondingly the estimated liquidationdistribution per common share.  As ofDecember 31, 2006, if we were required to pay AEW accrued dividends throughthat date, our liquidating distributions would be reduced by $1.73 per common shareor OP unit of the Operating Partnership outstanding on that date.

At thepresent time, we have not executed a binding agreement with AEW.  There are no assurances that we willsuccessfully execute such an agreement with AEW, or that the terms of any agreementthat we may execute with AEW will not be more onerous to us than we currentlyanticipate.  Further, even if we are able to execute an agreement with AEWwhich permits us to repurchase the series A preferred stock at $20 million orless, we may be unable to negotiate a financing arrangement through ourexisting lender relationships or otherwise procure sufficient funding to permitus to exercise that repurchase right and close the repurchase prior to itsexpiration.  In the event that we execute an agreement with AEW and we areunable to repurchase AEW’s series A preferred stock in accordance with theterms of that agreement, in addition to the requirement that we pay accrueddividends to AEW, we expect that agreement also would subject us to penaltiesor grant AEW additional rights with respect to us and our remaining assetswhich will be prejudicial to us and our assets.

***We cannotguarantee that we will be able to enter into a binding agreement for the saleor other disposition of the Resort.***

In connectionwith our efforts to sell the Resort, we intend to negotiate and execute abinding asset purchase agreement. Thereafter, any closing pursuant to an executed asset purchase agreementwill be conditioned upon, among other things, consideration and approval of thetransaction by the Special Committee of our Board and the receipt of asatisfactory fairness opinion. We cannot assure you that we will enter into anasset purchase agreement for the Resort or, if we do so, that all conditions toclosing will be satisfied and the Resort will be sold. Further, the price thatwe receive if we sell the Resort might be less than the then applicablecarrying value of the Resort on our financial statements. Significant legal andother costs and expenses will be incurred in connection with the negotiation ofany sale of the Resort, and these costs and expenses will further reduce theliquidating distributions that we make to the holders of our common stock.

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***We took ownership of the Resort on July 16, 2004pursuant to a global Settlement Agreement providing for the assumption ofcertain existing or modified financial obligations of our former borrower. Weare now responsible for any negative cash flow of the Resort. If the amount ofassumed liabilities and expenditures with respect to the Resort exceed ourexpectations, our liquidating distributions to common stockholders could bereduced.***

OnJuly 15, 2004, we entered a Settlement Agreement with our former borrowerrelating to our June 1997 $79.0 million loan to our former borrower.This loan was secured by a mortgage on the Resort we made to an unaffiliatedborrower. As part of the Settlement Agreement, we assumed certainfinancial obligations of the borrower, such as refurbishment expenses paid bythe condominium owners, a modified termination rights fee and outstanding golffacility management fees payable to Troon. As the owner of the Resort, we areresponsible for any negative cash flow associated with its ownership andoperation of the Resort. As a result of the assumption of these liabilities andour responsibility for any negative cash flow, we face the risk that ourultimate liabilities and expenditures might be greater than expected. In thatcase, our cash available for distribution and the ultimate amount of ourliquidating distributions to the holders of our common stock could be less thanour expectations. In 2005, we funded $1,050,000 and in 2006, we funded $600,000to address seasonal cash flow shortfalls plus we funded approximately $203,000and $33,000 for the beginning phase of the technological infrastructure capitalinvestment in October 2006 and November 2006, respectively.   In February 2007, we funded approximately$120,000 for a temporary operating cash shortfall which was subsequently repaidin early March 2007 along with the $33,000 originally advanced in November2006.  We expect that additionalintercompany advances of up to $1,000,000 in the aggregate might be required bylate summer to early fall deal with timing issues related to the refurbishmentpayments due in May and August.

Althoughthe revenues of the Resort have increased since we took title to it, we canprovide no assurance that the Resort’s future performance will continue to showimprovement. If we do not continue to improve the Resort’s financialperformance, our recovery with respect to this asset might be significantlydelayed or fail. A delay in our recovery of the Resort might reduce the netproceeds that we ultimately receive upon a sale of the Resort to less than ourcurrent estimate of the Resort’s fair value (approximately $37.9 millionincluding our interest in certain real estate), and we may be forced to usefunds that otherwise might be distributed to our stockholders, if any, to fundcash shortages of the Resort, causing our liquidating distributions to holdersof our common stock to be substantially reduced. Our estimate of the Resort’sfair value, as recorded on our books for accounting purposes, is based onforward-looking estimates which may be materially optimistic and subject toadverse change. We can provide no assurance of success under the SettlementAgreement, or the future success of the Resort.

