**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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##### ** **

##### **FORM 10-Q**

 
| **ý** | **Quarterly  report pursuant to section 13 or 15(d) of the Securities Exchange Act of  1934 for the quarterly period ended September 30, 2001.**                                                                                                                               |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **o**      | **Transition  report pursuant to section 13 or 15(d) of the Securities Exchange Act of  1934 for the transition period from              to             .** |

 

**Commission File Number 000-22091**

 

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**GOLF TRUST OF AMERICA, INC.**

 (Exact name of registrant as specified in itscharter)

 

| **Maryland**                                                    |   | **33-0724736**                          |
|-----------------------------------------------------------------|--------|-----------------------------------------|
| (State or other jurisdiction  of incorporation or organization) |   | (I.R.S. Employer Identification Number) |

 

**14 North Adger's Wharf, Charleston,South Carolina 29401**

 (Address of principal executive offices) (ZipCode)

 

**(843) 723-4653**

 (Registrant's telephone number, includingarea code)

 

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                Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such report(s) and (2) has been subject tosuch filing requirements for the past 90 days. Yes ý  No o.

 

                OnNovember 9, 2001 there were 7,778,103 common shares outstanding of theregistrant's only class of common stock. On November 9, 2001, there were800,000 shares outstanding of the registrant's 9.25% Series A CumulativeConvertible Preferred Stock, which is the registrant's only class ofoutstanding preferred stock.

 

 

**GOLF TRUST OF AMERICA, INC.**

**FORM 10-Q**

**FOR THE NINE MONTHS ENDED SEPTEMBER 30,2001**

 

 

**Index**

 

 
|         |                                                                                                                                                                                                                                                                                                         |   |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|         |                                                                                                                                                                                                                                                                                                         |   |
|         |                                                                                                                                                                                                                                                                                                         |   |
| **Part I.**  | **Financial Information**                                                                                                                                                                                                                                                                                    |   |
| **Item 1.**  | **Financial Statements**                                                                                                                                                                                                                                                                                     |   |
|         | Condensed  Consolidated Statement of Net Assets (unaudited) as of September 30, 2001  (Liquidation Basis)  and Condensed  Consolidated Balance Sheet as of December 31, 2000 (Going Concern Basis)                                                                                                 |   |
|         | Condensed  Consolidated Statements of Changes in Net Assets  for the Three Months Ended September 30, 2001(unaudited)  (Liquidation Basis) and Condensed  Consolidated Statement of Loss for the Three Months Ended September 30, 2000  (Going Concern Basis)                                      |   |
|         | Condensed  Consolidated Statements of Loss (unaudited) for the Period January 1, 2001 to  May 22, 2001 (Going Concern Basis), Changes in Net Assets for the period  May 23, 2001 to September 30, 2001 (Liquidation Basis) and for the  Nine Months Ended September 30, 2000 (Going Concern Basis) |   |
|         | Condensed  Consolidated Statements of Cash Flows (unaudited) for the Period  January 1, 2001 to May 22, 2001 (Going Concern Basis) and May 23,  2001 to September 30, 2001 (Liquidation Basis) and for the Nine Months Ended  September 30, 2000                                         |   |
|         | Notes  to Condensed Consolidated Financial Statements (unaudited)                                                                                                                                                                                                                                            |   |
| **Item 2.**  | Management's  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                                       |   |
| Item  3.     | Quantitative  and Qualitative Disclosures About Market Risk                                                                                                                                                                                                                                                  |   |
| **Part II.** | Other Information                                                                                                                                                                                                                                                                                            |   |
| Item 1.      | Legal Proceedings                                                                                                                                                                                                                                                                                            |   |
| Item 2.      | Changes in Securities                                                                                                                                                                                                                                                                                        |   |
| Item 3.      | Defaults upon  Senior Securities                                                                                                                                                                                                                                                                             |   |
| Item  4.     | Submission  of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                         |   |
| Item 5.      | Other Information                                                                                                                                                                                                                                                                                            |   |
| Item 6.      | Exhibits  Index and Report on Form 8–K                                                                                                                                                                                                                                                                  |   |
|         | Signatures                                                                                                                                                                                                                                                                                                   |   |
|         |                                                                                                                                                                                                                                                                                                         |   |

 

**GOLF TRUST OF AMERICA, INC.CONDENSED CONSOLIDATED STATEMENT OFNET ASSETS AS OF SEPTEMBER 30, 2001 (LIQUIDATION BASIS)AND CONDENSED CONSOLIDATED BALANCE SHEETAS OF DECEMBER 31, 2000 (GOING CONCERN BASIS)(In thousands except per share amounts)**

 
|                                                                                                     |   |                           |    |                          |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|-------------------------------|--------|
|                                                                                                     |   | **September 30,****2001** |    | **December 31,****2000** |   |
|                                                                                                     |   | **(unaudited)**                |    | ** **                    |
| **Assets**                                                                                               |   |                           |    |                          |   |
| Real Estate and Mortgage  Note Receivable—Net                                                       |   | $                              | —  |                          | $      | 335,350 |   |
| Real Estate and Mortgage  Note Receivable Held for Sale                                                  |   | 199,024                        |    | —                        |   |
| Cash and cash equivalents                                                                                |   | 13,919                         |    | 4,458                         |   |
| Restricted cash                                                                                          |   | 2,095                          |    | —                        |   |
| Prepaid expenses and  deferred charges                                                                   |   | 380                            |    | 1,693                         |   |
| Receivables—Net                                                                                     |   | 21,434                         |    | 18,380                        |   |
| **Total Assets**                                                                                         |   | $                              | 236,852 |                          | $      | 359,881 |   |
|                                                                                                     |   |                           |    |                          |   |
| **Liabilities**                                                                                          |   |                           |    |                          |   |
| Debt                                                                                                     |   | 119,476                        |    | 224,750                       |   |
| Accounts payable and  other liabilities                                                                  |   | 3,354                          |    | 7,997                         |   |
| Reserve for Estimated  Costs During the Period of Liquidation                                            |   | 11,195                         |    | —                        |   |
| **Total Liabilities**                                                                                    |   | $                              | 134,025 |                          | $      | 232,747 |   |
|                                                                                                     |   |                           |    |                          |   |   |   |
| **Commitments and Contingencies**                                                                        |   |                           |    |                          |   |
| Minority Interest                                                                                        |   | —                         |    | 45,061                        |   |
| Preferred stock, $.01 par  value, 10,000,000 shares authorized, 800,000 shares issued and outstanding    |   | 20,000                         |    | —                        |   |
|                                                                                                     |   |                           |    |                          |   |
| **Stockholders' Equity**                                                                                 |   |                           |    |                          |   |
| Preferred stock, $.01 par  value, 10,000,000 shares authorized, 800,000 shares issued and outstanding    |   | —                         |    | 20,000                        |   |
| Common stock, $.01 par  value, 90,000,000 shares authorized and 8,155,533 shares issued and  outstanding |   | —                         |    | 82                            |   |
| Additional paid–in  capital                                                                         |   | —                         |    | 130,288                       |   |
| Dividends in excess of  accumulated earnings                                                             |   | —                         |    | (55,053                       | )      |
| Loans to officers                                                                                        |   | —                         |    | (2,725                        | )      |
| Unearned compensation                                                                                    |   | —                         |    | (1,544                        | )      |
| Note receivable for  subscribed stock                                                                    |   | —                         |    | (8,975                        | )      |
|                                                                                                     |   |                           |    |                          |   |
| **Stockholders' Equity**                                                                                 |   | —                         |    | 82,073                        |   |
|                                                                                                     |   |                           |    |                          |   |
| **Total Liabilities and Stockholders'  Equity**                                                          |   | —                         |    | $359,881                      |   |
|                                                                                                     |   |                           |    |                          |   |   |
| **NET ASSETS IN LIQUIDATION (available  to holders of Common Stock and OP unit holders)**                |   | $                              | 82,827  |                          |   |   |
|                                                                                                          |        |                                |         |                               |        |  |  |  |  |

 

Seeaccompanying notes to condensed consolidated financial statements.

 

**CONDENSED CONSOLIDATED STATEMENTS OFCHANGES IN NET ASSETS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001(LIQUIDATION BASIS) AND LOSS**

**FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 (GOING CONCERNBASIS)**

** (in thousands except per share data)**

** (unaudited)**

 
|                                                                               |   |                                         |    |                                              |       |
|------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|---------------------------------------------------|------------|
|                                                                               |   | **Three Months Ended****September 30, 2001** |    | **Three Months Ended****September 30, 2000** | ** ** |
| Revenues                                                                           |   |                                         |    |                                              |       |
| Rent from affiliates                                                               |   | $                                            | 1,768   |                                              | $          | 4,727 |   |
| Rent                                                                               |   | 3,209                                        |    | 6,840                                             |       |
| Mortgage interest                                                                  |   | 2,258                                        |    | 2,217                                             |       |
|                                                                               |   |                                         |    |                                              |       |
| Total revenues                                                                     |   | 7,235                                        |    | 13,784                                            |       |
|                                                                               |   |                                         |    |                                              |       |
| Expenses:                                                                          |   |                                         |    |                                              |       |
| General &  Administrative                                                      |   | 1,130                                        |    | 1,780                                             |       |
| Impairment loss                                                                    |   | —                                       |    | 25,300                                            |       |
| Depreciation and  Amortization                                                     |   | —                                       |    | 4,497                                             |       |
| Total expenses                                                                     |   | 1,130                                        |    | 31,577                                            |       |
| Operating income (loss)                                                            |   | 6,105                                        |    | (17,793                                           | )          |
| Other (expense) income:                                                            |   |                                         |    |                                              |       |
| Interest income                                                                    |   | 139                                          |    | 608                                               |       |
| Interest expense                                                                   |   | (3,135                                       | )       | (4,851                                            | )          |
| Total other (expense)  income                                                      |   | (2,996                                       | )       | (4,243                                            | )          |
| Net income (loss) before  minority interest                                        |   | 3,109                                        |    | (22,036                                           | )          |
| Net loss applicable to  minority interest                                          |   | —                                       |    | (7,689                                            | )          |
|                                                                               |   |                                         |    |                                              |       |
| Income (loss) Before  Adjustment for Liquidation Basis                             |   | 3,109                                        |    | (14,347                                           | )          |
| Adjustment for  Liquidation Basis of Accounting                                    |   | (15,388                                      | )       | —                                            |       |
| Net loss                                                                           |   | (12,279                                      | )       | (14,347                                           | )          |
|                                                                               |   |                                         |    |                                              |       |
| Dividends and  Distributions:                                                      |   |                                         |    |                                              |       |
| Preferred Dividends                                                                |   | (463                                         | )       | (463                                              | )          |
| Dividends/Distributions  to Common Stock and Operating Partnership Unit Holders    |   | (2,071                                       | )       | —                                            |       |
| Value of Operating  Partnership Units redeemed in sale of Golf Courses             |   | (7,909                                       | )       | —                                            |       |
| Total Dividends and  Distributions                                                 |   | (10,443                                      | )       | (463                                              | )          |
|                                                                               |   |                                         |    |                                              |       |
| Net loss to holders of  Common Stock                                               |   |                                         |    | $                                                 | (14,810    | ) |
|                                                                                    |   |                                         |    |                                              |       |
| Net Change in Net Assets  Available to holders of Common Stock and OP Unit Holders |   | $                                            | (22,722 | )                                                 |       |   |
|                                                                                    |   |                                         |    |                                              |       |
| Basic loss per share                                                               |   |                                         |    | $                                                 | (1.82      | ) |
|                                                                                    |   |                                         |    |                                              |       |
| Weighted average number  of shares—basic                                      |   |                                         |    | 8,150                                             |       |
|                                                                                    |   |                                         |    |                                              |       |
| Diluted loss per share                                                             |   |                                         |    | $                                                 | (1.82      | ) |
|                                                                                    |   |                                         |    |                                              |       |
| Weighted average number  of shares—diluted                                    |   |                                         |    | 8,150                                             |       |
|                                                                                    |   |                                         |    |                                              |       |

Seeaccompanying notes to condensed consolidated financial statements.

 

**CONDENSED CONSOLIDATED STATEMENTS OFLOSS FOR THE PERIOD JANUARY 1, 2001 TO MAY 22, 2001(GOING CONCERN BASIS), CHANGES IN NET ASSETS FOR THE PERIOD MAY 23, 2001 TOSEPTEMBER 30, 2001(LIQUIDATION BASIS) AND LOSSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (GOING CONCERN BASIS)**

**(in thousands except per share data)**

**(unaudited)**

 
|                                                                               |   | **Period  1/1/01 to  5/22/01 (Going  Concern Basis)** |    | **Period 5/23/01 To 9/30/01   (Liquidation Basis)** |    | **Nine Months Ended  September 30, 2001** |   | **Nine Months Ended  September 30, 2000** | ** ** |
|------------------------------------------------------------------------------------|--------|-------------------------------------------------------|---------|-----------------------------------------------------|---------|------------------------------------------------|--------|------------------------------------------------|------------|
| Revenues                                                                           |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Rent  from affiliates                                                              |   | $                                                     | 6,539   |                                                | $       | 3,527                                          |   | $                                              | 10,066     |   | $ | 14,158 |   |
| Rent                                                                               |   | 8,458                                                 |    | 5,296                                               |    | 13,754                                         |   | 21,734                                         |       |
| Mortgage  interest                                                                 |   | 3,651                                                 |    | 3,126                                               |    | 6,777                                          |   | 6,835                                          |       |
| Total  revenues                                                                    |   | 18,648                                                |    | 11,949                                              |    | 30,597                                         |   | 42,727                                         |       |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Expenses:                                                                          |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| General  & Administrative                                                      |   | 5,630                                                 |    | 1,446                                               |    | 7,076                                          |   | 4,750                                          |       |
| Costs  associated with Plan of Liquidation                                         |   | 7,908                                                 |    | —                                              |    | 7,908                                          |   | —                                         |       |
| Impairment  loss                                                                   |   | —                                                |    | —                                              |    | —                                         |   | 25,300                                         |       |
| Depreciation  and Amortization                                                     |   | —                                                |    | —                                              |    | —                                         |   | 13,779                                         |       |
| Total  expenses                                                                    |   | 13,538                                                |    | 1,446                                               |    | 14,984                                         |   | 43,829                                         |       |
| Operating  income (loss)                                                           |   | 5,110                                                 |    | 10,503                                              |    | 15,613                                         |   | (1,102                                         | )          |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Other  income (expense):                                                           |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Interest  income                                                                   |   | 625                                                   |    | 306                                                 |    | 931                                            |   | 1,770                                          |       |
| Interest  expense                                                                  |   | (7,920                                                | )       | (5,026                                              | )       | (12,946                                        | )      | (13,830                                        | )          |
| Gain  on disposal of assets                                                        |   | 39                                                    |    | —                                              |    | 39                                             |   | —                                         |       |
| Total  other income (expense)                                                      |   | (7,256                                                | )       | (4,720                                              | )       | (11,976                                        | )      | (12,060                                        | )          |
| Net  (loss) income before minority interest                                        |   | (2,146                                                | )       | 5,783                                               |    | 3,637                                          |   | (13,162                                        | )          |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Net  loss applicable to minority interest                                          |   | (771                                                  | )       | —                                              |    | (771                                           | )      | (4,467                                         | )          |
| Income  (loss) before adjustment for liquidation basis                             |   | (1,375                                                | )       | 5,783                                               |    | 4,408                                          |   | (8,695                                         | )          |
| Adjustment  for Liquidation Basis of Accounting                                    |   | —                                                |    | (17,437                                             | )       | (17,437                                        | )      | —                                         |       |
| Net  loss                                                                          |   | (1,375                                                | )       | (11,654                                             | )       | (13,029                                        | )      | (8,695                                         | )          |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Dividends  and Distributions:                                                      |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Preferred  Dividends                                                               |   | (462                                                  | )       | (926                                                | )       | (1,388                                         | )      | (1,388                                         | )          |
| Dividends/Distributions  to Common Stock and Operating Partnership Unit Holders    |   | —                                                |    | (2,071                                              | )       | (2,071                                         | )      | —                                         |       |
| Value  of Operating Partnership Units redeemed in sale of Golf Courses             |   | —                                                |    | (7,909                                              | )       | (7,909                                         | )      | —                                         |       |
| Total  Dividends and Distributions                                                 |   | (462                                                  | )  | (10,906                                             | )       | (11,368                                        | )      | (1,388                                         | )          |
| Net  loss to holders of Common Stock                                               |   | $                                                     | (1,837  | )                                                   |    |                                           |   |                                           | $          | (10,083 | ) |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Net  Change in Net Assets Available to holders of Common Stock and OP Unit Holders |   |                                                  |    | $                                                   | (22,560 | )                                              | $      | (24,397                                        | )          |   |   |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |   |
| Basic  loss per share                                                              |   | $                                                     | (0.20   | )                                                   |    |                                           |   |                                           | $          | (1.25 | ) |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |   |
| Weighted  average number of shares—basic                                      |   | 9,055                                                 |    |                                                |    |                                           |   | 8,058                                          |       |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |
| Diluted  loss per share                                                            |   | $                                                     | (0.20   | )                                                   |    |                                           |   |                                           | $          | (1.25 | ) |
|                                                                               |   |                                                  |    |                                                |    |                                           |   |                                           |       |   |
| Weighted  average number of shares—diluted                                    |   | 9,055                                                 |    |                                                |    |                                           |   | 8,058                                          |       |

 

Seeaccompanying notes to condensed consolidated financial statements.