***Stockholderlitigation related to the plan of liquidation could result in substantial costsand distract our management.***

Extraordinarycorporate actions, such as our plan of liquidation, often lead to securitiesclass action lawsuits and derivative litigation being filed againstcompanies such as ours. We became involved in this type of litigation inconnection with our plan of liquidation (and the transactions associated withit) in a legal action we refer to as the *Crossley*litigation. During the second quarter of 2003, the *Crossley*claim was dismissed with prejudice on our motion for summary judgment.Accordingly, the lawsuit was dismissed and the plaintiff will not be allowed torefile the claim, although the plaintiff could appeal the dismissal. Wesubsequently entered into a non-monetary settlement with the plaintiff wherebythe plaintiff agreed not to appeal the dismissal and we agreed not to seekreimbursement of our legal costs from the plaintiff. Even though the *Crossley* litigation has been dismissed, we face the riskthat other claims might be brought against us. Any such litigation would likelybe expensive and, even if we ultimately prevail, the process would divertmanagement’s attention from implementing the plan of liquidation and otherwiseoperating our business. If we do not prevail in any such litigation, we mightbe liable for damages. It is not possible to predict the amount of suchpotential damages, if any, but they might be significant. Any damage liability 

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would reduce our cash available for distribution andthe ultimate amount of our liquidating distributions to holders of our commonstock.

***If we are unable to retain at least one of our keyexecutives and sufficient staff members to complete the plan of liquidation ina reasonably expeditious manner, our liquidating distributions might be delayedor reduced.***

Ourability to consummate sales transactions for our other interests in golfcourses depend to a large extent upon the experience and ability of ourpresident and chief executive officer, W. Bradley Blair, II and hisexperience and familiarity with our assets, our counter-parties and the marketfor golf course sales.  We believe that aloss of Mr. Blair’s services could materially harm our ability to complete theplan of liquidation in a reasonably expeditious manner and our prospects ofselling our assets at the best potential prices.

Thepotential resignation of Mr. Blair poses a relatively greater risk at thistime in light of the fact that Mr. Peters, our Senior Vice President and ChiefFinancial Officer and Secretary resigned effective February 5, 2007.  If Mr. Blair were to resign, we wouldlikely seek to hire a replacement for Mr. Blair. The cost that we incur toreplace Mr. Blair would likely depend upon our determination of theexperience and skills that must be possessed by his replacement in light of ourfinancial condition, our assets remaining to be liquidated, and the complexityof any issues bearing on us and the liquidation at that time.

Ourability to complete the plan of liquidation in a timely manner as soon asreasonably practicable also depends on our ability to retain our key non-executiveemployees, in particular our principal accounting officer. Those employeesmay seek other employment rather than remaining with us throughout theprocess of liquidation, even though they generally would lose their eligibilityfor severance payments by resigning. If we are unable to retain enoughqualified staff to complete our plan of liquidation in a reasonably expeditiousmanner, liquidating distributions might be delayed or reduced.

***If we are unable to consummate a sale of the Resort orour other remaining golf courses at our revised estimates of their respectivevalues, our liquidating distributions might be delayed or reduced.***

Inaddition to the four golf courses at the Resort, we have one other property (ortwo eighteen-hole equivalent golf courses). In calculating our projectedliquidating distributions, we assumed that we would be able to find buyers forthe Resort and our other remaining property at purchase prices equal to ourestimates of their respective fair market values. However, our estimates of thesales prices of the Resort and our other remaining property may exceed theprices we eventually receive. At December 31, 2005, we recorded a $2.421million write-down in the value of the Resort to $35.0 million (excluding our interestin Parcel F) based on market indications of interest. Should we not be able toexecute a purchase and sale agreement with a buyer at our current carryingvalue,  we might be required to lower ourasking price for the Resort and our other remaining property below our estimateof their fair value. If we are not able to find new buyers for these assets ina reasonably expeditious manner, or if we have overestimated the sales priceswe will ultimately receive, our liquidating distributions to the holders of ourcommon stock will be significantly delayed or reduced.

At thepresent time, we do not believe we are able to reliably project the amount ofthe total liquidating distributions we will make to the holders of our commonstock over the remainder of the liquidation period. Accordingly, you should notrely on the valuations or ranges earlier provided as representative of ourcurrent views on the subject.

***If we are unable to realize the value of a promissorynote taken as part of any purchase price, our liquidating distributionsmight be reduced.***

Insome golf course sales, we may agree to receive promissory notes from thebuyer as a portion of the purchase price. Promissory notes are often illiquid.If we are not able to sell the promissory note without a 

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great discount, or in the case of a short-term note,if we hold it to maturity and the maker ultimately defaults, our liquidatingdistributions might be reduced.  Wecurrently do not have any outstanding notes receivable.

***Decreases in golf course values caused by economicrecession and/or additional terrorist activity might reduce the amount forwhich we can sell our assets.***

Thevalue of our interests in golf courses might be reduced, and substantially so,by a number of factors that are beyond our control, including the following:

·        adverse changes in the economy,prolonged recession and/or additional terrorist activity against the UnitedStates or our allies, or other war-time activities might increase publicpessimism and decrease travel and leisure spending, thereby reducing golfcourse operators’ revenues (particularly destination-resort golf courserevenues) and diminishing the resale value of the affected golf courses;

·        increased competition, including,without limitation, increasing numbers of golf courses being offered for salein our markets or nationwide;

·        continuing imbalance in supply anddemand in the golf course industry; and

·        changes in real estate tax ratesand other operating expenses.

Anyreduction in the value of our golf courses would make it more difficult for usto sell our assets for the amounts and within the time-frames that we haveestimated. Reductions in the amounts that we receive when we sell our assetscould decrease or delay our payment of liquidating distributions to ourstockholders, perhaps in substantial ways.

***If our liquidation costs or unpaid liabilities aregreater than we expect, our liquidating distributions might be delayed orreduced, potentially in a substantial manner.***

Beforemaking the final liquidating distribution to the holders of our common stock,we will need to pay all of our transaction costs pertaining to the liquidationand all valid claims of our creditors, which we expect will be substantial. Ourboard may also decide to acquire one or more additional insurance policiescovering unknown or contingent claims against us, including, withoutlimitation, additional directors’ and officers’ liability insurance, for whichwe would pay an additional premium based upon market prices prevailing at thetime of any such purchase. In addition, if we form a liquidating trust, weexpect to have additional expenses in connection with the formationthereof and for such for items such as insurance for the trustees. We haveestimated such transaction costs in calculating the amount of our projectedliquidating distributions. To the extent that we have underestimated costs andexpenses in calculating our historical projections, our actual aggregateliquidating distributions will be lower than we have historically projected,and perhaps by substantial amounts.

***The holder of our series A preferred stock mightexercise its right to appoint two directors to our board of directors, whichmight result in decisions that prejudice the economic interests of our commonstockholders in favor of our preferred stockholders.***

Weentered into a voting agreement with the holder of our series A preferredstock, AEW, pursuant to which the holder agreed to vote in favor of our plan ofliquidation. The voting agreement provided that if we failed to redeem our series Apreferred stock by May 22, 2003, the holder of the series A preferredstock would be entitled to require us to redeem the series A preferred stock.We received such a demand from the holder of our series A preferred stock onMay 23, 2003; however, we do not have cash available to redeem the holderof our series A preferred stock. Our default in making a timely redemptionpayment gives the holder of our series A preferred stock the right under thevoting agreement to appoint two new 

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directors to our board. Our series A preferred stockcharter also gives the holder of our series A preferred stock the right toelect two new directors if and when dividends on its series A preferredstock are in arrears for more than six quarters. We have not paid a quarterlydividend since the dividend paid for the second quarter of 2001. These directorelection rights are not cumulative, which means that the holder of our series Apreferred stock may elect two, but not four, new directors. The currentholder of our series A preferred stock, AEW, informed us previously that itdoes not currently intend to exercise its director election rights. However, itmight decide to exercise such right at any time in the future. The appointmentof such directors to our board might reduce the efficiency of our board’sdecision-making or result in decisions that prejudice the economic interests ofthe holders of our common stock in favor of the holder of our series Apreferred stock.

***Distributinginterests in a liquidating trust may cause you to recognize gain prior tothe receipt of cash.***

As wecontemplate the sale of our remaining assets and the wind-up of the Company, ascontemplated by our plan of liquidation, we may elect to contribute ourremaining assets and liabilities to a liquidating trust. Our stockholders wouldreceive interests in the liquidating trust, our corporate existence wouldterminate and our shares would no longer trade publicly. The plan ofliquidation prohibits us from contributing our assets to a liquidating trust unlessand until our series A preferred stock has been redeemed in full or until suchtime as it consents to such a contribution.

Fortax purposes, the creation of the liquidating trust should be treated as adistribution of our remaining assets to our stockholders, followed by acontribution of the same assets to the liquidating trust by our stockholders.As a result, we will recognize gain or loss inherent in any such assets, withany gains offset by available net operating loss carry-overs (discussed above).In addition, a stockholder would recognize gain to the extent his share of thecash and the fair market value of any assets received by the liquidating trustwas greater than the stockholder’s basis in his stock, notwithstanding that thestockholder would not contemporaneously receive a distribution of cash or anyother assets with which to satisfy the resulting tax liability, and would notbe able to transfer its interests in the liquidating trust.