**GOLFTRUST OF AMERICA, INC.CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS FOR THE PERIOD JANUARY 1, 2001 TO MAY 22, 2001 (GOING CONCERN BASIS) AND MAY 23, 2001 TO SEPTEMBER 30, 2001 (LIQUIDATION BASIS) AND THEFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000(In thousands)**

**(unaudited)**

 
|                                                                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
|------------------------------------------------------------------------------------|--------|------------------------------------------------------|--------|-----------------------------------------------------|--------|---------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                                               |   | **Period 1/1/01 To  5/22/01 (Going  Concern Basis)** |   | **Period 5/23/01 To  9/30/01  (Liquidation Basis)** |   | **Nine Months  Ended****September 30, 2001** |   | **Nine Months  Ended  September 30, 2000** |    |
|                                                                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| **Cash  flows from operating activities:**                                         |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Net  loss                                                                          |   | $                                                    | (1,375 | )                                                   | $      | (11,654                                           | )      | $                                               | (13,029 | ) | $ | (8,695 | ) |
| Adjustments  to reconcile net income to net cash provided by operating activities: |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Impairment  loss                                                                   |   | —                                               |   | —                                              |   | —                                            |   | 25,300                                          |    |
| Adjustment  to Liquidation Basis of Accounting                                     |   | —                                               |   | 17,438                                              |   | 17,438                                            |   | —                                          |    |
| Depreciation  and amortization                                                     |   | —                                               |   | —                                              |   | —                                            |   | 13,779                                          |    |
| Accrued  interest on note receivable                                               |   | —                                               |   | (143                                                | )      | (143                                              | )      | —                                          |    |
| Gain  on disposal of assets                                                        |   | (40                                                  | )      | —                                              |   | (40                                               | )      | —                                          |    |
| Loan  cost amortization                                                            |   | 139                                                  |   | —                                              |   | 139                                               |   | 996                                             |    |
| Straight–line  interest, rent and other                                       |   | 174                                                  |   | —                                              |   | 174                                               |   | (431                                            | )       |
| Forgiveness  of officer loans                                                      |   | 2,725                                                |   | —                                              |   | 2,725                                             |   | —                                          |    |
| Amortization  of restricted stock compensation                                     |   | 1,544                                                |   | —                                              |   | 1,544                                             |   | 695                                             |    |
| (Loss)  applicable to minority interest                                            |   | (771                                                 | )      | —                                              |   | (771                                              | )      | (4,467                                          | )       |
| Decrease  (increase) in receivable from affiliates                                 |   | 66                                                   |   | (352                                                | )      | (286                                              | )      | (1,644                                          | )       |
| Decrease  (increase) in other assets                                               |   | 1,782                                                |   | 4,262                                               |   | 6,044                                             |   | (918                                            | )       |
| Increase  in restricted cash                                                       |   | —                                               |   | (2,095                                              | )      | (2,095                                            | )      | —                                          |    |
| Increase  in accounts payable and other liabilities                                |   | (2,507                                               | )      | 942                                                 |   | (1,565                                            | )      | (1,417                                          | )       |
| Decrease  in liquidation liabilities                                               |   | —                                               |   | (3,171                                              | )      | (3,171                                            | )      | —                                          |    |
|                                                                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Net  cash provided by operating activities                                         |   | 1,737                                                |   | 5,227                                               |   | 6,964                                             |   | 23,198                                          |    |
|                                                                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| **Cash  flows from (used in) investing activities:**                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Golf  Course improvements                                                          |   | (826                                                 | )      | (483                                                | )      | (1,309                                            | )      | (2,987                                          | )       |
| Other  investing activities                                                        |   | —                                               |   | (254                                                | )      | (254                                              | )      | —                                          |    |
| Net  proceeds from Golf Course dispositions                                        |   | 40,383                                               |   | 78,943                                              |   | 119,326                                           |   | —                                          |    |
| Payments  on note receivable from sale of land                                     |   | 1,243                                                |   | —                                              |   | 1,243                                             |   | 1,110                                           |    |
| Decrease  in mortgage notes receivable                                             |   | 4                                                    |   | 442                                                 |   | 446                                               |   | 12                                              |    |
|                                                                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Net  cash provided by (used in) investing activities                               |   | 40,804                                               |   | 78,648                                              |   | 119,452                                           |   | (1,865                                          | )       |
|                                                                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| **Cash  flows from financing activities:**                                         |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Net  (repayments) borrowings on line of credit                                     |   | (34,275                                              | )      | (58,949                                             | )      | (93,224                                           | )      | 2,000                                           |    |
| Payments  on notes and line of credit                                              |   | (148                                                 | )      | (11,902                                             | )      | (12,050                                           | )      | (249                                            | )       |
| Net  proceeds from issuance of Common Stock                                        |   | 10                                                   |   | —                                              |   | 10                                                |   | 19                                              |    |
| Preferred  Stock issuance costs and other                                          |   | (6                                                   | )      | (152                                                | )      | (158                                              | )      | (31                                             | )       |
| Loan  fees                                                                         |   | —                                               |   | —                                              |   | —                                            |   | (233                                            | )       |
| Loans  to officers                                                                 |   | (1,603                                               | )      | (41                                                 | )      | (1,644                                            | )      | (226                                            | )       |
| Redemption  of OP Units                                                            |   | —                                               |   | —                                              |   | —                                            |   | (2,269                                          | )       |
| Distributions  to minority partners                                                |   | (935                                                 | )      | (127                                                | )      | (1,062                                            | )      | (6,365                                          | )       |
| Dividends  paid                                                                    |   | (2,740                                               | )      | (6,087                                              | )      | (8,827                                            | )      | (12,087                                         | )       |
| Net  cash used in financing activities                                             |   | (39,697                                              | )      | (77,258                                             | )      | (116,955                                          | )      | (19,441                                         | )       |
| Net  increase in cash                                                              |   | 2,844                                                |   | 6,617                                               |   | 9,461                                             |   | 1,892                                           |    |
| Cash  and cash equivalents, beginning of period                                    |   | 4,458                                                |   | 7,302                                               |   | 4,458                                             |   | 3,905                                           |    |
|                                                                               |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Cash  and cash equivalents, end of period                                          |   | $                                                    | 7,302  |                                                | $      | 13,919                                            |   | $                                               | 13,919  |   | $ | 5,797 |   |
|                                                                                    |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| **Supplemental  Disclosure of Cash Flow Information**                              |   |                                                 |   |                                                |   |                                              |   |                                            |    |
| Interest  paid during the period                                                   |   | $                                                    | 7,920  |                                                | $      | 5,026                                             |   | $                                               | 12,946  |   | $ | 13,830 |   |

 

Seeaccompanying notes to condensed consolidated financial statements.

**GOLF TRUST OF AMERICA, INC.FORM 10-QFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001Notes to Condensed ConsolidatedFinancial Statements(unaudited)**

 

**1.              Planof Liquidation, Sale to Legends Golf, and Impact of Events of  September 11, 2001**

 

                During2000, our management and Board of Directors observed increasingly unfavorabletrends in the golf course industry, including the supply and demand imbalance,the limited availability of debt and equity capital and the general impact ofnational and global economic concerns. This business environment posed asignificant challenge for us due to the fact that, as a real estate investmenttrust ("REIT") utilizing the triple-net lease structure, we areunable to control the direct operation of our Golf Courses (see Note 2 forfurther discussions) without jeopardizing our REIT status.

 

                OnNovember 6, 2000, our Board formally directed management to develop a planof orderly liquidation and a related proxy statement for presentation to the Board.On February 25, 2001 our Board of Directors adopted a Plan of Liquidation(the "Plan of Liquidation") and directed that the Plan of Liquidationbe submitted to our stockholders for approval. Our stockholders approved thePlan of Liquidation at a Special Meeting of the Stockholders  on May 22, 2001. Ninety-eight percentof the shares represented at the special meeting voted in favor of the Plan ofLiquidation.  As a percentage of ouroutstanding common shares, 77% voted in favor of the Plan of Liquidation.   One hundred percent of our preferred stockvoted in favor of the Plan of Liquidation. The Plan of Liquidation contemplatesthe orderly sale of all our assets and the payment of (or provision for) ourliabilities and expenses, as well as the establishment of a reserve to fundcertain of our contingent liabilities. The Plan of Liquidation gives our Boardof Directors the power to sell any and all of our assets without furtherapproval by our stockholders and provides that liquidating distributions be madeto our stockholders.  All of ourremaining Golf Courses are now held for sale following shareholders’ approvalof the Plan of Liquidation.

 

We believe that publicreaction to the terrorist attacks of September 11, 2001, together with thenational economic slowdown of the past few months, is having a significantadverse impact on the travel and leisure sector of the U.S. economy.  Based on management’s discussions withindustry participants, we believe the golf industry in general, and thegolf-related  destination-resort sectorin particular, is experiencing material declines in revenue since September 11,2001. We attribute these

declines primarily to the public’s fearof travel and hesitancy to engage in leisure spending. In this environment,golf course and golf resort operators are finding it difficult to projectfuture operating results because of their inability to predict how long publicpessimism will last or when economic recovery will begin.

 

Immediately afterSeptember 11th , Golf Course sales negotiations stalled due to the uncertaintyof the economic impact of the attacks. Some potential buyers face internalmoratoriums on new investments while other potential Golf Course buyers faceuncertain prospects of obtaining financing. In addition, the increaseddifficulty of projecting operating results caused some potential Golf Coursebuyers to reduce their offer prices insofar as they valued our Golf Coursesbased on projected revenue streams.

 

Recently, salesnegotiations have resumed on selected Golf Course assets; however, the effectof September 11 th on the financial markets and the travel, leisure, anddestination resort sector, may impact our Plan of Liquidation by causing aprolonged liquidation time frame and uncertain Golf Course asset valuations.Prior to September 11, we had expected that the Plan of Liquidation would becompleted within 12 to 24 months from the date of stockholder approval on May22, 2001. Our ability to complete the Plan of Liquidation within this timeframe and within the contemplated range of liquidating distributions per sharecontemplated in the Plan of Liquidation is now less certain. Our ability tocomplete the Plan of Liquidation as contemplated therein is also contingent onour ability to extend our loan terms with our lender. See “Credit Agreement”below.

 

The Innisbrook Resortborrower recently informed us that the events of September 11th hadsignificantly impacted the short- and intermediate-term operating performanceof the Innisbrook property and that there is a risk that the borrower maydefault on its mortgage payments to us. We are in discussions with the borrowerregarding its ability to meet its financial obligations to us pursuant to theParticipating Mortgage. In that regard, on November 14, 2001, we forwarded anotice of default to the borrower based upon a cross-default of its affiliate,Lost Oaks, L.P., under its Participating Lease, and on November 14, 2001, weforwarded a notice to the borrower based upon its non-payment of the October2001 interest payment on the Participating Mortgage.  In consideration of all of the aforementioned facts andcircumstances and consistent with management’s valuation assessments appliedsince the third quarter of 2000 when we recorded the first impairment loss onour Golf Course assets, we have included in our Adjustment to the LiquidationBasis of Accounting for the three months ended September 30, 2001 a write-downof our Golf Course assets of approximately $15.0 million. (See Note 2 –“Adjustment to Liquidation Basis of Accounting”).

 

**                CreditAgreement**

 

                On July 25, 2001, weentered into an amended and restated credit agreement with our lenders underthe Credit Facility and the line of credit. The new Credit Agreementconsolidated the balances outstanding under the Credit Facility and the line ofcredit into a single, secured term loan with an outstanding principal balanceof approximately $151,000,000, which has since been paid down to approximately$101,000,000, and a maturity date of June 30, 2002. All events of defaultunder the Credit Facility and line of credit were waived or cured as of theclosing of the new Credit Agreement. The loan under the new Credit Agreement issecured by substantially all of our Golf Courses and by one mortgage held by usor by our subsidiaries.  Each of ourmaterial subsidiaries is a guarantor under the new Credit Agreement.  Due to the impact of the economic slowdownand the events of September 11th on the operating performance of ourlessees and our mortgagee, we face an increased risk that we may not be able tosatisfy the operating income financial covenant in our new Credit Agreement. An uncuredevent of default under this covenant would cause our interest rate to increaseto prime plus 3% per annum and would give our lenders the right to demand thatwe immediately repay all of our outstanding debt under the CreditAgreement.  If we were unable to do so,the lenders could foreclose upon and sell our remaining Golf Courses.  There is a risk that the lenders would notmarket the Golf Courses as effectively as we would.  To the extent that the net proceeds from sales conducted by thelenders would be lower than the net proceeds from sales conducted by us, theamount available for our liquidating distributions to shareholders would belower. ( see Note 7 for further discussion).

 

**2.             Organizationand Basis of Presentation**

 

                Wewere incorporated in Maryland on November 8, 1996 and we elected to betaxed as a REIT from and after our initial public offering in February,1997.  As of November 9, 2001, we holdparticipating interests in 16.0 Golf Courses and direct controlling interestsin 7.0 Golf Courses (collectively, the "Golf Courses"), 19 of the 23Golf Courses are owned by us and four (owned by others) serve as collateral fora 30-year participating mortgage loan wherein we are the lender. Of the 19 GolfCourses that we own, 17.5 are held in fee simple and 1.5 are held pursuant tolong-term ground leases. The Golf Courses are located in Florida (10), SouthCarolina (2), Michigan (1.5), Illinois (3.5), Missouri (1.5), Texas (1.5),California, New Mexico, and West Virginia. Golf Course quantities are stated interms of 18-hole equivalents; therefore, one 27-hole golf course facility wouldbe counted as 1.5 Golf Courses. Title to the acquired Golf Courses is held byGolf Trust of America, L.P., a Delaware limited partnership, and, in the caseof the Sandpiper Golf Course, through a wholly–owned subsidiary of GolfTrust of America, L.P. We refer to Golf Trust of America, L.P. as our"Operating Partnership" or "OP" and we refer to theOperating Partnership and Golf Trust of America, Inc. (together with allof their subsidiaries) collectively as "we", "us" or our"Company." Golf Trust of America, Inc., through its wholly ownedsubsidiaries GTA GP, Inc. ("GTA GP") and GTA LP, Inc.("GTA LP"), each of which is a Maryland corporation, holds a96.6 percent interest in the Operating Partnership as of November 9, 2001.GTA GP is the sole general partner of the Operating Partnership and owns a0.2 percent interest therein. GTA LP is a limited partner in the OperatingPartnership and owns a 96.4 percent interest therein. Operators of theGolf Courses, their affiliates and an officer of the Company hold the remaining3.4 percent interest in the Operating Partnership.

                Theaccompanying consolidated financial statements include the accounts of theCompany and the Operating Partnership and their material subsidiaries. Allsignificant intercompany balances and transactions have been eliminated inconsolidation.

 

**                Adjustmentto Liquidation Basis of Accounting**

 

                As aresult of the Board’s adoption of the Plan of Liquidation and its approval byour stockholders, we adopted the liquidation basis of accounting for allperiods subsequent to May 22, 2001. Accordingly, on May 22, 2001,assets were adjusted to their estimated fair value and liabilities, includingestimated costs associated with implementing the Plan of Liquidation, wereadjusted to their estimated settlement amounts. The minority interest has beenreclassified because the common OP unit holders do not have preferentialdistribution rights over the common shareholders. The valuation of real estateheld for sale as of September 30, 2001 is based on current contracts andestimates of sales values. The valuation of other assets and liabilities undera liquidation basis of accounting are based on management's estimates as ofSeptember 30, 2001. The net adjustment at May 23, 2001 required to convertfrom the going concern (historical cost) basis to the liquidation basis ofaccounting, amounted to a negative adjustment of $2,816,000, which is includedin the June 30, 2001 Consolidated Statement of Net Assets (liquidationbasis).  Further adjustments wereincluded in the September 30, 2001 Consolidated Statement of Changes in NetAssets (liquidation basis) to reflect decreases in the carrying value of netassets summarized below.  The Net Assetsrepresent the assets available to our common shareholders and the remaining OPunit holders. The actual values realized for assets and settlement ofliabilities may differ materially from the amounts estimated. The actual numberof common shares and OP units (excluding intra-Company holdings) outstanding atNovember 9, 2001 is approximately 8,076,993.

 

|                                                                                                            |   |                                        |        |
|-----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|-------------|
|                                                                                                            |   | **Nine Months Ended****September 30, 2001** |        |
|                                                                                                            |   |                                        |        |
| Increase to reflect  estimated net realizable values of certain Golf Courses                                    |   | $                                           | 30,987,000  |   |
| Decrease to reflect  estimated fair value of certain Golf Courses                                               |   | (29,657,000                                 | )           |
| Gain realized on disposal  of certain Golf Courses                                                              |   | 352,000                                     |        |
| Reserve for estimated  costs during the period of liquidation                                                   |   | (14,366,000                                 | )           |
| Write–off of  deferred debt costs                                                                          |   | (1,224,000                                  | )           |
| Write–off of  unamortized initial issue discount on the Mortgage Note Receivable and  certain Golf Courses |   | (3,529,000                                  | )           |
| **Adjustment to reflect the change to  liquidation basis of accounting**                                        |   | $                                           | (17,437,000 | ) |

 

 

**                Reservefor Estimated Costs During the Period of Liquidation**

 

                Underthe liquidation basis of accounting, we are required to estimate and accrue thecosts associated with executing the Plan of Liquidation. These amounts can varysignificantly due to, among other things, the timing and realized proceeds fromGolf Course sales, the costs of retaining personnel and others to oversee theliquidation, including the costs of insurance, the timing and amountsassociated with discharging known and contingent liabilities and the costsassociated with cessation of our operations. These costs are estimated and areexpected to be paid out over the liquidation period.

 

                Thefollowing is a summary of the changes in the Reserve for Estimated Costs Duringthe Period of Liquidation:

 

|                                    |   | **June 30, 2001** |                   | **Payments** |   | **Adjustments** |   | **Balance  September 30, 2001** |   |
|-----------------------------------------|--------|------------------------|------------------------|--------------|--------|-----------------|--------|--------------------------------------|--------|
|                                    |   |                   |                   |         |   |            |   |                                 |   |
| Severance                               |   | $                      | 5,163,000              |         | $      | (9,000          | )      | —                               |   | $ | 5,154,000 |   |
| Professional Fees                       |   | 3,010,000              |                   | (1,137,000   | )      | —          |   | 1,873,000                            |   |
| Fees related to  renegotiations of debt |   | 1,105,000              |                   | (1,105,000   | )      | —          |   | -                                    |   |
| Financial Advisor Fees                  |   | 1,408,000              |                   | (794,000     | )      | —          |   | 614,000                              |   |
| Capital Expenditures                    |   | 880,000                |                   | (92,000      | )      | —          |   | 788,000                              |   |
| Other                                   |   | 2,800,000              |                   | (34,000      | )      | —          |   | 2,766,000                            |   |
|                                    |   |                   |                   |         |   |            |   |                                 |   |
| **Total**                               |   | **$**                  | **   14,366,000** |         | **$**  | **(3,171,000**  | **)**  | —                               |   | **$** | **11,195,000** |   |
|                                         |        |                        |                        |              |        |                 |        |                                      |        |  |  |  |  |  |

 

                Includedin the severance amounts above are payments to our executives pursuant to theiramended and restated employment agreements. Payments aggregating approximately $2,526,000are payable upon the later of stockholder approval of the Plan of Liquidation(which has already occurred) and the repayment of the Credit Agreement.Additional payments aggregating approximately $1,895,000 are payable upon thelater of our repayment of the Credit Agreement and the one-year anniversary ofour Board adoption of the Plan of Liquidation. Any severance payments otherwisepayable under the amended and restated employment agreements will be reduced bythe amount of the above payments made.

 

                Includedin our reserve for costs during the period of liquidation are payments to ourexecutives, pursuant to their amended and restated employment agreements, thatmay constitute parachute payments under the Internal Revenue Code and could besubject to excise tax. Such excise taxes could be triggered if a change incontrol were to occur by February 25, 2002, as defined by the Internal RevenueCode, and all payments due the executives under their employment agreementswere determined to be parachute payments. The employment agreements require usto reimburse our executives for any such excise taxes.  The amount of these "gross-up"excise tax payments due could be as much as $4.7 million. We do notanticipate that these excise taxes will be triggered and, therefore, have notrecorded a reserve for such amount.

 

**3.             Summaryof Significant Accounting Policies**

 

**                InterimStatements**

 

                Theaccompanying condensed consolidated financial statements for the three and ninemonth periods ended September 30, 2000 and for the period endedMay 22, 2001 have been prepared in accordance with generally acceptedaccounting principles ("GAAP"), and under the liquidation basis ofaccounting since then, and with the instructions to Form 10-Q and Article 10of Regulation S-X. These financial statements have not been audited byindependent public accountants but include all adjustments (consisting ofnormal recurring adjustments) which are, in the opinion of management,necessary for a fair presentation of the net assets, financial condition,results of operations and cash flows for such periods. However, these resultsare not necessarily indicative of results for any other interim period or forthe full year. The accompanying consolidated balance sheet as ofDecember 31, 2000 has been derived from the audited financial statements,but does not include all disclosures required by GAAP.

 

                Certain information and footnote disclosures normallyincluded in financial statements in accordance with GAAP have been omitted asallowed by the rules of the Securities and Exchange Commission (the"SEC"). Management believes that the disclosures included in theaccompanying interim financial statements and footnotes are adequate to makethe information not misleading but should be read in conjunction with theconsolidated financial statements and notes thereto included in our annualreport on Form 10-K, as amended, for the year ended December 31, 2000.

 

**                Principlesof Consolidation**

 

                Theaccompanying consolidated financial statements include the accounts of theCompany, the Operating Partnership and their wholly owned subsidiaries. Allsignificant intercompany transactions and balances have been eliminated inconsolidation.

 

**                Depreciationand Amortization**

 

                Depreciationexpense was not recorded during the nine-month period ended September 30,2001 because substantially all of our long-lived assets were deemed to be heldfor sale.

 

                Priorto the time that we adopted the liquidation basis of accounting, deferred loanfees were amortized using the straight-line method over the related estimatedlife. Upon the adoption of the liquidation basis of accounting, deferred loanfees of approximately $1,224,000 were written off to reflect the balances attheir net realizable value.

 

**                IncomeTaxes**

 

                We qualify as a real estateinvestment trust ("REIT") under the Internal Revenue Code of 1986, asamended (the "Code"). A REIT will generally not be subject to federalincome taxation to the extent that it distributes at least 90% of its taxableincome to its stockholders and complies with other requirements. Because of thetax rules applicable to REITs, we are generally not allowed to operate our GolfCourses. As an exception to this rule, however, the Internal Revenue Codeallows a 90-day grace period following a foreclosure or eviction of the lesseeunder the Participating Leases during which we can operate the Golf Course andthe revenues will be qualifying income for REIT tax purposes. The tax code'sREIT rules limit the amount of disqualified income that we may receive 5% ofour Gross Income, thus, at the expiration of the 90-day period, the propertymust either be sold or an agreement must be secured with an independentcontractor to assume management. Otherwise gross revenue from subsequent operations at any such GolfCourse is disqualified income for REIT tax purposes. Gross revenue from GolfCourses managed after the expiration of the 90-day grace period and thatexceeds 5% of our Gross Income is taxable. Management by an independentcontractor is allowed until the close of the third taxable year following thetaxable year in which the foreclosure occurred. The Golf Courses subject tothis rule as of November 9, 2001 were Tierra Del Sol, Osage National, Wekiva,Cypress Creek, Black Bear and Mystic Creek. At September 30, 2001, thegrace period had expired for 5.5 of the 7.0 aforementioned Golf Courses.  However, we were in compliance with the REITrules for the fiscal quarter ended September 30, 2001 due to the fact thatthe Gross Revenue test is only measured on an annual basis. We face therisk that, in future periods, projected income from our directly managed GolfCourses might exceed the maximums allowed by the REIT rules.  In that case, in order to retain ourqualification as a REIT, we might be forced to close operations at one or moreof those Golf Courses (until an independent operator could be located or untilthe Golf Course could be sold).  Such aclosure would reduce our revenue and, ultimately, might reduce our liquidatingdistributions to our shareholders. Moreover, our foreclosure on the borrower atthe Innisbrook Resort may impact our REIT status; we are currently evaluatingthe consequences of any such foreclosure on our REIT status.

                Inorder for us to maintain our qualification as a REIT, not more than 50% invalue of our Common Stock may be owned, directly or constructively, by five orfewer individuals. For the purpose of our REIT qualification, our Articles ofIncorporation prohibit direct or constructive ownership of more than 9.8% of theCommon Stock by any person.

 

                Wehave elected to qualify as a REIT for federal income tax purposes. Although weexpect that we will continue to qualify as a REIT for the period prior to thedistribution of our remaining assets to the common stockholders (including thepotential transfer of remaining assets to a liquidating trust), we face therisk that we might lose or terminate our status as a REIT as a result ofpresently unforeseen circumstances.

 

**                Earnings/LossPer Common Share**

 

                Earnings/lossper common share are presented for the period ended May 22, 2001 and thenine months ended September 30, 2000 under two formats: basicearnings/loss per common share and diluted earnings/loss per common share.Earnings/loss per common share are computed by dividing net income (afterdeducting dividends on preferred stock) by the weighted average number ofcommon share outstanding during the year. Diluted earnings/loss per commonshare are computed by dividing net income/loss (after deducting dividends onpreferred stock) by the weighted average number of common shares outstandingduring the period, plus the impact of those common share equivalents (i.e.,stock options, convertible preferred stock and OP Units) that are dilutive.Common share equivalents for the effect of dilutive stock options were 700 forthe nine months ended September 30, 2000.

 

                Sincethe adoption of the liquidation basis of accounting on May 23, 2001,earnings/loss per share was not computed, as such amounts are not deemed to bemeaningful.

 

 

**4.             Commitmentsand Contingencies**

 

**                Litigation**

 

*                ConcordiaI, L.P. v. Golf Trust of America, Inc., et al.* On April 5, 2001, a class action lawsuit was filed in the CircuitCourt for Baltimore City, Maryland against Golf Trust of America, Inc.,its directors and Mr. Young. The lawsuit was brought by Concordia I, L.P.,which claims to be one of our stockholders and which seeks to prosecute itsclaim on behalf of all of our stockholders other than the defendants and theiraffiliates or immediate family members. The lawsuit seeks damages in anunspecified amount. The plaintiff alleges that our payments to our officersunder their employment contracts and our agreement to sell Golf Courses toLegends resulted from a breach of the defendants' fiduciary duties to our stockholdersand that these transactions constitute non-pro rata liquidating distributionsallegedly in violation of our charter and Maryland law. Additionally, theplaintiff alleges that our preliminary proxy statement contained materiallymisleading statements and omissions and, on that basis, the plaintiff seeks tovoid any vote taken pursuant thereto or, in the alternative, damages. Theplaintiff delivered to us on July 30, 2001 an Amended Class ActionComplaint which, among other things, added Banc of America Securities LLC andBank of America, N.A., as defendants. The Amended Class Action Complaintagainst Banc of America Securities, LLC and Bank of America, N.A. assertsclaims against these entities for negligent misrepresentation, unjustenrichment, equitable estoppel and aiding and abetting proxy misrepresentation.The matter has been tendered to our directors’ and officers’ insurance carrier.Golf Trust of America, Inc. and its officers and directors have moved todismiss the complaint for failure to state a claim upon which relief may begranted.  The plaintiff's’response to this motion was received on November 6, 2001.  A hearingon this motion is scheduled for November 19, 2001.  We are not able to assess the outcome of this action at this time.

 

                We currently are in litigation or disputes withcertain lessees respecting events of defaults under the Participating Leases orother matters.

 

On January 18, 2001,Sandpiper at SBCR, LLC, which is the Lessee of our Sandpiper Golf Course, andEnvironmental Industries, Inc. (“EII”) filed a Complaint for Injunctive Reliefand Declaratory Relief Pending Arbitration in the Superior Court of SantaBarbara, California, against the subsidiary through which we own the GolfCourse, Sandpiper-Golf Trust LLC, or SGT. SGT had leased the Golf Course to the Sandpiper Lessee pursuant to aParticipating Lease dated March 6, 1998. EII has secured a line of credit guaranteeing the Lessee’s performanceunder the Participating Lease.  Thecomplaint alleges that the Sandpiper Lessee is excused from paying rent underthe Participating Lease because SGT has failed to perform certain obligationsunder the Participating Lease and under a purported amendment to theParticipating Lease.  The complaint doesnot allege a cause of action for breach of the Participating Lease; instead, itonly seeks an injunction prohibiting SGT from issuing notices of default underthe Participating Lease, terminating the Participating Lease, or drawing on theletter of credit pending the outcome of a dispute resolution process containedin the Participating Lease.  On January24, 2001, the Sandpiper Lessee sought and obtained a temporary restrainingorder prohibiting SGT from issuing notices of default, terminating theParticipating Lease, or drawing on the letter of credit pending a preliminaryinjunction hearing scheduled for February 2, 2001.  On January 27, 2001, the parties entered into a StandstillAgreement, pursuant to which the temporary restraining order dissolved by itsterms on February 2, 2001.  In addition,SGT agreed, among other things, not to terminate the Participating Lease basedon the current disputes between the parties pending the outcome of the disputeresolution process.  In exchange, theSandpiper Lessee agreed, among other things, to post a bond in the amount of$1 million to secure payment of some or all of any arbitration award.  

 

Pursuant to the terms ofthe Participating Lease, the parties have agreed to arbitrate thisdispute.  The arbitration hearing isscheduled to commence on December 13, 2001. Discovery is just now commencing, and it is not possible to predict theoutcome of the dispute.

                Two complaints (a federal and state court action) havebeen filed against the Company related to the Sandpiper Golf Course allegingthat the Company breached, among other things, its promise under the GolfUtilization Agreement and failed to perform under the terms of theParticipating Lease. The plaintiffs are seeking damages in excess of$50 million. On March 31, 2001, in the case of the federal courtaction, the parties filed a stipulation in court to dismiss the action in itsentirety without prejudice. On May 22, 2001, HT-Santa Barbara, Inc.and the ADCO Group, Inc. filed a complaint in the Superior Court of SantaBarbara, California titled HT-Santa Barbara, Inc.*and the ADCO Group, Inc. v. Golf Trust ofAmerica, Inc., GTA GP, Inc., Golf Trust of America LP, andSandpiper-Golf Trust, LLC*, Case No. 1042834. The allegations inthe complaint are substantially similar to the allegations in the dismissedfederal action. The complaint alleges causes of action for breach of writtencontract, breach of implied covenant of good faith and fair dealing,intentional interference with prospective economic advantage, negligentinterference with prospective economic advantage, fraudulent promise withoutintention to perform, intentional misrepresentation and fraud, and specificperformance. The complaint seeks compensatory damages of not less than$50,000,000, interest, punitive damages, costs of suit, (including attorney'sfees), and specific performance. On Friday, June 22, 2001, defendantsfiled a motion to dismiss the complaint and a motion to stay the action pendingthe outcome of an arbitration to be concluded in a dispute regarding Sandpiperat SBCR, LLC and Environmental Industries, Inc. Following a hearing on themotions on September 17, 2001, the court granted the motion to stay the actionpending the outcome of the arbitration. The court did not rule on the motion to dismiss.  The parties have conducted no discovery todate.  It is not possible to predict theoutcome of these disputes, and accordingly, the financial statements do notinclude adjustments that may be required in connection with the resolution ofthese complaints.

 

                We entered into a purchase andsale agreement with Legends Golf Holding, LLC, on February 14, 2001, tosell Bonaventure Country Club, located in Ft. Lauderdale, Florida. Legends GolfHolding, LLC subsequently attempted to terminate its obligations to purchaseBonaventure Country Club. We believe the basis on which the purchaser hasattempted to terminate its obligations are invalid. In connection with thisdispute, we filed a complaint for a declaratory judgement in the Court ofCommon Pleas, Ninth Judicial Circuit, in the County of Charleston, SouthCarolina, on August 10, 2001 seeking specific performance of Legends GolfHolding, LLC's obligations to purchase the Bonaventure Country Club. OnJuly 31, 2001, the parties agreed to an accelerated non-appealable disputeresolution process, which is scheduled to be concluded by November 30,2001.   On August 23, 2001, we filed anamended complaint in the Court of Common Pleas seeking a declaration thatLegends Golf Holding, LLC did not have a valid basis for terminating itsobligation to purchase the Bonaventure Country Club.   The trial is currently scheduled to begin on November 26,2001.  During thisprocess, we have the right to market these Golf Courses for sale without anyobligation to Legends.

 

                Ownersand operators of Golf Courses are subject to a variety of legal proceedingsarising in the ordinary course of operating a golf course, includingproceedings relating to personal injury and property damage. Such proceedingsare generally brought against the operator of a golf course, but may also bebrought against the owner. The Participating Leases provide that each Lessee isresponsible for claims based on personal injury and property damage at the GolfCourses, which are leased and require each Lessee to maintain insurance forsuch purposes. Although we are currently not party to any legal proceedingsrelating to personal injury or property damage at the Golf Courses that wouldhave a material adverse effect upon our business or financial position, it ispossible that in the future we could become a party to such proceedings.

 

 

**                Eventsof Default under the Participating Leases and the Participating Mortgage**

 

                Wemay declare an "event of default" when a Lessee fails to pay renttimely under its Participating Lease. During the nine months ended September30, 2001, we declared events of default at the following Golf Courses:Sweetwater Country Club; Wekiva Golf Club; Pete Dye Golf Course; and Lost Oaksof Innisbrook.