Inaddition, it is possible that the fair market value of the assets received bythe liquidating trust, as estimated for purposes of determining the extent ofthe stockholder’s gain at the time interests in the liquidating trust aredistributed to the stockholders, will exceed the cash or fair market value ofproperty ultimately received by the liquidating trust upon its sale of theassets, in which case the stockholder may not receive a distribution ofcash or other assets with which to satisfy any tax liability resulting from thecontribution of the assets to the liquidating trust. In this case, thestockholder would recognize a loss in a taxable year subsequent to the taxableyear in which the gain was recognized, which loss might be limited under thetax code.

If wedo not distribute our assets to a liquidating trust and, instead, continue tooperate as a regular corporation until all of our assets are sold, we wouldrecognize gains or losses upon the sale of assets for federal income taxpurposes. Since we are no longer a REIT, we could be subject to income tax onany recognized gains. If we were to recognize taxable gains in a year beforeconsideration of net operating loss carryovers, we could be subject toalternative minimum tax. Generally, for tax years ending afterDecember 31, 2002, the use of net operating loss carryovers to reducealternative minimum taxable income is limited to 90% of alternative minimumtaxable income. Therefore, tax at a rate of 20% could be imposed on ouralternative minimum taxable income that cannot be reduced by net operating losscarryovers. If a liquidating trust is formed, our net operating loss carryoverswill not be available to reduce any gains recognized within the trust. However,the trust will have a tax basis equal to the fair market value of its assets atthe date the liquidating trust is formed. Any gain recognized by the trustwould thus be the result of either appreciation in the value of the assetsduring the time that they are owned by the trust, or an initial underestimationof the fair market value of the assets at the time the trust is formed.

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***Our common stock may be de-listed from AmericanStock Exchange, which would make it more difficult for investors to sell theirshares.***

Currently,our common stock trades on the American Stock Exchange, or Amex. We cannotassure you that we will be able to maintain our listing on Amex or any otherestablished trading market. Among other things, Amex has considerablediscretion with respect to listing standards, which include qualitative andquantitative criteria, some of which are beyond our control. Further, in theevent that we form a liquidating trust, we expect that we would de-listfrom the Amex.

Wecannot assure you that we will be able to maintain our listing on Amex, orpredict the degree to which an involuntary delisting would harm our businessand the value of your investment. If our common stock were to be de-listed fromAmex, either as a result of voluntarily action by us or by Amex because we nolonger meet the Amex listing standards, it could severely limit the liquidityof the common stock and your ability to sell our securities in the secondarymarket.

***We and our subsidiary, GTA-IB LLC, expect to incursignificant compliance costs relating to the Exchange Act and Sarbanes-OxleyAct.***

We andour subsidiary, GTA-IB, LLC, are required to comply with the reportingrequirements of the Exchange Act as they apply to non-accelerated filers. Assuch, both entities must timely file Quarterly Reports on Form 10-Q,Annual Reports on Form 10-K and Current Reports on Form 8-K, amongother actions. Further, recently enacted and proposed laws, regulations andstandards relating to corporate governance and disclosure requirementsapplicable to public companies, including the Sarbanes-Oxley Act and new SECregulations have increased the costs of corporate governance, reporting anddisclosure practices which are now required of us and of GTA-IB. We were formedprior to the enactment of these new corporate governance standards, and as aresult, we did not have all necessary procedures and policies in place at thetime of their enactment. Our efforts to comply with applicable laws andregulations, including requirements of the Exchange Act and the Sarbanes-OxleyAct, are expected to involve significant, and potentially increasing, costs.Costs incurred in complying with these regulations may reduce the amountof cash available for liquidating distributions.

TheSarbanes-Oxley Act and related laws, rules and regulations create legalbases for administrative enforcement, civil and criminal proceedings against usin case of non-compliance, thereby increasing our risk of liability andpotential sanctions. Costs incurred in defending against any such actions orproceedings, and any liability or sanctions incurred in connection with such actionsor proceedings, could negatively affect the amount of cash available forliquidating distributions.

**Risks Relating to theResort**

***In the event that the Resort does not providesufficient cash flow to us, we may be forced to reduce capitalexpenditures and improvements at the Resort, diminishing the value of theResort.***

As theowner of the Resort, we are responsible for any negative cash flow associatedwith its operation. As a result of our assumption of these liabilities and ourresponsibility for any negative cash flow of the Resort, we may be exposedto liabilities and expenditures exceeding our expectations or ability to pay.In the event cash flow is insufficient to fund planned improvements, ourability to rent the units in the Rental Pool may decline. A decline in therental rates that can be charged for the units or related vacancies resultingfrom our inability to make necessary capital expenditures may cause thevalue of the Rental Pool units, and the Resort, to decline.