 

                OnJune 20, 2001, we terminated the Participating Lease at Pete Dye GolfClub. In connection with the termination of the Participating Lease, weredeemed collateral pledged by the former lessee in the amount of $1,350,000(48,949 Series C Preferred OP Units at the original issue price per shareof $27.58) and applied this amount to accrued rent and other past dueobligations under the Participating Lease and the remaining balance was appliedto the basis of the asset. The former lessee continued to operate the GolfCourse from the time of the termination until August 30, 2001, at which time weentered into a forbearance agreement and a Short Term Lease with the lessee andits affiliates, and in consideration  wereceived a $150,000 forbearance commitment fee.  The Short Term Lease requires the lessee to pay rent in theamount of $175,000 per month and terminates no later than December 1,2001.  Additionally, we entered into anOption and Purchase and Sale Agreement dated August 30, 2001 with Golf andFairway, LLC, a West Virginia limited liability company, an affiliate of thelessee at the Golf Course, in which we granted the purchaser an option topurchase the Golf Course and related notes on or before December 1, 2001.  The purchaser exercised its option topurchase the Golf Course on October 15, 2001 and paid a non-refundable $500,000option commitment fee to us at that time. We agreed to allow the lessee under the Short Term Lease to defer thepayment of October and November 2001 rent until the closing date of the sale ofthe Golf Course.  If the purchaser failsto purchase the Golf Course by December 1, 2001 or if the lessee defaults underthe Short Term Lease, the lessee has agreed to allow us to take possession ofthe Golf Course immediately and will cooperate in allowing us to foreclose ondevelopment property securing the $5.8 million loans that the lessee hasoutstanding with us.

 

                OnJuly 13, 2001, we took possession and assumed management of SweetwaterGolf Club, which was sold on September 18, 2001, and Wekiva Golf Club, which weare currently managing.  With respect toMystic Creek, the lessee filed a bankruptcy petition on February 25, 2000 toprevent us from concluding our eviction action.  The lessee then commenced an adversary proceeding in thebankruptcy court seeking a declaratory judgment that the Participating Leasewas not a true lease but was rather a financing arrangement which could bemodified in the lessee’s Chapter 11 case. On October 10, 2001, the Bankruptcy Court issued a Trial Opinion holdingthat the Participating Lease was a true lease not subject to modification inbankruptcy. The lessee surrendered the Golf Course to us on November 1, 2001and we assumed management of this Golf Course as of this date. We continue tomanage Tierra Del Sol Golf Club and Osage National Golf Club, which weforeclosed upon in 2000.

 

                OnNovember 6, 2001, we notified Lost Oaks, L.P., the Lessee of our Lost Oaks GolfClub, that Lessee’s failure to pay rent in arrears for the month of September,as well as late charges and interest, constitutes an event of default under theParticipating Lease.  We also notifiedLessee that it has 10 days from the date of the notice to pay those amounts orwe will terminate the Participating Lease and take possession of the property.  Under the terms of our Loan Agreement withGolf Host, Inc., the Owner of the Innisbrook Golf Club, the Lost Oaks defaultalso constitutes a default under that Loan Agreement.  On November 14, 2001, we provided written notice to the borrowerunder the Participating Mortgage of this cross-default.

 

                OnNovember 14, 2001, we forwarded a notice to the borrower under theParticipating Mortgage based upon its non-payment of the October 2001 interestpayment on the Participating Mortgage.

 

**5.             AssetDispositions**

 

                 In the nine months ended September 30,2001, we disposed of the following 23.0 Golf Courses:

 

| **Golf Course Name**                |   | **City and State**        |   | **No. of Holes** |   | **Sale Date** |   | **Total Consideration**              |                            |
|-------------------------------------|--------|---------------------------|--------|------------------|--------|---------------|--------|--------------------------------------|---------------------------------|
|                                |   |                      |   |             |   |          |   |                                 |                            |
| Raintree  Golf Course               |   | Akron, OH                 |   | 18               |   | 1/4/01        |   | $                                    | 10.65    million |   |
| Ohio  Prestwick Country Club        |   | Akron, OH                 |   | 18               |   | 1/4/01        |   |                                 |                            |
| Persimmon  Ridge Country Club       |   | Louisville, KY            |   | 18               |   | 2/15/01       |   | 5.2     million  |                            |
| Club  of the Country                |   | Louisburg, KS             |   | 18               |   | 3/16/01       |   | 2.655 million                        |                            |
| Brentwood  Golf & Country Club  |   | White Lake  Township, MI  |   | 18               |   | 3/20/01       |   | 2.6     million  |                            |
| Metamora  Golf & Country Club   |   | Metamora, MI              |   | 18               |   | 4/9/01        |   | 4.93   million             |                            |
| Silverthorn  Country Club           |   | Tampa, FL                 |   | 18               |   | 4/12/01       |   | 4.25   million             |                            |
| Palm  Desert Country Club           |   | Palm Desert, CA           |   | 27               |   | 4/20/01       |   | 4.075 million                        |                            |
| Woodlands  Golf Course              |   | Gulf Shore, AL            |   | 18               |   | 5/1/01        |   | 6.4     million  |                            |
| Cooks  Creek Golf Club              |   | Ashville, OH              |   | 18               |   | 5/16/01       |   | 4.0     million  |                            |
| Royal  New Kent Golf Club           |   | Providence Forge,  VA     |   | 18               |   | 6/15/01       |   | 10.8     million |                            |
| Legends  of Stonehouse Golf Club    |   | Williamsburg, VA          |   | 18               |   | 6/15/01       |   |                                 |                            |
| Eagle  Watch Golf Club              |   | Woodstock, GA             |   | 18               |   | 7/11/01       |   | 5.85   million             |                            |
| Olde  Atlanta Golf Club             |   | Suwanee, GA               |   | 18               |   | 7/11/01       |   | 7.8     million  |                            |
| Parkland  (Legends)                 |   | Myrtle Beach, SC          |   | 18               |   | 7/31/01       |   |                                 |                            |
| Moorland  (Legends)                 |   | Myrtle Beach, SC          |   | 18               |   | 7/31/01       |   |                                 |                            |
| Heathland  (Legends)                |   | Myrtle Beach, SC          |   | 18               |   | 7/31/01       |   | 89.41   million            |                            |
| Heritage  Golf Club (Legends)       |   | Pawley’s Island,  SC |   | 18               |   | 7/31/01       |   |                                 |                            |
| Oyster  Bay Golf Links (Legends)    |   | Sunset Beach, NC          |   | 18               |   | 7/31/01       |   |                                 |                            |
| Tiburon  Golf Course (Legends)      |   | Omaha, NE                 |   | 27               |   | 7/31/01       |   |                                 |                            |
| Emerald  Dunes Golf Club            |   | West Palm Beach,  FL      |   | 18               |   | 9/7/01        |   | 16.9     million |                            |
| Sweetwater  Golf & Country Club |   | Apopka, FL                |   | 18               |   | 9/18/01       |   | 3.25   million             |                            |
|                                     |        |                           |        |                  |        |               |        |                                      |                                 |  |

 

**6.             Receivables—Net**

 

                Receivables-Netconsists of the following:

 
|                                             |   | **September 30, 2001** |   |
|--------------------------------------------------|--------|------------------------|--------|
|                                             |   |                   |   |
| Note  receivable from subscribed stock           |   | $  8,975,000      |   |
| Rent  receivable                                 |   | 2,615,000              |   |
| Note  receivable for land sale                   |   | 2,311,000              |   |
| Loans  to officers                               |   | 1,644,000              |   |
| Loans  to lessees – net of bad debt reserve |   | 5,882,000              |   |
| Other  miscellaneous receivables – net      |   | 7,000                  |   |
| **Receivables  – Net**                      |   | $21,434,000            |   |

 

 

                Thenote receivable from subscribed stock was reclassed from the Stockholder'sEquity section under the liquidation basis of accounting.  This note is related to the originalpurchase of the Innisbrook Participating Mortgage.  The rent receivable includes approximately $820,000 attributed toMystic Creek Golf Club. The value of the collateral held by the OperatingPartnership against the lessee's obligations under the Participating Leaseexceeds the total amount recorded as of September 30, 2001. We have beenunable to take possession of this collateral due to the fact that theBankruptcy Court automatically stayed the eviction action on February 25, 2000.  However, since the Bankruptcy Court issued aTrial Opinion on October 10, 2001 holding that the Participating Lease was atrue lease not subject to modification in bankruptcy; we expect that theproceedings will be concluded by year-end and that the collateral will bereleased allowing us to apply the proceeds against the outstanding leaseobligations.   No Rent Revenue wasrecognized for this Golf Course after October 2000.  The rent receivable balance also includesapproximately $420,000 in amounts due from the lessee at Sandpiper that will beresolved in the arbitration process.  Ofthe remaining balance of rents receivable of approximately $1,375,000,approximately $1,093,000 was received by November 9, 2001.  The note receivable for the sale of land issecured by a parcel of land adjacent to Sandpiper Golf Course.  The loans to officers are secured by commonstock.   The loans to lessees – net ofbad debt reserve are currently subject to a purchase and sale agreement.

** **

 

**7.             Debt**

 

                Debtconsists of the following:

 

|                                                                                                                                                                                                        |   |                   |        |                  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-------------|-----------------------|--------|
|                                                                                                                                                                                                   |   | **September 30, 2001** |        | **December 31, 2000** |   |
|                                                                                                                                                                                                   |   | **(In thousands)**     |        |
|                                                                                                                                                                                                   |   |                   |        |                  |   |
| **Credit Agreement**                                                                                                                                                                                   |   |                   |        |                  |   |
| $109.4 million  secured, with an interest rate of prime +1% per annum for a current effective  rate of 7.0% per annum at September 30, 2001, which matures June 30, 2002                               |   | $                      | 109,476     |                  | $      | - |   |
| **Revolving Credit Facility and Line of  Credit**                                                                                                                                                      |   |                   |        |                  |   |
| Two loans aggregating  $210.0 million (refinanced through the new Credit Agreement)                                                                                                                    |   | _                      |        | 202,700               |   |
| **Note Payable**                                                                                                                                                                                       |   | -                      |        | 12,050                |   |
| **Note Payable**                                                                                                                                                                                       |   |                   |        |                  |   |
| Secured financing,  collateralized by certain Golf Courses, with an interest rate of prime +1%  per annum for a current effective rate of 7.0% per annum at September 30,  2001, maturing through 2002 |   | 10,000                 |        | 10,000                |   |
|                                                                                                                                                                                                   |   |                   |        |                  |   |
| **Total**                                                                                                                                                                                              |   | **$**                  | **119,476** | ** **            | $      | **224,750** | ** ** |

 

 

**                Credit Agreement**

 

                OnJuly 25, 2001, we entered into a second amended and restated creditagreement (the “Credit Agreement”) with the lenders under the Credit Facilityand the line of credit. This Credit Agreement consolidated the balancesoutstanding under the Credit Facility and the line of credit into a single,secured term loan with an outstanding principal balance of approximately$151,000,000 on July 25, 2001. All events of default under the CreditFacility and line of credit were waived or cured upon the closing of the newCredit Agreement. The loans under the new Credit Agreement mature onJune 30, 2002. We are required to make quarterly principal payments in theamount of $10,000,000. We are also required to use the net proceeds from thesale of our golf course properties and related assets to repay the loans. Suchpayments will offset the quarterly scheduled principal payments. Thenon-default interest rate payable on the loans is equal to the prime rate plus1% per annum. The loans under the new Credit Agreement are secured bysubstantially all of our Golf Courses and by certain mortgages held by us andour subsidiaries that are secured by Golf Courses. Each of our materialsubsidiaries is a guarantor under the Credit Agreement.

 

                Thenew Credit Agreement limits our ability to sell Golf Courses unless we receivenet cash proceeds in excess of minimum amounts that are set forth in the newCredit Agreement. The new Credit Agreement contains a financial covenantregarding the minimum amount of cash rent that we receive. Non-financialcovenants include maintenance of Golf Courses, requirements to insure the GolfCourses, restrictions on debt, restrictions on liens, restrictions oncontingent obligations, limitations on loans to officers and investments inthird parties, restrictions on payment of dividends, restrictions ontransactions with affiliates, and restrictions on adverse amendments to ourParticipating Leases and mortgage notes, among others.

 

                Due to the impact of theeconomic slowdown and the events of September 11th on the operatingperformance of our Lessees and our Mortgagee, we face an increased risk that wemay not be able to satisfy the operating income financial covenant in ourCredit Agreement.  An uncured event ofdefault under this covenant would cause our interest rate to increase to primeplus 3% per annum and would give our lenders the right to demand that weimmediately repay all of our outstanding debt under the Credit Agreement.  If we were unable to do so, the lenderscould foreclose upon and sell our remaining Golf Courses.  To the extent that the net proceeds fromsales conducted by the lenders would be lower than the net proceeds from salesconducted by us, the amount available for our liquidating distributions wouldbe lower.

 

                **RestrictedCash**

 

**               **The balance in restricted cash of $2,095,000 is comprised of $1,500,000,plus accrued interest that is being held in an interest escrow account,pursuant to the terms of the Credit Agreement, to be used to pay interest onthe Bank of America loan at such time as the Innisbrook owner defaults in thepayment of interest due under the Innisbrook Mortgage Note and provided theaggregate principal amount due on the Credit Agreement is $60,000,000 or lessat the time such default occurs or during its continuance.   The remaining balance in restricted cash isthe cash collateral of approximately $580,000, including accrued interest, thatwe hold in connection with the Mystic Creek Golf Course.  These funds are held in a separate bankaccount to which Bank of America has a security interest.  When this collateral is formally released bythe Bankruptcy Court as part of the conclusion to Mystic Creek’s bankruptcyproceedings, the cash must be remitted to Bank of America as payment againstthe outstanding balance under the Credit Agreement.

 

 

                **Note Payable**

 

                OnJuly 28, 2001, a payment of $5,000,000 was due on the Note Payable to CityNational Bank related to the purchase of the Pete Dye Golf Club inJuly 1999. We signed a Forbearance Agreement and paid a fee of $25,000 toextend the maturity date of the payment to January 28, 2002.   Additionally, we may extend the maturitydate of the payment for an additional six months (i.e., from January 28,2002 to July 28, 2002 for an extension fee of $35,000).

 

**8.             StockOptions and Awards**

 

                **Loans toOfficers**

 

                TheCompensation Committee of the board has authorized us from time to time to makeloans to our officers to help them pay their personal income tax liabilityarising in connection with their non-cash compensation and benefitarrangements. The aggregate amount of indebtedness, including accrued interest,outstanding on February 25, 2001 was $2,847,000, of which $2,164,000 wasowed by Mr. Blair and $683,000 was owed by Mr. Peters. These loanswere forgiven pursuant to the terms of the related promissory notes upon ourBoard's approval of the Plan of Liquidation on February 25, 2001. Thisdebt forgiveness of $2,847,000 plus amortization of restricted stockcompensation of $1,544,000 related to the accelerated vesting of 90,897 sharesof restricted stock previously issued to our executive officers, was recordedas compensation expense in the first quarter of 2001.

 

                Pursuantto the terms of our officers' employment agreements, as amended onFebruary 25, 2001, we made additional loans of $1,595,000 to our executiveofficers on February 25, 2001 for the payment of personal income taxesarising from the acceleration of their restricted stock grants and theforgiveness of their outstanding debt to us that occurred on such date. Thesenew loans are evidenced by promissory notes and secured by holdings of ourCommon Stock. Interest accrues on these loans at 5.06% per annum (theapplicable federal rate on the date of the loan) and is due at maturity. Theseloans mature at the earliest of the following: (i) February 25, 2006;(ii) three years following termination of the borrower's employment; or(iii) the date of the final distribution under the Plan of Liquidation. Atany time when the loan is over-secured, the borrower has the right to sell theCommon Stock securing the loan, provided that all proceeds of the sale arefirst applied to the loan. All distributions (including any liquidatingdistributions) on the Common Stock securing the loan are applied against theloan. The related promissory notes are non-recourse to the borrower.

 

 

**9.             SubsequentEvents**

 

**                AssetDispositions**

 

                OnOctober 19, 2001, we sold one additional Golf Course, Polo Trace Golf Course,for total consideration of $8.35 million. We used the net proceeds to makea debt principal payment of approximately $8.2 million.