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***The Resort’s performance may not provide adequateresources to fund the refurbishment reimbursement to the Rental Poolparticipants.***

Pursuant to GHR’s arrangement with many of the personswho own condominium units at the Resort, the condominiums owned by theseparticipating persons are placed in a securitized pool and rented as hotelrooms to guests of the Resort. We refer to this securitized pool ofparticipating condominiums as the Rental Pool. In addition to the currentRental Pool agreement, GHR agreed with the Association that GHR would reimburse50% of the refurbishment costs, plus accrued interest at 5% per annum on theunpaid balance of that portion of the unpaid refurbishment costs which we arerequired to reimburse. This amount will be reimbursed to participating condominiumowners (or transferees of their condominium unit(s)) over the five-year periodbeginning in 2005. The reimbursement is contingent on the units remaining inthe Rental Pool from the time of their refurbishment through 2009. If the unitdoes not remain in the Rental Pool during the reimbursement period from 2005through 2009, the owner or successor owner forfeits any unpaid installments atthe time the unit is removed from the Rental Pool.  In addition, GTA IB agreed to providerefurbishment reimbursement for units placed into the rental pool during 2005at a level of 25% of the applicable condominium owner’s investment in therefurbishment.  We refer to this programas Phase 5. Interest on the Phase 5 liability is accrued at a rate of 2.5% perannum and paid quarterly. Principal payments for Phase 5 begin in the firstquarter of 2008 and will be paid quarterly through the fourth quarter of2012.  The reimbursement is contingent onthe units remaining in the Rental Pool from the time of their refurbishmentthrough 2012. If the unit does not remain in the Rental Pool during thereimbursement period from 2005 through 2012, the owner or successor ownerforfeits any unpaid installments at the time the unit is removed from theRental Pool.  As of March 26, 2007, 614units were participating in the Rental Pool.

Accordingly,maintaining condominium owner participation in the Rental Pool is veryimportant to the continued economic success of the Resort. We assumed certainexisting or modified financial obligations of GHR, including itsresponsibilities regarding the administration of the condominium unit RentalPool, when we took ownership of the Resort pursuant to the SettlementAgreement. Also as part of the Settlement Agreement, we assumed GHR’sobligation to reimburse the refurbishment expenses paid by the condominiumowners.

Asowner of the Resort, we are responsible for any negative cash flow associatedwith the ownership and operation of the Resort. As a result of the assumptionof these liabilities and our responsibility for any negative cash flow, we facethe risk that our ultimate liabilities and expenditures might be greater thanwe expected. In that case, we may not have sufficient cash available forthe payment of the refurbishment expenses relating to the Rental Pool units, orwe may otherwise decide not to use our funds in this manner. If thisoccurs, a disagreement involving the funding for the Rental Poolmay arise, and this disagreement could both divert our management’sattention from the operation of the Resort and prove costly to the parties toany such dispute.

***The number of Rental Pool units may decline ifcurrent owners find alternative uses of the units more attractive thanparticipating in the Rental Pool, reducing the number of available Rental Poolunits and diminishing the value of the remaining units.***

Participantsin the Rental Pool may decide that alternative uses of their condominiumunits are more attractive than participating in the Rental Pool. In particular,condominium owners may determine that it is more financially advantageousto rent their units to longer term tenants, or to live in their units ratherthan paying to live elsewhere and allowing their units to participate in theRental Pool. Any such reduction in the number of participants in the RentalPool may result in increased pro-rata costs and reduced revenues for theremaining Rental Pool participants. In particular, a decrease in the number ofparticipants in the Rental Pool will result in higher per capita costs relatingto fixed costs that are incurred in connection with the administration of theRental Pool. In the event that the number of units in the 

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Rental Pool declines below 575, our obligation toreimburse refurbishment expenses for the units will be abated until the numberof units in the Rental Pool is restored to 575 or higher. As of March 26, 2007,the number of units participating in the Rental Pool is 614.

***Severe weather patterns experienced by Florida during2004 and the southeastern portion of the United States during 2005 could resultin depressed bookings, adversely affecting the Resort’s results of operationsand reducing proceeds to the participants in the Rental Pool.***

Weexpect that bookings at the Resort during the late summer and early fall offuture years may be adversely affected as a result of a series ofhurricanes that affected Florida during 2004 and the southeastern portion ofthe United States during 2005. Our management detected such an adverse effectin 2005. In particular, the hurricane and tropical storm weather that occurredduring 2004 and 2005 may have increased the awareness of potential guests,particularly those not residing in the southeastern portion of the UnitedStates, to the danger that hurricanes and tropical storms are present. Weexpect that potential guests may be more reluctant to book rooms inregions subject to such weather patterns. In particular, it is possible thatgroups will choose alternative destinations for travel during the hurricaneseason. In the event that potential guests and groups choose alternativedestinations as a result of these weather-related concerns, the Resortmay experience lower bookings and reduced revenues, which in turn willresult in reduced distributions to the Rental Pool participants.