 

**GOLF TRUST OF AMERICA, INC.**

**FORM 10Q**

**FOR THE NINE MONTHS ENDED SEPTEMBER 30,2001**

 

 

 

**ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

 

**Organization**

 

                Wewere incorporated in Maryland on November 8, 1996 and we elected to betaxed as a REIT from and after our initial public offering in February,1997.  As of November 9, 2001, we holdparticipating interests in 16.0 Golf Courses and direct controlling interestsin 7.0 Golf Courses (collectively, the "Golf Courses"), 19 of the 23Golf Courses are owned by us and four (owned by others) serve as collateral fora 30-year participating mortgage loan wherein we are the lender. Of the 19 GolfCourses that we own, 17.5 are held in fee simple and 1.5 are held pursuant tolong-term ground leases. The Golf Courses are located in Florida (10), SouthCarolina (2), Michigan (1.5), Illinois (3.5), Missouri (1.5), Texas (1.5),California, New Mexico, and West Virginia. Golf Course quantities are stated interms of 18-hole equivalents; therefore, one 27-hole golf course facility wouldbe counted as 1.5 Golf Courses. Title to the acquired courses is held by GolfTrust of America, L.P., a Delaware limited partnership, and, in the case of theSandpiper Golf Course, through a wholly–owned subsidiary of Golf Trust ofAmerica, L.P. We refer to Golf Trust of America, L.P. as our "OperatingPartnership" or "OP" and we refer to the Operating Partnershipand Golf Trust of America, Inc. (together with all of their subsidiaries)collectively as "we", "us" or our "Company." GolfTrust of America, Inc., through its wholly owned subsidiaries GTAGP, Inc. ("GTA GP") and GTA LP, Inc. ("GTA LP"),each of which is a Maryland corporation, holds a 96.6 percent interest inthe Operating Partnership as of November 9, 2001. GTA GP is the sole generalpartner of the Operating Partnership and owns a 0.2 percent interesttherein. GTA LP is a limited partner in the Operating Partnership and owns a96.4 percent interest therein. Operators of the Golf Courses, theiraffiliates and an officer of the Company hold the remaining 3.4 percentinterest in the Operating Partnership.

 

 

**Plan of Liquidation**

 

                During2000, our management and Board of Directors observed increasingly unfavorabletrends in the golf course industry, including the supply and demand imbalance,the limited availability of debt and equity capital and the general impact ofnational and global economic concerns. This business environment posed a significantchallenge for us due to the fact that, as a real estate investment trust("REIT") utilizing the triple-net lease structure, we are unable tocontrol the direct operation of our Golf Courses  without jeopardizing our REIT status.

 

                OnNovember 6, 2000, our Board formally directed management to develop a planof orderly liquidation and a related proxy statement for presentation to theBoard. On February 25, 2001 our Board of Directors adopted a Plan ofLiquidation (the "Plan of Liquidation") and directed that the Plan ofLiquidation be submitted to our stockholders for approval. Our stockholdersapproved the Plan of Liquidation at a Special Meeting of the Stockholders  on May 22, 2001.  Ninety-eight percent of the sharesrepresented at the special meeting voted in favor of the Plan ofLiquidation.  As a percentage of ouroutstanding common shares, 77% voted in favor of the Plan of Liquidation.  One hundred percent of our preferred stockvoted in favor of the Plan of Liquidation. The Plan of Liquidation contemplatesthe orderly sale of all our assets and the payment of (or provision for) ourliabilities and expenses, as well as the establishment of a reserve to fundcertain of our contingent liabilities. The Plan of Liquidation gives our Boardof Directors the power to sell any and all of our assets without furtherapproval by our stockholders and provides that liquidating distributions bemade to our stockholders.  Accordingly,we have adopted the liquidation basis of accounting since May 22, 2001 (see“Results of Operations” below).

 

                Inconnection with the plan of liquidation, we entered into a voting agreementwith our sole preferred stockholder, AEW Targeted Securities Fund, L.P., orAEW. Under the voting agreement, AEW agreed, among other things, to vote infavor of the plan of liquidation. We agreed under the voting agreement, in theevent that common stockholders approve the Plan of Liquidation and theagreement is not otherwise terminated, to redeem all of the shares ofSeries A Preferred Stock for $25 per share plus dividends accrued andunpaid thereon through the date of the final redemption payment. We agreed toso redeem the Series A Preferred Stock promptly after we have determinedin good faith that we have received sufficient net proceeds from thedisposition of our assets and/or operations to redeem all of the preferredshares without violating any legal or contractual obligations. We have furtheragreed that other than common dividends for the first and second quarter of2001 in an amount not to exceed $0.25 per share which we are permitted to make,we will make no further regular common dividend distributions without AEW'sconsent until the preferred stock is redeemed, other than distributions thatare required to maintain our status as a REIT and other distributions that wemay be required to make to avoid the payment of certain taxes resulting fromthe sale of our properties.

 

                Also, in connection with the Plan of Liquidation, weentered into a purchase and sale agreement with an affiliate of our largestlessee, Legends Golf Management, LLC, ("Legends"), to sell to thataffiliate up to 12.5 (eighteen-hole equivalent) Golf Courses leased by Legends.In addition, Legends would be released from its obligation to repay working capitalloans in the amount of approximately $6.6 million. Pursuant to thepurchase and sale agreement, we could accept superior offers for these GolfCourses (other than five Myrtle Beach courses) upon payment of a break-up feeto Legends. Subsequent to the signing of this agreement, we accepted superioroffers on 4.0 of these Golf Courses and, to date, have closed on the sale of3.0 of these Golf Courses.

 

                On July 31, 2001, we closedon the sale of 6.5 Golf Courses to Legends, including the Myrtle Beach courses,for $89.4 million, consisting of cash, a redemption of 3.7 millionshares/OP units valued at $44.7 million and a release of obligations topay us $6.6 million, which represented all of Legends’ obligations under itsworking capital loans, other than interest. Two Golf Courses remain subject tothe Legends purchase and sale agreement, namely the Bonaventure Resort Coursesin Ft. Lauderdale, Florida.These Golf Coursesare subject to a pending disputeresolution process between Legends and us which we commenced on August 10,2001,and the current trial date is scheduled tobegin November 26, 2001.   Duringthis process, we have the right to market these Golf Courses for sale withoutany obligation to Legends.

 

We believe that publicreaction to the terrorist attacks of September 11, 2001, together with thenational economic slowdown of the past few months, is having a significantadverse impact on the travel and leisure sector of the U.S. economy.  Based on management’s discussions withindustry participants, we believe the golf industry in general, and thegolf-related  destination-resort sectorin particular, is experiencing material declines in revenue since September 11,2001. We attribute these

declines primarily to the public’s fearof travel and hesitancy to engage in leisure spending. In this environment,golf course and golf resort operators are finding it difficult to projectfuture operating results because of their inability to predict how long publicpessimism will last or when economic recovery will begin.

 

Immediately afterSeptember 11th , Golf Course sales negotiations stalled due to the uncertaintyof the economic impact of the attacks. Some potential buyers face internalmoratoriums on new investments while other potential Golf Course buyers faceuncertain prospects of obtaining financing. In addition, the increaseddifficulty of projecting operating results caused some potential Golf Coursebuyers to reduce their offer prices insofar as they valued our Golf Coursesbased on projected revenue streams.

 

Recently, salesnegotiations have resumed on selected Golf Course assets; however, the effectof September 11 th on the financial markets and the travel, leisure, anddestination resort sector, may impact our Plan of Liquidation by causing aprolonged liquidation time frame and uncertain Golf Course asset valuations.Prior to September 11, we had expected that the Plan of Liquidation would becompleted within 12 to 24 months from the date of stockholder approval on May22, 2001. Our ability to complete the Plan of Liquidation within this timeframe and within the contemplated range of liquidating distributions per sharecontemplated in the Plan of Liquidation is now less certain. Our ability tocomplete the Plan of Liquidation as contemplated therein is also contingent onour ability to extend our loan terms with our lender. See “Credit Agreement”below.

 

The Innisbrook Resortborrower recently informed us that the events of September 11th hadsignificantly impacted the short- and intermediate-term operating performanceof the Innisbrook property and that there is a risk that the borrower maydefault on its mortgage payments to us. We are in discussions with the borrowerregarding its ability to meet its financial obligations to us pursuant to theParticipating Mortgage. In that regard, on November 14, 2001, we forwarded anotice of default to the borrower based upon a cross-default of its affiliate,Lost Oaks, L.P., under its Participating Lease, and on November 14, 2001, weforwarded a notice of default to the borrower based upon its non-payment of theOctober 2001 interest payment on the Participating Mortgage that was due onNovember 1, 2001.  In consideration ofall of the aforementioned facts and circumstances and consistent withmanagement’s valuation assessments applied since the third quarter of 2000 whenwe recorded the first impairment loss on our Golf Course assets, we haveincluded in our Adjustment to the Liquidation Basis of Accounting for the threemonths ended September 30, 2001 a write-down of our Golf Course assets ofapproximately $15.0 million.

 

 

                As of November 9, 2001, we haveclosed on the sale of 24.0 of our 47.0 Golf Courses for gross sales pricestotaling $187.1 million.  Only 2.0of these sales occurred after September 11, 2001.  From the net proceeds of the 24.0 sales, we used$101.1 million to partially pay down our Bank of America, N.A. debt. In addition,we have obtained signed Purchase and Sale Agreements on 4.0 Golf Courses, whichincludes the 2.0 Golf Courses at Bonaventure Country Club for an aggregate$29.3 million. These Purchase and SaleAgreements are subject to due diligence and other conditions, and we canprovide no assurance that these Purchase and Sale Agreements will result inclosings. We have also been working to revitalize the financial performance ofthe 2.5 Golf Courses that we have been directly managing since 2000, 5.0additional Golf Courses that we began managing in July 2001 (of which we havesubsequently sold 2.0), and 1.5 additional Golf Courses that we began managingon November 1, 2001.

**Commitments and Contingencies**

 

                *Employment Agreements*.   Under the amended employment agreements,our executives are entitled to payments aggregating approximately $2,526,000upon the later to occur of stockholder approval of the Plan of Liquidation(which has already occurred) and the repayment of our credit facilities andline of credit. The executives are entitled to additional payments aggregatingapproximately $1,895,000 upon the later of our repayment of all of our creditfacilities and the one-year anniversary of board adoption of the Plan ofLiquidation. Any severance payments otherwise payable under the employmentagreements will be reduced by the amount of the above payments that we make.

 

                Thepayments to our executives described above might constitute parachute paymentsunder the Internal Revenue Code and could be subject to excise tax. Such excisetaxes could be triggered if a change in control were to occur by February 25,2000, as defined by the Internal Revenue Code, and all payments due theexecutives under their employment agreements were determined to be parachutepayments.  The employment agreementsrequire us to reimburse our executives for any such excise taxes.  The amount of "gross-up" excisetax payments due could be as much as $4.7 million. We do not anticipatethat these excise taxes will be triggered and, therefore, have not recorded areserve for such amount. The Compensation Committee of the Board has authorizedus from time to time to make loans to our officers to help them pay theirpersonal income tax liability arising in connection with their non-cashcompensation and benefit arrangements. The aggregate amount of indebtedness,including accrued interest, outstanding on February 25th was $2,847,000,of which $2,164,000 was owed by Mr. Blair and $683,000 was owed byMr. Peters.  These loans wereforgiven pursuant to the terms of the related promissory notes upon our Board'sapproval of the Plan of Liquidation on February 25, 2001.

 

                Pursuantto the terms of our executive officers' employment agreements, as amended onFebruary 25, 2001, we made additional loans of $1,595,000 to our executiveofficers on February 25, 2001 for the payment of personal income taxesarising from the acceleration of their restricted stock grants and theforgiveness of their outstanding debt to us that occurred on such date. Thesenew loans are evidenced by promissory notes and secured by their Common Stock.Interest accrues on these loans at 5.06% per annum (the applicable federal rateon the date of the loan) and is due at maturity.

 

                Theseloans mature at the earliest of the following times: (i) February 25,2006, (ii) three years following termination of the borrower's employmentwith our company, or (iii) the date of the final distribution under thePlan of Liquidation. At any time when the loan is over-secured, the borrowerhas the right to sell such Common Stock securing the loan, provided that allproceeds of the sale are first applied to the loan. All distributions (includingany liquidating distributions) on the stock securing the loan are appliedagainst the loan. The related promissory notes are nonrecourse to the borrower.

 

                Thisdebt forgiveness of $2,847,000 plus income of $627,000 related to theaccelerated vesting of 78,397 shares of restricted stock, 49,209 of which areheld by Mr. Blair and 29,188 of which are held by Mr. Peters, at avalue of $8.00 per share was recorded as compensation expense in the firstquarter of 2001.

 

**Dispositions**

 

                FromJanuary 1, 2001 through November 9, 2001, we have disposed of the following24.0 (eighteen-hole equivalent) Golf Courses:

 

| **Golf  Course Name**               |   | **City and State**      |   | **No. of  Holes** |   | **Sale Date** |   | **Total Consideration**              |
|-------------------------------------|--------|-------------------------|--------|-------------------|--------|---------------|--------|--------------------------------------|
|                                |   |                    |   |              |   |          |   |                                 |
| Raintree Golf Course                |   | Akron, OH               |   | 18                |   | 1/4/01        |   | $10.65    million     |
| Ohio Prestwick Country  Club        |   | Akron, OH               |   | 18                |   | 1/4/01        |   |                                 |
| Persimmon Ridge Country  Club       |   | Louisville, KY          |   | 18                |   | 2/15/01       |   | 5.2     million  |
| Club of the Country                 |   | Louisburg, KS           |   | 18                |   | 3/16/01       |   | 2.655 million                        |
| Brentwood Golf &  Country Club  |   | White Lake Township, MI |   | 18                |   | 3/20/01       |   | 2.6     million  |
| Metamora Golf &  Country Club   |   | Metamora, MI            |   | 18                |   | 4/9/01        |   | 4.93   million             |
| Silverthorn Country Club            |   | Tampa, FL               |   | 18                |   | 4/12/01       |   | 4.25   million             |
| Palm Desert Country Club            |   | Palm Desert, CA         |   | 27                |   | 4/20/01       |   | 4.075 million                        |
| Woodlands Golf Course               |   | Gulf Shore, AL          |   | 18                |   | 5/1/01        |   | 6.4     million  |
| Cooks Creek Golf Club               |   | Ashville, OH            |   | 18                |   | 5/16/01       |   | 4.0     million  |
| Royal New Kent Golf Club            |   | Providence Forge, VA    |   | 18                |   | 6/15/01       |   | 10.8     million |
| Legends of Stonehouse Golf  Club    |   | Williamsburg, VA        |   | 18                |   | 6/15/01       |   |                                 |
| Eagle Watch Golf Club               |   | Atlanta, GA             |   | 18                |   | 7/11/01       |   | 5.85   million             |
| Olde Atlanta Golf Club              |   | Atlanta, GA             |   | 18                |   | 7/11/01       |   | 7.8     million  |
| Parkland (Legends)                  |   | Myrtle Beach, SC        |   | 18                |   | 7/31/01       |   | 89.41    million      |
| Moorland (Legends)                  |   | Myrtle Beach, SC        |   | 18                |   | 7/31/01       |   |                                 |
| Heathland (Legends)                 |   | Myrtle Beach, SC        |   | 18                |   | 7/31/01       |   |                                 |
| Heritage Golf Club  (Legends)       |   | Pawley's Island, SC     |   | 18                |   | 7/31/01       |   |                                 |
| Oyster Bay Golf Links  (Legends)    |   | Sunset Beach, NC        |   | 18                |   | 7/31/01       |   |                                 |
| Tiburon Golf Course  (Legends)      |   | Omaha, NE               |   | 27                |   | 7/31/01       |   |                                 |
| Emerald Dunes Golf Club             |   | West Palm Beach, FL     |   | 18                |   | 9/7/01        |   | 16.9     million |
| Sweetwater Golf &  Country Club |   | Apopka, FL              |   | 18                |   | 9/18/01       |   | 3.25   million             |
| Polo Trace Golf &  Country Club |   | Delray Beach, FL        |   | 18                |   | 10/22/01      |   | 8.35   million             |

 

**Results of Operations**

 

*For the Three Months Ended September 30, 2001 and 2000*

 

**Total Revenues:**  Total revenues decreased $6,549,000 from$13,784,000 to $7,235,000 primarily due to lost rental revenue of approximately$4,798,000 from the 23.0 Golf Courses, 4.0 of which were operated by LegendsNational, that were sold between January 1, 2001 and September 30,2001, and lost or deferred rental revenue of approximately $1,911,000 (of which$239,000 is deferred) from Lessees that have defaulted under theirParticipating Leases (the most significant being the Lessee at Sandpiper GolfCourse) and are currently in dispute proceedings or have been taken backthrough Lease Termination Agreements. Mortgage interest increased approximately $41,000 due to the scheduledincrease in the interest rate on the mortgage. The decreases in revenue wereoffset by scheduled rent increases on performing Participating Leases totalingapproximately $136,000 (which represents approximately a 3% average increase).

 

**Operating Expenses:** Operating expenses decreased  to$1,130,000 for the three months ended September 30, 2001from $31,533,000for the three months ended September 30, 2000. This category typicallyreflects depreciation and amortization, and general and administrativeexpenses; however, in the third quarter of 2000 it included an impairment lossof $25,300,000. Additionally, no depreciation expense was recorded in the thirdquarter of 2001 because all of our assets are deemed to be assets held for salecompared to depreciation expense of $4,497,000 in the third quarter of2000.   The remaining decrease of$606,000 in general and administrative expenses is primarily due to there being  no amortization of restricted stockcompensation or amortization of loan fees during the third quarter of2001.  For the three months endedSeptember 30, 2000, amortization of loan fees and amortization of restricted stock compensation was $619,000.  All unamortized restricted stockcompensation was included in costs associated with the Plan of Liquidation forthe three months ended March 31, 2001 due to the accelerated vesting of allunvested shares of restricted stock previously issued to our executiveofficers.  All unamortized loan fees of$1,224,000 were written off in the three months ended June 30, 2001 due to theconversion to the liquidation basis of accounting.   These decreases were offset by a net increase of approximately$13,000 in miscellaneous operating expenses.