***Severe weatherpatterns could further intensify the seasonal nature of the results of theResort.***

Thehotel industry is cyclical in nature. Our business has historically been weakerduring the third quarter of each year. In the event that we suffer from reducedbookings as a result of hurricane-related concerns of potential guests, thiseffect could reduce the revenues to the Resort in the third quarter of eachyear, increasing the disparity between our results in the third quarter ascompared to other quarters. This increased cyclicality could make it moredifficult for us to project the results of the Resort, and may result in alower than expected percentage of the Resort’s fixed costs being offset byrevenue during the third quarter.

***We are subject to all the operating risks common tothe hotel industry which could adversely affect our results of operations.***

Operatingrisks common to the Resort include:

·       changes in general economicconditions, including the timing and robustness of the recovery in the UnitedStates from an economic downturn and the prospects for improved performance inother parts of the world;

·       the impact of war andterrorist activity (including threatened terrorist activity) and heightenedtravel security measures instituted in response thereto;

·       domestic and internationalpolitical and geopolitical conditions;

·       decreases in the demand fortransient rooms and related lodging services, including a reduction in businesstravel as a result of general economic conditions;

·       the impact of internet intermediarieson pricing and our increasing reliance on technology;

·       cyclical over-building inthe hotel industry which increases the supply of hotel rooms;

·       changes in travel patterns;

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·       changes in operating costs,including, but not limited to, energy, labor costs (including the impact ofunionization), workers’ compensation and health-care related costs, insuranceand unanticipated costs such as acts of nature and their consequences;

·       disputes with the managersand former managers of the Resort which may result in litigation;

·       the availability of capitalto allow us to fund renovations and investments at the Resort; and

·       the financial condition ofthe airline industry and the impact on air travel.

***General economic downturns, or an increase in labor orinsurance costs, may negatively impact our results.***

Moderateor severe economic downturns or adverse conditions may negatively affectthe operations of the Resort. These conditions may be widespread orisolated to one or more geographic regions. A tightening of the labor marketsin Florida may result in fewer and/or less qualified applicants for jobopenings at the Resort. Higher wages, related labor costs and the increasingcost trends in the insurance markets may negatively impact our results asthese costs increase. A general economic downturn, or increase in expenditureson insurance and labor costs, would adversely impact the operations of theResort, potentially reducing funding that we provide to the Rental Pool andnegatively impacting our results.

***If we are unableto successfully compete for customers, it may adversely affect ouroperating results.***

Thehotel industry is highly competitive. The Resort competes for customers withother hotel and resort properties. Some of our competitors may have substantiallygreater marketing and financial resources than we do, and they may improvetheir facilities, reduce their prices, or expand or improve their marketingprograms in ways that adversely affect the Resort and our operating results.

***Internet reservationchannels may negatively impact our bookings and results of operations.***

Internettravel intermediaries such as Travelocity.com®, Expedia.com® andPriceline.com® are attempting to commoditize hotel rooms byincreasing the importance of price and general indicators of quality at theexpense of brand or property-specific identification. These travelintermediaries hope that consumers will eventually develop brand loyalties totheir reservations system rather than to lodging brands. Although we expect to derivemost of our business from traditional channels, if the amount of sales madethrough internet intermediaries increases significantly, our business andprofitability may be significantly harmed.

***The Resort placessignificant reliance on technology.***

Thehospitality industry continues to demand the use of sophisticated technologyand systems including technology utilized for property management, procurement,reservation systems, operation of customer loyalty programs, distribution andguest amenities. These technologies can be expected to require refinements andthere is the risk that advanced new technologies will be introduced. There canbe no assurance that as various systems and technologies become outdated or newtechnology is required we will be able to replace or introduce them as quicklyas our competition or within budgeted costs for such technology. Further, therecan be no assurance that we will achieve the benefits that may have beenanticipated from any new technology or system. Now that the Westin Management Agreement is terminated, we have begunthe capital improvement project of upgrading the technological infrastructureof the Resort and replacing certain components which are proprietary toWestin.   Our projections indicate thatthe replacement of these components could require us to make an investment inthe range of $1.0 to $2.0 million of which we funded $203,000 and $33,000 inOctober 2006 and November 2006, respectively. Additionally, there are risks associated with transferring the data andensuring that there are no 

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interruptions in the operations of the Resort.  There are no assurances that suchtechnological components can be identified, purchased and implemented in a costeffective and efficient manner.

***The Resort iscapital intensive, and may become uncompetitive in the event thatsufficient financing is not available.***

Forthe Resort to remain attractive and competitive, we must spend moneyperiodically to keep the properties well maintained, modernized andrefurbished. These expenditures result in an ongoing need for cash. From timeto time, it may also be necessary to undertake material capitalexpenditure projects at the Resort such as the upgrading of the technologicalinfrastructure at the Resort. To the extent we cannot fund expenditures fromcash generated by the Resort’s operations, we must seek to obtain funds byborrowing or otherwise. We may be unable to find such financing onfavorable terms, if at all. To the extent that we are unsuccessful in obtainingsuch financing, it could adversely impact the Resort’s results from operations.

Asdiscussed previously, we are currently negotiating the terms of a three yearnon—revolving credit facility with a Tampa community bank for approximately$1,200,000.  The proceeds of which wouldbe used to finance renovations at the Resort restaurants, informationtechnology infrastructure upgrades and other property improvements  at the Resort and to cover short-term workingcapital shortfalls.  The threecondominium units that we own at the Resort will serve as collateral for thisloan.  We are also seeking to obtain arevolving accounts receivable line of credit for at least $500,000.  However, there can be no assurance that theCompany will enter into this loan facility or that we will be able to obtain anaccounts receivable credit line.

***Our investment inthe Resort is subject to numerous risks, which could adversely affect ourincome.***

As aresult of our ownership of the Resort, we are subject to the risks thatgenerally relate to investments in real property. The investment returnsavailable from equity investments in real estate such as the Resort depends inlarge part on the amount of income earned and capital appreciationgenerated by the Resort, reduced by the expenses incurred to operate it. Inaddition, a variety of other factors affect both income from the Resort and theResort’s real estate value, including governmental regulations, real estate,insurance, zoning, tax and eminent domain laws, interest rate levels and theavailability of financing. When interest rates increase, the cost ofdeveloping, expanding or renovating real property increases and real propertyvalues may decrease as the number of potential buyers decreases. Any ofthese factors could have a material adverse impact on our results of operationsor financial condition. If the Resort does not generate revenue sufficient tomeet operating expenses, including debt service and capital expenditures, ourincome will be adversely affected.

***Environmentalregulations may increase the Resort’s costs, or limit our ability todevelop, use or sell the Resort.***

Environmentallaws, ordinances and regulations of various federal, state, local and foreigngovernments impact our properties and could make us liable for the costs of removingor cleaning up hazardous or toxic substances on, under, or in property wecurrently own or operate. These laws could impose liability without regard towhether we knew of, or were responsible for, the presence of hazardous or toxicsubstances. The presence of hazardous or toxic substances, or the failure toproperly clean up such substances when present, could jeopardize our ability todevelop, use, sell or rent the real property or to borrow using the realproperty as collateral. If we arrange for the disposal or treatment ofhazardous or toxic wastes, we could be liable for the costs of removing orcleaning up wastes at the disposal or treatment facility, even if we neverowned or operated that facility. Other laws, ordinances and regulations couldrequire us to manage, abate or remove lead or asbestos containing materials.Certain laws, ordinances and regulations, particularly those governing themanagement or preservation of wetlands, coastal zones and threatened orendangered species, could limit our ability to develop, use, or sell theResort. Further, in the

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event that environmental obligations prevent us fromdeveloping, using or selling the Resort, distributions that we are able to payto the holders of our stock could be reduced.

***Although the courts have recently delivered favorablerulings in the Land Use Lawsuits to which we are a party, in the event that theultimate rulings in these matters are unfavorable to us, the value of Parcel Fand the Resort would be adversely effected.***

Asdiscussed in further detail under the heading “Legal Proceedings” inPart I Item 3 of this report, on March 10, 2005 we filed a motion tointervene as a defendant in the lawsuit styled Innisbrook CondominiumAssociation, Inc., C. Frank Wreath, Meredith P. Sauer, and Mark Banning(as plaintiffs) vs. Pinellas County, Florida, Golf Host Resorts, Inc. andInnisbrook F LLC (as defendants), Case No. 043388CI-15. This matterrelates to a tract of land within the Resort known as Parcel F. InApril 2005, a subsequent lawsuit relating to this matter was filed. We arealso a defendant in this subsequent lawsuit. In this report, we refer to theMarch 2005 and the April 2005 lawsuits collectively as the Land UseLawsuits.

OnJanuary 6, 2006, the court ruled in favor of all defendants and againstall plaintiffs as to each count in both cases. While we believe that theJanuary 6, 2006 ruling is a favorable result for us and for the otherdefendants, the plaintiffs in the Land Use Lawsuits have the right to appeal orotherwise challenge that ruling. On March 8, 2006, the court formallyentered its final judgment on the record ruling in favor of the defendants onall counts and denying all claims asserted by the plaintiffs in both cases. OnMarch 31, 2006, the plaintiffs in the consolidated cases filed a notice ofappeal. On April 4, 2006, the plaintiffs in the consolidated cases filed anotice of appeal.  The Second DistrictCourt of Appeal head oral argument on February 14, 2007.  The Appeal Court affirmed the Circuit Courtjudgment in favor of the Defendants on February 28, 2007 and denied theplaintiff-appellants’ motion for attorneys fees.  On March 14, 2007, the plaintiff-appellantsfiled a motion requesting the Appeal Court to rehear their claims.  The Appeal Court has not yet responded tothis motion.