 

**Interest Expense:**  Interest expense was $3,135,000for the three months ended September 30, 2001 compared to $4,851,000 forthe three months ended September 30, 2000, primarily due to the decreasein the average principal balance outstanding of approximately $75,000,000offset by higher interest rates during the three months ended September 30,2001 compared to the same period in the prior year.

 

**Interest Income:**  Interest Income was $139,000 and $608,000for the three months ended September 30, 2001 and 2000, respectively. Thisdecrease of $471,000 is primarily due to the lost interest income on workingcapital loans.  These loans include oneloan to the Sandpiper Lessee which Participating Lease is currently in default;five loans that were forgiven in connection with the sale of 6.5 Golf Coursesto Legends; one loan that was forgiven in connection with the sale of 1.0 otherGolf Course; one loan in connection with Bonaventure, which is currently inarbitration; and two loans in connection with Pete Dye, which is currently in asales negotiation.

 

**Results of Operations:** Net loss to common shareholders for the three months endedSeptember 30, 2001 was $12,050,000 compared to $14,347,000 for the sameperiod in 2000. In addition to the items discussed above, the results ofoperations for this period in 2001 was unfavorably impacted by anadjustment  to the estimated fair valueof our Golf Course properties of $14,974,000 which represented the thirdquarter impairment write-off. 

 

*For the Nine Months Ended September 30, 2001 and 2000*

 

 

**Total Revenues:**  Total revenues decreased $12,130,000 from$42,727,000 to $30,597,000, primarily due to lost rental revenue ofapproximately $7,086,000 from the 23.0 Golf Courses (4.0 of which were operatedby Legends National) that were sold between January 1, 2001 andSeptember 30, 2001, and lost or deferred rental revenue of approximately$5,223,000 (of which $239,000 is deferred) from Lessees that either are in  default under their Participating Leases(the most significant being the Lessee at Sandpiper Golf Course) or are indispute proceedings with us or have surrendered their Golf Course back to usthrough Lease Termination Agreements. Miscellaneous revenue included in rent decreased approximately $135,000due to amortization of straight-line rents and other miscellaneous chargesbilled to Lessees pursuant to the Participating Leases. Mortgage interestdecreased approximately $61,000 due to higher interest offset by theamortization of straight-line amounts. The decreases in revenue were offset byschedule rent increases on performing Participating Leases totalingapproximately $375,000 (which represents approximately a 3% average increase).

**Operating Expenses:**  Operating expenses decreased$28,845,000 to $14,984,000 from $43,829,000 for the nine months ended September 30,2001 and 2000, respectively. This category typically reflects depreciation andamortization and general and administrative expenses; however, in the thirdquarter of 2000 it also included an impairment loss of $25,300,000. We alsoincurred approximately $7,908,000 in expenses this year related to the Plan ofLiquidation, which included the debt forgiveness to our officers of $2,847,000and retention bonus payments totaling $1,188,000 paid to our officers pursuantto their amended employment agreements, whereas in the first nine months of2000 we did not have such expenses. Additionally, no depreciation expense was recorded in 2001 because allof our assets are deemed to be assets held for sale compared to depreciationexpense of $13,779,000 in the nine months ended September 30, 2000. General andAdministrative expenses increased approximately $2,326,000, primarily due toprofessional fees incurred related to various Lessee issues and transitionmatters related to the Golf Courses that we are now managing offset by the lackof amortization of both restricted stock compensation and bank loan. Allunamortized restricted stock compensation was recognized in the three monthsended March 31, 2001 due to the accelerated vesting of all unvested shares ofrestricted stock previously issued to our executive officers and is included inthe costs associated with the plan of liquidation.  All unamortized loan fees of $1,224,000 were expensed in thethree months ended June 30, 2001 due to the conversion to the liquidation basisof accounting.

 

**Interest Expense:**  Interest expense was$12,946,000 for the nine months ended September 30, 2001 compared to$13,830,000 for the nine months ended September 30, 2000, due to debtprincipal payments in 2001 totaling approximately $91,500,000 offset by higherinterest rates.

 

**Interest income:**  Interest Income was $931,000 and $1,770,000for the nine months ended September 30, 2001 and 2000, respectively. Thisdecrease of $839,000 is primarily due to the lost interest income on workingcapital loans.  These loans include oneloan to the Sandpiper Lessee, which Participating Lease is currently indefault; five loans that were forgiven in connection with the sale of 6.5 GolfCourses to Legends; one loan that was forgiven in connection with the sale of1.0 other Golf Course; one loan in connection with Bonaventure, which iscurrently in arbitration; and two loans in connection with  Pete Dye, which is currently in a salesnegotiation.

 

**Results of Operations:** The nine months ended September 30, 2001 resulted in net loss of$13,029,000 compared to net loss of $8,695,000 for the same period in 2000. Inaddition to the items discussed above, the results of operations  for this period in 2001 was unfavorablyimpacted by adjustments to our assets and liabilities of $17,437,000 toestimated fair value to reflect the liquidation basis of accounting. Refer to the table under “Adjustment to Liquidation Basis of Accounting”below.  In addition, we incurredapproximately $7,908,000 in costs  prior  to the formaladoption of the Plan of Liquidation.

 

                As aresult of the Board’s adoption of the Plan of Liquidation and its approval byour stockholders, we adopted the liquidation basis of accounting for allperiods subsequent to May 22, 2001. Accordingly, on May 22, 2001,assets were adjusted to their estimated fair value and liabilities, includingestimated costs associated with carrying out the liquidation, were adjusted totheir estimated settlement amounts. The minority interest has been reclassifiedbecause the common OP unit holders do not have preferential distribution rightsover the common stockholders. The valuation of real estate held for sale as ofSeptember 30, 2001 is based on current contracts and estimates of salesvalues. As a result, we recorded a non-cash charge of $15.0 million(included in the adjustment of $17,437,000 discussed above) in the thirdquarter of 2001 to reflect the estimated fair value of certain real estateproperties. The valuation of other assets and liabilities under a liquidationbasis of accounting are based on management's estimates as of September 30,2001. These amounts are presented in the accompanying Statement of Net Assets.The Net Assets represent the assets available to the common stockholders and theremaining OP unit holders. The actual values realized for assets and settlementof liabilities may differ materially from the amounts estimated. The actualnumber of common shares and OP units (excluding intra-Company holdings)outstanding at November 9, 2001 is approximately 8,076,993.

 

 

**Real Estate Held for Sale**

 

                Priorto the adoption of the liquidation basis of accounting, real estate was statedat the lower of cost or estimated fair value in accordance with Statement ofFinancial Accounting Standards No. 121. Additions, renovations or improvementswere capitalized. Based upon a comprehensive review of all of our propertiestaking into account our intention to have stockholders vote to approve the Planof Liquidation, our implementation of several steps in contemplation of aliquidation, a significantly shortened holding period for the properties, andcurrent market conditions, we determined that the value of certain real estateproperties was impaired. As a result of this determination, we recorded a non-cashcharge of $62.5 million in the latter six months of 2000 and additionalnon-cash charges aggregating of $29.7 million in the nine months endedSeptember 30, 2001 (which includes a reserve for capital expenditures) toreflect the impairment loss of certain real estate properties.

 

**Adjustment to Liquidation Basis of Accounting**

 

 

|                                                                                                                           |   |                                           |        |
|---------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|-------------|
|                                                                                                                      |   | **Nine Months Ended  September 30, 2001** |        |
|                                                                                                                      |   |                                           |        |
| Increase to reflect  estimated net realizable values of certain real estate properties                                    |   | $                                              | 30,987,000  |   |
| Decrease to reflect  estimated fair value of certain assets                                                               |   | (29,657,000                                    | )           |
| Gain realized on disposal  of certain assets                                                                              |   | 352,000                                        |        |
| Reserve for estimated  costs during the period of liquidation                                                             |   | (14,366,000                                    | )           |
| Write–off of  deferred debt costs                                                                                    |   | (1,224,000                                     | )           |
| Write–off of  unamortized initial issue discount on the Mortgage Note Receivable and  certain real estate properties |   | (3,529,000                                     | )           |
|                                                                                                                      |   |                                           |        |
| **Adjustment to reflect the change to  liquidation basis of accounting**                                                  |   | $                                              | (17,437,000 | ) |

 

 

**Reserve for Estimated Costs During the Period of Liquidation**

 

                Underthe liquidation basis of accounting, we are required to estimate and accrue thecosts associated with executing the Plan of Liquidation. These amounts can varysignificantly due to, among other things, the timing and realized proceeds fromproperty sales, the costs of retaining personnel and trustees to oversee theliquidation, including the costs of insurance, the timing and amountsassociated with discharging known and contingent liabilities and the costsassociated with cessation of our operations. These costs are estimated and areexpected to be paid out over the liquidation period.

 

                Thefollowing is a summary of the changes in the Reserve for Estimated Costs Duringthe Period of Liquidation:

 

|                                         |   | **June 30, 2001** |           | **Payments** |   | **Adjustments** |   | **BalanceSeptember 30, 2001** |       |
|-----------------------------------------|--------|------------------------|----------------|--------------|--------|-----------------|--------|------------------------------------|------------|
|                                    |   |                   |           |         |   |            |   |                               |       |
| Severance                               |   | $                      | 5,163,000      |         | $      | (9,000          | )      | —                             |       | $ | 5,154,000 |   |
| Professional Fees                       |   | 3,010,000              |           | (1,137,000   | )      | —          |   | 1,873,000                          |       |
| Fees related to  renegotiations of debt |   | 1,105,000              |           | (1,105,000   | )      | —          |   | -                                  |       |
| Financial Advisor Fees                  |   | 1,408,000              |           | (794,000     | )      | —          |   | 614,000                            |       |
| Capital Expenditures                    |   | 880,000                |           | (92,000      | )      | —          |   | 788,000                            |       |
| Other                                   |   | 2,800,000              |           | (34,000      | )      | —          |   | 2,766,000                          |       |
|                                    |   |                   |           |         |   |            |   |                               |       |
| **Total**                               |   | **$**                  | **14,366,000** | ** **   | **$**  | **(3,171,000**  | **)**  | —                             | ** ** | **$** | **11,195,000** | ** ** |

 

                Includedin the severance amounts above are payments to our executives pursuant to theiramended and restated employment agreements. Payments aggregating approximately$2,526,000 are payable upon the later of stockholder approval of the Plan ofLiquidation (which has already occurred) and the repayment of our new CreditAgreement. Additional payments aggregating approximately $1,895,000 are payableupon the later of our repayment of the Credit Agreement and the one-yearanniversary of our Board adoption of the Plan of Liquidation. Any severancepayments otherwise payable under the amended and restated employment agreementswill be reduced by the amount of the above payments made.

 

                Includedin our reserve for costs during the period of liquidation are payments to ourexecutives, pursuant to their amended and restated employment agreements, andthat may constitute parachute payments under the Internal Revenue Code andcould be subject to excise tax. Such excise taxes could be triggered, if achange in control were to occur by February 25, 2002, as defined by theInternal Revenue Code, and all payments due the executives under theiremployment agreements were determined to be parachute payments. The employmentagreements require us to reimburse our executives for any such excise taxes.  The amount of these "gross-up"excise tax payments due could be as much as $4.7 million. We do notanticipate that these excise taxes will be triggered and, therefore, have notrecorded a reserve for such amount.

**Lessee Defaults, Lease Terminations and Legal Proceedings**

 

                Wehave a policy of acting promptly and aggressively on any Lessee defaults inaccordance with the terms of the Participating Lease, whether the defaults areof a monetary or non-monetary nature. When a Lessee fails to pay its rent inaccordance with the applicable Participating Lease, we, as landlord, maydeclare an "event of default." When we declare an event of default,the Lessee has a 10-day grace period in which to cure the default, after whichtime we may seek to exercise our remedies under the Participating Lease andunder law. We have elected to pursue legal remedies available to us under theParticipating Leases to cure events of default that occurred in 2001 at thefollowing Golf Courses: Sweetwater Country Club; Wekiva Golf Club; Pete DyeGolf Course; and Lost Oaks of Innisbrook. In addition, we assumed management ofCypress Creek, Polo Trace and Black Bear through Lease Termination andTransition agreements with the respective Lessees while we continue to manageTierra Del Sol Golf Club and Osage National Golf Club that we foreclosed uponin 2000.  On November 1, 2001, theLessee of Mystic Creek surrendered the property to us and we assumed managementof this Golf Course also.

 

                Weare currently in litigation or disputes over events of defaults or othermatters with several of our lessees and we are a  party to other lawsuits unrelated to our lessees.  See Part II. Item 1—"Legal Proceedings."

 

*Wekiva Golf Club/Sweetwater Country Club*

 

                OnJuly 12, 2001, we took possession of both golf courses pursuant to the terms ofthe Sale Agreement, and entered into transition documentation with the Lesseeswhich included a note from Todd Stottlemyre and Greg Gagliardi, guarantors ofthe Participating Leases; and, DPC Wekiva, L.C., and DPC Sweetwater, L.C., theformer lessees, as joint and several co-borrowers, in the amount ofapproximately $84,000 which matures December 31, 2001.

 

                OnSeptember 18, 2001, we completed the sale of Sweetwater Country Club toSweetwater Golf & Country Club, Inc., a Florida corporation, for  $3.25 million.  As of November 9, 2001, we are still managing Wekiva Golf Club.

 

*The Pete Dye Golf Club*

 

                OnJune 20, 2001, we provided written notice to the Lessee at the Pete Dye GolfClub that the Participating Lease was terminated and that the $5.8 million loanwas accelerated and due and payable in full. Additionally, we redeemed collateral pledged by the former Lessee in theamount of $1.35 million (48,949 Series C Preferred OP Units at the originalissue price per share of $27.58) and applied this amount to accrued rent andother past due obligations under the participating lease and the remainingbalance was applied to the basis of the asset. The former Lessee continued to operate the Golf Course from the time of thetermination of the Participating Lease until August 30, 2001, at which time weentered into a Forbearance Agreement with the Lessee and its affiliates and inconsideration for us entering into the forbearance agreement and a Short TermLease with the Lessee, we received a $150,000 forbearance commitment fee.  The Short Term Lease requires the Lessee topay rent in the amount of $175,000 per month and terminates no later thanDecember 1, 2001.  Additionally, we haveentered into an Option and Purchase and Sale Agreement dated August 30, 2001with Golf and Fairway, L.L.C., a West Virginia limited liability company, anaffiliate of the Lessee at the Golf Course, in which the purchaser was grantedan option by us to purchase the Golf Course on or before December 1, 2001.  The purchaser exercised its option topurchase the Golf Course on October 15, 2001 and paid a non-refundable $500,000option commitment fee to us at that time. We agreed to allow the Lessee under the Short Term Lease to defer thepayment of October and November 2001 rent until the closing date of the sale ofthe Golf Course.  If purchaser fails topurchase the Golf Course by December 1, 2001 or if the lessee defaults underthe Short Term Lease, the Lessee has agreed to allow us to take possession ofthe Golf Course immediately and will cooperate in allowing us to foreclose ondevelopment property securing the $5.8 million loan.

 

*Cypress Creek Country Club*

 

                Wehave been operating this Golf Course since July 16, 2001, when the Lessee,Emerald Dunes–Cypress Creek, Inc., a Florida corporation, agreed todeliver possession of the Golf Course to us pursuant to a Lease Termination andTransition Agreement. We are operating this Golf Course through a wholly ownedsubsidiary, GTA Cypress Creek, LLC.

*Polo Trace Golf Course*

 

                Weoperated this Golf Course through a wholly owned subsidiary, GTA Polo Trace,LLC from July 16, 2001 until October 19, 2001. On July 16, 2001, the Lessee, Emerald Dunes-Polo Trace, Inc., a Floridacorporation, agreed to deliver possession of the Golf Course to us pursuant toa Lease Termination and Transition Agreement. On October 19, 2001, we completed the sale of The Links at Polo Trace toSouthern Golf Partners, LLLP, a Florida limited liability limited partnership,for $8.35 million.

 

*Tierra Del Sol Golf Club*

 

                Wehave been operating this Golf Course through a wholly owned subsidiary, GTATierra Del Sol, LLC, since February 7, 2000.  On September 20, 2000, Terence Mulvihill, a principal in the Lessee andin the entity which previously owned the golf course, attempted to terminateGTA's Water Rights Lease Agreement at the Golf Course for (a) the existence ofan unauthorized assignment, which Mulvihill claimed was the result of allowingGTA Tierra Del Sol, LLC to operate the Golf Course; (b) utilizing the water onthe Golf Course in a manner whichwas contrary to the purposes authorized under the Water Rights Lease Agreement;(c) using the water in amounts in excess of what was permitted under the termsof the Water Rights Lease Agreement; and (d) non-payment of taxes under theWater Rights Lease Agreement for fiscal year 1999. We have responded in writingto Mulvihill disputing the termination of the Water Rights LeaseAgreement.  We are preparing to file aComplaint against the Mulvihill Estate (Mr. Mulvihill passed away in December2000) and other related properties that seeks various forms of relief inrelation to the Water Rights Lease Agreement and the underlying purchase ofTierra Del Sol, including but not limited, to requesting a determination that:(1) the Water Rights Lease Agreement has not been terminated and remains ineffect; (2) the Lease, in essence, constitutes a transfer of a fee interest inthe water rights; or (3) alternatively requesting a recission of the 1998Contribution Leaseback Agreement pursuant to which the water rights wereassigned to Mulvihill, based upon the fraud and misrepresentation of the sellerand Mulvihill.   It is not possible topredict the outcome of this dispute at this time.

 

                Wehave also been involved in negotiations with Taylor-Graham Development Company(“Taylor-Graham”) and Sunset Hills Estates Homeowners Association (“SunsetHills”) regarding our December 1999 letter to the New Mexico State Engineerwhich objects to Taylor-Graham’s proposed transfer of water rights to SunsetHills.  We have received and arecurrently reviewing a document/mutual release that would fully resolve thismatter.

 

# ***Lost Oaks of Innisbrook***

 

On November 6, 2001, wenotified Lost Oaks, L.P., the Lessee of our Lost Oaks Golf Club, that Lessee’sfailure to pay rent in arrears for the month of September, as well as latecharges and interest, constitutes an event of default under the ParticipatingLease. We also notified Lessee that it has 10 days from the date of the noticeto pay those amounts or we will terminate the Participating Lease and takepossession of the property. Under the terms of our Loan Agreement with GolfHost, Inc. (formerly Golf Host Resorts, Inc.), the Owner of the Innisbrook GolfClub, the Lost Oaks default also constitutes a default under the LoanAgreement.  On November 14, 2001, weprovided written notice to the borrower under the Participating Mortgage ofthis cross-default. 

 

*Innisbrook Resort*

 

                We hold a Participating Mortgageas the lender on the Innisbrook Resort. We are advised that the individual condominium homeowners filed anaction against the borrower under our Participating Mortgage, Golf Host Inc.(formerly Golf Host Resorts, Inc.), seeking damages and for declaratoryjudgment in the Circuit Court for the Sixth Judicial Circuit In And ForPinellas County Florida.  Plaintiffs'allege that the defendant (i) developed a golf–oriented resortcondominium project known as Innisbrook, and (ii) marketed the purchase of"condominium–rental apartments" as a "partial businessinvestment" setting forth facts and assumptions regarding the amount ofrental income that could be expected under a "condo–rental approachof ownership," among other things. The plaintiffs are seeking to resolve the following issues, amongothers:  (i) whether every condominiumowner who is also a member of the Innisbrook Golf and Country Club has theright to participate in the lessor's rental pool, so long as there is a rentalpool, by virtue of defendant's marketing promises to all purchasers ofcondominiums at the project; (ii) whether the condominium unit owners werecoerced by economic pressure and duress to enter into the GuaranteedDistribution Master Lease Agreement ("GDMLA"); (iii) whether theGDMLA is invalid by reason of such coercion and economic duress, and, if so,whether the condominium owners who entered into the GDMLA are entitled to bereimbursed for the difference between the amount of income that was distributedto them under the GDMLA and the amount of income that would have beendistributed to them had they remained under the Master Lease Agreement("MLA"); (iv) whether the unit owners who signed the GDMLA have theright to return to the MLA without penalty and thereby to be entitled to bereimbursed for the difference between the income that they received under theGDMLA and the income they would have received under the MLA; and (v) whetherthe defendant breached its contract with the unit owners by allowing members ofthe public upon the golf courses of the resort thereby adversely affecting the"private golf course" concept of Innisbrook. The obligorhas recently negotiated a new MLA with a committee of the condominiumhomeowners.  If the committee of thecondominium homeowners is successful in having a significant number of thecondominium homeowners accept and adopt the new MLA, then it may be less likelythat the lawsuit will have the necessary impetus and numbers of plaintiffs tocontinue the prosecution of the case. However, neither we nor any of ouraffiliates are parties to this litigation. We are unable to determine orpredict how or whether the litigation may adversely affect our interest in theParticipating Mortgage or the borrower's collateral which is our security underthe Participating Mortgage.

 

As discussed above, withrespect to Lost Oaks, we provided written notice to the borrower under theParticipating Mortgage of a cross-default under the Participating Mortgage as aresult of Lost Oaks, L.P.’s default under its Participating Lease.  Additionally on November 14, 2001, weforwarded a notice of default to the borrower based upon its non-payment of theOctober 2001 interest payment on the Participating Mortgage.

 

                Inaddition to litigation between lessor and lessee (and their affiliates), ownersand operators of golf courses are subject to a variety of legal proceedingsarising in the ordinary course of operating a golf course, includingproceedings relating to personal injury and property damage. Such proceedingsare generally brought against the operator of a golf course, but may also bebrought against the owner. Our Participating Leases provide that each Lessee isresponsible for claims based on personal injury and property damage at the GolfCourses which are leased and require each Lessee to maintain insurance for suchpurposes. We are not currently subject to any claims of this sort that we deemto be material.

**Liquidity and Capital Resources of theCompany**

 

                Our ability to meet our obligations in the near termis contingent upon the disposition of our assets in accordance with the Plan ofLiquidation. Management estimates that the net proceeds from the sales ofassets pursuant to the Plan of Liquidation will be adequate to pay ourobligations; however, there can be no assurances as to the outcome or the netproceeds therefrom.

 

*Cash Flows for the nine months endedSeptember 30, 2001 and September 30, 2000*

 

                Cash flow provided by operating activities for thenine months ended September 30, 2001 was $6,979,000 compared to cash flowsprovided by operating activities for the nine months ended September 30,2000 of $23,198,000. This reflects the net loss for these periods, plusnon-cash charges to income for the adjustment to liquidation basis ofaccounting, loan cost amortization, restricted stock compensation amortization,forgiveness of officer loans, depreciation, straight line rents and interest,and working capital changes.    The cashflows from operating activities was unfavorably impacted by a decrease inrevenue of $12,130,000 primarily due to the lost revenue from the 23.0 GolfCourses sold between January 1, 2001 and September 30, 2001 and from theGolf Courses that are in default under their Participating Leases, namelySandpiper.

 

                The decrease in Other Assets is primarily attributedto the decrease in Rents Receivable due to Golf Course dispositions in 2001,which is also the cause of the decrease in Receivable from Affiliates.   The increase in Restricted Cash of$2,080,000 is due to an interest escrow account of $1,500,000 pursuant to ourCredit Agreement of July 25, 2001 and additional funds of approximately$580,000, which represents the Mystic Creek cash collateral in which Bank ofAmerica has a security interest.

 

                Our investing activities provided $119,326,000 incash flow from the sale of 23.0 Golf Courses in the nine months ended September30, 2001, offset by $1,563,000 used for golf course capital replacementsprimarily at Eagle Ridge and the Legends Golf Courses. This activity comparedto $2,987,000 in improvements in the same period in 2000. The 2000 improvementsconsisted primarily of $627,000 invested in Cypress Creek Golf Club, $751,000invested at Cooks Creek to replace assets destroyed by a fire, $624,000invested in Eagle Ridge for capital replacements, $185,000 invested atSandpiper, plus $800,000 miscellaneous improvements, replacements andcapitalized costs among the other Golf Courses. We also received a 2001principal payment plus accrued interest totaling $1,243,000 on our NoteReceivable related to the sale of the Sandpiper parcel of land in June of 1999.

 

                During the first nine months of 2001, our cash flowsused in financing activities netted to a use of $116,955,000. We repaid$93,224,000 of our outstanding debt under the Credit Agreement, paid off the principalbalance of the note payable $12,050,000, made new officer loans of $1,623,000plus accrued interest on these loans of $21,000, and realized net proceeds fromissuance of common stock under the employee stock purchase plan of $10,000 andincurred $158,000 in other costs related to the issuance of stock, and paiddividends and minority partner distributions of $9,889,000.  This compares to net cash used in financingactivities of $19,441,000 in 2000. We borrowed $2,000,000 under the unsecuredline of credit, paid loan fees of $233,000 related to the six-month extensionof the unsecured line of credit, made new officer loans of $226,000, foreclosedon OP unit collateral valued at $2,269,000 securing the lessees’ performanceunder Participating Leases, made principal payments on the note payable of$249,000 and paid dividends and minority partner distributions of $18,452,000

 

 

**Credit Agreement**

 

                We negotiated with the lenders under our previousCredit Facility and the line of credit on the terms of an amendment andrestatement of those agreements. On July 25, 2001, we entered into anamended and restated credit agreement (the “Credit Agreement”) with thoselenders. The new Credit Agreement consolidated the balances outstanding underthe $200 million credit facility and the $25 million line of credit into asingle, secured term loan with an outstanding principal balance ofapproximately $150,000,000 on July 25, 2001. All events of default underthe Credit Facility and line of credit were waived or cured upon the closing ofthe new Credit Agreement and the pending lawsuit was dismissed. The loans underthe new Credit Agreement mature on June 30, 2002. We are required to makequarterly principal payments in the amount of $10,000,000. We are also requiredto use the net proceeds from the sale of our Golf Course and related assets torepay the loans. Such payments will offset the quarterly scheduled principalpayments. The non-default interest rate payable on the loans is equal to thebase rate plus 1% per annum. Our obligations under the new Credit Agreement issecured by substantially all of our real property assets and by certainmortgage notes held by us and our subsidiaries that are secured by realproperty. Each of our material subsidiaries is a guarantor under the new CreditAgreement. As of November 9, 2001, the aggregate principal amount of loansoutstanding under the new Credit Agreement is approximately $101,000,000.

 

                Thenew Credit Agreement limits our ability to sell real estate assets unless wereceive net cash proceeds in excess of minimum amounts that are set forth inthe new Credit Agreement. The new Credit Agreement contains a financialcovenant regarding the minimum amount of cash rent that we receive.Non-financial covenants include maintenance of properties, requirements toinsure the properties, restrictions on debt, restrictions on liens,restrictions on contingent obligations, limitations on loans to officers andinvestments in third parties, restrictions on payment of dividends, restrictionson transactions with affiliates, and restrictions on adverse amendments to ourParticipating Leases and mortgage notes, among others. **Funds from Operations**

 

                Wehave historically considered Funds from Operations ("FFO") to be arelevant supplemental measure of the performance of equity REITs in general,and us in particular, because FFO excludes the effect of depreciation andcertain amortization expenses as operating expenses. Management also believesFFO is generally helpful to investors as a measure of the performance of anequity REIT because, along with cash flows from operating activities, financingactivities, and investing activities, it provides our investors with anunderstanding of our ability to incur and service debt and make capital expenditures.However, because we are liquidating, our ability to incur additionalindebtedness, make capital expenditures and finance new investments is nolonger meaningful. Accordingly, we no longer believe that FFO is meaningful inunderstanding our performance, and, therefore, no longer plans to report FFO.

 

**Inflation**

 

                Webelieve the effect of inflation on us is not material.

 

 

# **ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

 

                Wehave not entered into any transactions using derivative commodity instruments.We are subject to market risk associated with changes in interest rates. Thetotal outstanding debt, at September 30, 2001, subject to interest rateexposure is $119.5 million. A 25 basis point movement in the interest rateon the floating rate debt would result in an approximate $299,000 annualizedincrease or decrease in interest expense and cash flows.  Reference is made to Note 8 to theCondensed Consolidated Financial Statements of Item 1 for additional debtinformation.

 

**PART II. OTHER INFORMATION**

** **

**Item 1. LEGAL PROCEEDINGS**

 

We are currently involved in the following material legalproceedings:

 

*Bonaventure Country Club*

 

                We entered into a purchase andsale agreement with Legends Golf Holding, LLC, on February 14, 2001, tosell Bonaventure Country Club, located in Ft. Lauderdale, Florida. Legends GolfHolding, LLC subsequently attempted to terminate its obligations to purchaseBonaventure Country Club. We believe the bases on which the purchaser hasattempted to terminate its obligations are invalid. On July 31, 2001, theparties agreed to this accelerated non-appealable dispute resolution processwhich is to be concluded by November 30, 2001. In connection with thisdispute, we filed a complaint for a declaratory judgement in the Court ofCommon Pleas, Ninth Judicial Circuit, in the County of Charleston, SouthCarolina, on August 10, 2001 seeking specific performance of Legends GolfHolding, LLC to purchase the Bonaventure Country Club. On August 23, 2001, wefiled an amended complaint for a declaratory judgment in the Court of CommonPleas seeking a declaration that Legends Golf Holding, LLC did not have a validbasis for terminating its obligation to purchase the Bonaventure CountryClub.  The current trial date isscheduled to begin on November 26, 2001. During thisprocess, we have the right to market these Golf Courses for sale without anyobligation to Legends.

 

                OnJuly 30, 2001, Golf Trust of America, L.P. ("Seller"), Legends GolfHolding, LLC ("Buyer"), Legends at Bonaventure, Inc.("Lessee"), Larry Young and Danny Young entered into a FirstAmendment To Purchase Agreement, Fifth Amendment To Lease Agreement andSettlement Agreement to address their disputes regarding the BonaventureCountry Club (the "Bonaventure Settlement Agreement").  The Bonaventure Settlement Agreementprovides, in pertinent part, as follows: (i) the parties thereto shall close the transactions contemplated by theFebruary 14, 2001 Purchase Agreement (the "Purchase Agreement") inaccordance with the terms thereof, except with respect to the BonaventureCountry Club, without prejudice to the parties pending disputes applicable tothe Bonaventure Country Club; (ii) the pending dispute pertains primarily towhether Buyer rightfully terminated its obligation to acquire the BonaventureCountry Club under the Purchase Agreement as a result of certain title andenvironmental issues, and the parties thereto have determined that the mattershall be resolved in a judicial proceeding (the "Declaratory Relief Action");(iii) the Seller and Buyer shall use their respective best efforts to cause thepending dispute to be heard and the trial to be held not later than 120calendar days after the Declaratory Relief Action is heard; (iv) the decisionrendered by the Court in the Declaratory Relief Action shall be final, bindingand non–appealable; (v) if the Court in the Declaratory Relief Actiondetermines that Buyer does not have the right to terminate its obligation topurchase the Bonaventure Country Club under the Purchase Agreement, then Buyershall be obligated to close the purchase of the Bonaventure Country Club within30 days after the date of the Court's decision; (vi) if Buyer fails toconsummate the purchase of the Bonaventure Country Club within the aforesaid 30–dayperiod (other than by reason of Seller's default), then Seller may terminatethe Purchase Agreement and require that Buyer pay Seller $3,000,000 asliquidated damages; (vii) in the event of any closing by Buyer of theBonaventure Country Club, at Buyer's request, Seller shall provide buyer with apurchase money loan up to $5,000,000 as contemplated by the Purchase Agreementand subject to the underwriting requirements therein; (viii) if Seller electsto sell the Bonaventure Country Club to a third–party purchaser it may doso without the approval of Buyer and, upon such sale, the Declaratory ReliefAction shall be dismissed, the Participating Lease and the Purchase Agreementshall be terminated and Buyer and Seller shall be released of any obligations eithermay have to the other with respect to the purchase and sale of the BonaventureCountry Club; (ix) the Participating Lease shall (a) terminate upon theearliest to occur of the sale of the Bonaventure Country Club, 30 days afterthe Court renders its decision in the Declaratory Relief Action, or theoccurrence of an uncured default by the Lessee under the Participating Lease,(b) provide for Annual Base Rent from and after August 1, 2001 until theexpiration of the Participating Lease shall be $1,374,996 (or a monthly BaseRent of $114,583), and (c) if Buyer prevails in the Declaratory Relief Actionand, as a result, the Participating Lease is terminated, and Buyer does notacquire the Bonaventure Country Club, Seller shall reimburse the Lessee the amount(if any) by which (1) the aggregate Base Rent actually paid by the Lessee toSeller for the Bonaventure Country Club for the period accruing from and afterAugust 1, 2001 through and including the effective date of termination of theParticipating Lease, exceeds (2) the aggregate earnings before interest, taxes,depreciation, amortization, rent and management fees, calculated on a cashbasis, derived by the Lessee from the Bonaventure Country Club and accruingduring the period commencing on (and including) August 1, 2001 through andincluding the effective date of termination of the Participating Lease; and (x)Larry Young and Danny Young shall each execute a guaranty of the obligations ofthe Seller under the Bonaventure Settlement Agreement.

*Mystic Creek Golf Course*

 

TheLessee filed a bankruptcy petition on February 25, 2000 to prevent us fromconcluding our eviction action.  TheLessee then commenced an adversary proceeding in the Bankruptcy Courtseeking a declaratory judgment that the Participating Lease was not a trueLease but was rather a financing arrangement which could be modified in theLessee’s Chapter 11 case.  The matterwas tried in May 2001 and closing arguments were made in July 2001.  The Bankruptcy Court took the matter underadvisement.  On October 10, 2001, itissued a Trial Opinion holding that the Participating Lease was a true leasenot subject to modification in bankruptcy. On October 24, 2001, the Court entered its Declaratory Judgment to thateffect.  The Lessee had until December3, 2001 to either assume the Participating Lease (and cure all arrearages) orreject the Participating Lease (and surrender the property to us).  The Lessee surrendered the property to us onNovember 1, 2001 and we assumed management of this Golf Course as of that date.