In theevent that the Appeal Court grants the plaintiffs request to rehear the caseand in the event that the  plaintiffsthen convince the Appeal Court to overturn the February 28, 2007 ruling, wecould lose all or substantially all of our land use and development rights withrespect to Parcel F. Such an unfavorable result could adversely impact ourability to realize the benefits from the proposed development of Parcel F. Inaddition, if the defendants do not ultimately prevail in the rehearing of theLand Use Lawsuits and a court subsequently applies a similar interpretation ofour rights with respect to the remaining developable units at the Resort, ourland use and development rights in those remaining units could be jeopardized,adversely effecting both our ability to develop the Resort and the value of theRental Pool units.

***So-called acts ofGod, terrorist activity and war could adversely affect the Resort.***

TheResort’s financial and operating performance may be adversely affected byso-called acts of God, such as natural disasters, in Florida and in areas ofthe world from which we draw a large number of guests. Similarly, wars(including the potential for war), terrorist activity (including threats ofterrorist activity), political unrest and other forms of civil strife andgeopolitical uncertainty have caused in the past, and may cause in thefuture, our results to differ materially from anticipated results. The returnsto participants in the Rental Pool could be adversely impacted in the eventthat acts of God, war or terrorism impact the Resort’s ability to attractguests.

***Some potentiallosses of the Resort are not covered by insurance.***

Wecarry comprehensive insurance coverage for general liability, property,business interruption and other risks with respect to the Resort. Our policiesoffer coverage features and insured limits that we believe are customary forsimilar types of property. Generally, our “all-risk” property policies providethat

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coverage is available on a per occurrence basis andthat, for each occurrence, there is a limit as well as various sub-limits onthe amount of insurance proceeds we can receive. In addition, there may beoverall limits under the policies. Sub-limits exist for certain types of claimssuch as service interruption, abatement, expediting costs or landscapingreplacement, and the dollar amounts of these sub-limits are significantly lowerthan the dollar amounts of the overall coverage limit.

Inaddition, there are also other risks such as war, certain forms of terrorismsuch as nuclear, biological or chemical terrorism, acts of God such ashurricanes and earthquakes and some environmental hazards that may bedeemed to fall completely outside the general coverage limits of our policiesor may either be uninsurable or too expensive to justify insuring against.

***Ourgolf course operations at the Resort are currently managed by an outsidemanager, Troon.  On February 22, 2007, wesent Troon a notice of termination in regards to the Facilities ManagementAgreement pursuant to which Troon manages the golf operations at the Resort. Weand Troon are in the process of negotiating the terms and conditions of thetermination which we expect to be effective upon the conclusion of ournegotiations and the execution of a termination agreement.  As a result of the termination of Troon’sFacilities Management Agreement,  theResort’s results of operations could be adversely affected.***

Troon continues tomanage the golf facilities at the Resort pursuant to a facility managementagreement that we assumed upon Westin’s termination on October 31, 2006. OnFebruary 22, 2007, we sent Troon a notice of termination in regards to theFacilities Management Agreement pursuant to which Troon manages the golfoperations at the Resort. We and Troon are in the process of negotiating theterms and conditions of the termination which we expect to be effective uponthe conclusion of our negotiations and the execution of a terminationagreement.   Following Troon’stermination, we currently intend to manage the golf operations internally. Ifwe do not prove to be as successful as Troon in managing the Resort’s golfoperations, the Resort’s results of operations could be adverselyaffected.  Also, upon Troon’stermination, certain of the Troon employees employed at the Resort may decideto stay with Troon and leave the Resort. We face the risk that we may not be able to replace these employees withequally qualified employees with golf or Resort industry experience.

***A sustained increase in energy costsmay negatively impact the Resort’s results by increasing itsenergy-related costs and by discouraging potential guests from traveling andtaking part in recreational activities.***

During the past year,energy costs in the United States have increased substantially. Energy costsrepresent an increasingly larger percentage of the costs of the Resort, and weexpect energy costs to increase in both absolute and relative terms in futureperiods. In addition, we expect that higher energy costs will negatively affectthe Resort by discouraging travel and recreational activities. In particular,potential guests of the Resort are less likely to travel as they bear theaffects of higher energy costs as either higher airline fares or in an increasedcost per gallon of gasoline. In addition, higher energy costs may reducethe disposable income of potential guests, making them less likely to spendmoney for travel and recreational activities. As a result of these factors, asustained increase in energy costs may negatively impact the Resort’sresults by increasing its energy-related costs and by discouraging travelingand taking part in recreational activities.

 

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