 

                Since commencement of theChapter 11 proceedings, Mystic Creek made certain payments to our OperatingPartnership in a total amount less than the total rent payments due under theParticipating Lease. In May 2001, our Operating Partnership filed a motionto compel the payment or escrow of rent and taxes due under the ParticipatingLease in and after May 2001. The Bankruptcy Court heard the motion inJune 2001 and took the matter under advisement.   After the issuance of its Trial Opinion in the adversaryproceeding, the Bankruptcy Court has scheduled this motion for hearing onNovember 30, 2001 in light of the Trial Opinion.

 

                Thecollateral securing the Lessee's obligations includes $543,000 in cash and52,724 OP Units. Due to the bankruptcy, we are currently unable to apply thiscollateral to outstanding obligations owed to us by the Lessee. No othermaterial developments have occurred in these proceedings since the filing ofour Annual Report on Form 10-K on March 14, 2001.

 

 

*Golf Trust of America v. Township of Milford andOakland County.*

 

                Threeseparate but virtually identical cases are pending in which we have challengedthe Township's and County's inclusion of the Mystic Creek Golf Course on theproperty tax rolls. We assert that the Golf Course (in which we have a longterm ground lease interest) is not subject to ad valorem property tax becauseit is land owned by a municipality (the City of Dearborn) and is operated as aconcession for public purpose. Two cases are presently pending before theMichigan Tax Tribunal on this issue (for tax assessments for the years 2000 and2001), while a third case (for prior years' tax assessments) is presentlybefore the Michigan Court of Appeals. We are unable to predict the outcome ofthese cases with certainty at this time. We anticipate that the Court ofAppeals will act on this case before the end of the year; the other cases arestayed pending the outcome of that appeal.

 

#### *Osage NationalGolf Club*

 

                Thelawsuit Osage National Golf Club, Inc. et al. V. Golf Trust ofAmerica, Inc. et al, United States District Court Eastern District ofMissouri was filed on or about April 5, 2000. This lawsuit involves a saleand lease transaction between plaintiffs and Golf Trust of America L.P. of agolf course located in Miller County, Missouri. Part of the consideration forthis transaction was the transfer of OP Units to Osage National Golf Club.Plaintiffs allege, under various theories, that the defendants misrepresentedthe nature of these OP Units. Plaintiffs assert that because of thismisrepresentation the OP Units were substantially less valuable than had beenrepresented and, because of this, they have suffered actual damages in theamount of not less than $3,500,000. In addition, they claim that they areentitled to unspecific punitive damages. A Scheduling Conference was held inthis case in late December 2000. The case is tentatively set for trial inJanuary of 2002. The parties have exchanged the initial disclosures requiredunder the Federal Rules of Civil Procedure. In addition, we have responded toPlaintiffs' requests for documents and Plaintiffs have taken the depositions ofseveral of our current and former officers. Plaintiffs failed to produce acorporate representative for deposition. Plaintiffs have not yet responded to our discovery. In addition, theformer Manager of the Plaintiffs, who was the most knowledgeable of Plaintiffs’claims, is now deceased.  Plaintiffs’attorney has filed a Memorandum with the Court purporting to withdraw.  The Court has not, however, approved thewithdrawal.  Because of the uncertaintyas to the Plaintiffs’ potential witnesses and because of the uncertainty as torepresentation of the Plaintiffs, we are unable to give an assessment as to thelikely outcome or as to a probable range of loss.

*Sandpiper Golf Course*

 

On January 18, 2001,Sandpiper at SBCR, LLC, which is the lessee of our Sandpiper golf course, andEnvironmental Industries, Inc. (“EII”) filed a Complaint for Injunctive Reliefand Declaratory Relief Pending Arbitration in the Superior Court of SantaBarbara, California, against the subsidiary through which we own the golfcourse, Sandpiper-Golf Trust LLC, or SGT. SGT had leased the golf course to the Sandpiper lessee pursuant to alease dated March 6, 1998.  EII hassecured a line of credit guaranteeing the lessee’s performance under thelease.  The complaint alleges that theSandpiper lessee is excused from paying rent under the lease because SGT hasfailed to perform certain obligations under the lease and under a purportedamendment to the lease.  The complaintdoes not allege a cause of action for breach of the lease; instead, it onlyseeks an injunction prohibiting SGT from issuing notices of default under thelease, terminating the lease, or drawing on the letter of credit pending theoutcome of a dispute resolution process contained in the lease.  On January 24, 2001, the Sandpiper lesseesought and obtained a temporary restraining order prohibiting SGT from issuingnotices of default, terminating the lease, or drawing on the letter of creditpending a preliminary injunction hearing scheduled for February 2, 2001.  On January 27, 2001, the parties enteredinto a Standstill Agreement, pursuant to which the temporary restraining orderdissolved by its terms on February 2, 2001. In addition, SGT agreed, among other things, not to terminate the leasebased on the current disputes between the parties pending the outcome of thedispute resolution process.  Inexchange, the Sandpiper lessee agreed, among other things, to post a bond inthe amount of $1 million to secure payment of some or all of anyarbitration award.

 

Pursuant to the terms ofthe Lease, the parties have agreed to arbitrate this dispute.  The arbitration hearing is scheduled tocommence on December 13, 2001. Discovery is just now commencing, and it is not possible to predict theoutcome of the dispute.

 

                In arelated action, on January 22, 2001, Golf Trust of America, Inc. wasserved with a Summons and Complaint in a case titled *H-T Santa Barbara, Inc. and The ADCO Group, Inc. v. GolfTrust of America, Inc.*, Case No. CV 01-00364-NM (AJWx), filedin the United States District Court for the Central District of California. Thecomplaint alleged that plaintiff H-T Santa Barbara, Inc., or HT, is theowner of a resort near Santa Barbara, California and that plaintiff ADCO is anaffiliate of HT. The complaint alleged that we are the alter ego of SGT, thatHT and SGT are parties to a Golf Utilization Agreement, and that we, throughSGT, breached that agreement "by failing to establish and maintain a firstclass golf facility" near HT's resort and by failing to "use goodfaith efforts to fund, establish, and maintain a first class golf coursefacility." The complaint also alleged that, if we are not the alter ego ofSGT, then we have negligently and/or intentionally interfered with the GolfUtilization Agreement. The complaint further alleged that we misrepresented itsintention to fund the renovation of the golf course, that we falsely representedthat the lease for the golf course had been altered by the execution of a termsheet dated March 31, 1999, and that these misrepresentations fraudulentlyinduced HT and ADCO to invest in the resort, to invest in the development of anew club house, and to guarantee the performance of the lessee of the golfcourse. The complaint also alleged that we breached the term sheet and thelease by failing to renovate the golf course. The complaint sought actualdamages in excess of $50 million, punitive damages and injunctive relief.On March 31, 2001, the parties filed a stipulation in court to dismiss theaction in its entirety without prejudice.

 

                OnMay 22, 2001, HT-Santa Barbara, Inc. and the ADCO Group, Inc.filed a complaint in the Superior Court of Santa Barbara, California, titled *HT-Santa Barbara, Inc. and the ADCOGroup, Inc. v. Golf Trust of America, Inc., GTA GP, Inc., GolfTrust of America LP, and Sandpiper-Golf Trust, LLC*, CaseNo. 1042834. The allegations in the complaint are substantially similar tothe allegations in the dismissed federal action. The complaint alleges causesof action for breach of written contract, breach of implied covenant of goodfaith and fair dealing, intentional interference with prospective economicadvantage, negligent interference with prospective economic advantage,fraudulent promise without intention to perform, intentional misrepresentationand fraud, and specific performance. The complaint seeks compensatory damagesof not less than $50,000,000, interest, punitive damages, costs of suit,(including attorney's fees), and specific performance. On Friday, June 22,2001, defendants filed a demurrer (which is a motion to dismiss for failure tostate a claim on which release can be granted) and a motion to stay the actionpending the outcome of the arbitration to be concluded in the disputeddescribed above regarding SBCR, LLC and EII. Following a hearing on thedemurrer and motion to stay on September 17, 2001, the court granted the motionto stay the action pending the outcome of the arbitration described above.  The court did not rule on the demurrer.   The parties have conducted no discovery todate.   It is not possible to predictthe outcome of the dispute.

 

*Concordia I, L.P. v. Golf Trust of America, Inc., etal.*

 

                OnApril 5, 2001, a class action lawsuit was filed in the Circuit Court forBaltimore City, Maryland against Golf Trust of America, Inc., itsdirectors and Mr. Young. Concordia I, L.P., which claims to be one of ourstockholders and which seeks to prosecute its claim brought the lawsuit onbehalf of all of our stockholders other than the defendants' and theiraffiliates or immediate family members. The lawsuit seeks damages in anunspecified amount. The plaintiff alleges that our payments to our officersunder their employment contracts and our agreement to sell Golf Courses toLegends resulted from a breach of the defendants' fiduciary duties tostockholders and that these transactions constitute non-pro rata liquidatingdistributions allegedly in violation of our charter and Maryland law. Finally,the plaintiff alleges that our preliminary proxy statement contained materiallymisleading statements and omissions and, on that basis, the plaintiff seeks tovoid any vote taken pursuant thereto or, in the alternative, damages. Theplaintiff delivered to us on July 30, 2001 an Amended Class ActionComplaint which, among other things, added Banc of America Securities LLC andBank of America, N.A., as defendants. The matter has been tendered to ourdirectors and officers insurance carrier. We are evaluating the Amended ClassAction Complaint. The Amended Class Action Complaint against Banc of AmericaSecurities, LLC and Bank of America, N.A. asserts claims against these entitiesfor negligent misrepresentation, unjust enrichment, equitable estoppel andaiding and abetting proxy misrepresentation. Golf Trust of America, Inc. and its officers and directors have moved todismiss the complaint for failure to state a claim upon which relief may begranted.  The plaintiff’s response tothis motion was received on November 6, 2001. A hearing on this motion is scheduled for November 19, 2001.  It is not possible to predict the outcome ofthis motion or dispute at this time.

 

 

*Lake Ozark Industries, Inc. and Everett Holding Company, Inc.v. Golf Trust of America, et al.*

 

                Thisis an action filed by a contractor, Lake Ozark Construction Industries, Inc.(“LOCI”), and its asserted assignee of lien and account rights, Everett HoldingCompany, Inc. (“Everett ”), in the Fall of 1999 against numerous defendantsincluding Golf Trust of America, L.P. Plaintiffs assert LOCI performed construction services on, or thatbenefited, the property of various defendants, including Golf Trust of America,L.P.  Plaintiffs’ amended petition is insix counts.  Counts I, II, and III seekrecovery of payment for LOCI’s work from M & M Contractors, Inc., whichPlaintiffs claim was the prime contractor and hired LOCI as a subcontractor.  Counts IV, V, and VI name Golf Trust ofAmerica, L.P. and other defendants. Count IV seeks to foreclose a mechanic’s lien upon the property ofvarious defendants, including Golf Trust of America, L.P.  The lien is for the principal amount of $1,276,123,plus interest at 10% per year and attorney fees.  Plaintiffs calculate interest to the May 29, 1999,lien-filing date to be $151,180 and interest thereafter to be $354 perday.  Count V of the amended petition,directed at various defendants including Golf Trust of America, L.P., seeks adetermination of priority of Plaintiffs’ claimed mechanic’s lien over variousdeeds of trust and property interests, including Golf Trust of America,L.P.’s.  The outcome of Count V will bedetermined by the resolution on the merits of Count IV.  Finally, Count VI seeks foreclosure of adeed of trust from one of the other defendants, Osage Land Company, to Everett,apparently given to Everett to forestall Plaintiffs’ filing of the mechanic’slien.  The deed of trust was recordedsubsequent to the recordation of the deed from Ozark Land Company to Golf Trustof America, L.P. for its property.  TheCourt ruled on June 25, 2001, on cross motions for summary judgment filedby Plaintiffs, Golf Trust of America, L.P., and defendant Central Bank of Lakeof the Ozarks, a beneficiary of deeds of trust on some of the property coveredby the mechanic’s lien and by the deed of trust from Osage Land Company toEverett.  The Court denied all themotions with one exception -- it granted Everett summary judgment on Count VI(foreclosure of the deed of trust to Everett from Osage Land Company) but ruledthat the deed to Golf Trust of America, L.P. and the deeds of trust to CentralBankof Lake of the Ozarks are prior to the deedof trust to Everett.  The Court did notexplain its rulings on the remainder of Plaintiffs’ motion or on the motions ofGolf Trust of America, L.P. and Central Bank of Lake of the Ozarks, except that“there remain substantial and genuine issues of material fact.”  Since the Court’s ruling on the summaryjudgment motions, Plaintiffs have moved for a trialsetting. The scheduled August 28 hearing on thetrial setting motion that we reported in our July 31, 2001, letter wascancelled by the Court.  The Court hasscheduled another hearing, on November 21, at which we anticipate the trialsetting motion may be taken up.  Whilesubstantial discovery and other activity have occurred in this case,substantial further discovery remains to be conducted, and we are unable togive an assessment as to a likely outcome or as to a probable range of loss.

 

                RoutineLitigation

 

                Inaddition to litigation between lessor and lessee (and their affiliates), ownersand operators of golf courses are subject to a variety of legal proceedingsarising in the ordinary course of operating a golf course, including proceedingsrelating to personal injury and property damage. Such proceedings are generallybrought against the operator of a golf course, but may also be brought againstthe owner. Our Participating Leases provide that each Lessee is responsible forclaims based on personal injury and property damage at the Golf Courses whichare leased and require each Lessee to maintain insurance for such purposes. Weare not currently subject to any claims of this sort that we deem to bematerial.

 

###### **Item 2.    CHANGES IN SECURITIES**

 

Not Applicable.

**Item 3.    DEFAULTSUPON SENIOR SECURITIES**

 

Not Applicable.

 

 

###### **Item4.    SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

No matters were submitted to a vote of security holdersduring the three months ended September 30, 2001.

 

 

###### **Item 5.    OTHER INFORMATION**

 

Not Applicable.

 

 

###### **Item6.    EXHIBITS AND REPORTS ONFORM 8-K**

 

During the quarter ended September 30, 2001, wefiled the following reports on Form 8-K:

 

•         Dated July 10, 2001,describing under Item 5 that the continuing discussions with our lenders led tothe postponement of the injunction hearing scheduled for July 10, 2001 to July26, 2001 and that on July 25, 2001, we entered into an amended and restatedcredit agreement with our lenders.

 

•         Dated July 31, 2001,describing under Item 5 that the Legends transaction has closed and that theBonaventure Participating Lease was amended.

 

•         Dated August 20,2001, describing under Item 5 that our 2001 Annual Shareholders meeting isscheduled for November 15, 2001 at 8:30 a.m. to be held at Charleston PlaceHotel, 205 Meeting Street, Charleston, South Carolina, and further describingthat our shareholders will be mailed a proxy statement with voting instructionsprior to the annual meeting.

Exhibits

 

                Thefollowing exhibits are part of this quarterly report on Form 10-Q for thequarterly period ended September 30, 2001 (and are numbered in accordance withItem 601 of Regulation S-K). Items marked with an asterisk (*) are filedherewith.

 
| **No.**  |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 2.1      |   | Plan of Liquidation and  Dissolution, as approved by our company's shareholders on May 22, 2001  (previously filed as Exhibit 2.1 to our company's Current Report on Form 8–K,  filed May 30, 2001, and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.1.1    |   | Articles of Amendment and  Restatement of Golf Trust of America, Inc., as filed with the State  Department of Assessments and Taxation of Maryland on January 31, 1997,  (previously filed as Exhibit 3.1A to our company's Registration  Statement on Form S–11 (Commission File No. 333–15965)  Amendment No. 2 (filed January 30, 1997) and incorporated herein by  reference).                                                                                                                                                                                                                                              |
| 3.1.2    |   | Articles of Amendment of  Golf Trust of America, Inc. as filed with the State Department of Assessments  and Taxation of Maryland on June 9, 1998 (previously filed as  Exhibit 3.2B to our company's Quarterly Report on Form 10–Q,  filed August 14, 1998 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                             |
| 3.1.3    |   | Articles of Amendment of  Golf Trust of America, Inc., as filed with the State Department of  Assessments and Taxation of Maryland on May 25, 2001 (previously filed  as Exhibit 3.1 to our company's Current Report on Form 8–K, filed  May 30, 2001 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                        |
| 3.2.1    |   | Articles Supplementary of  Golf Trust of America, Inc. relating to the Series A Preferred Stock, as  filed with the State Department of Assessments and Taxation of the State of  Maryland on April 2, 1999 (previously filed as Exhibit 3.1 to our  company's Current Report on Form 8–K, filed April 13, 1999,  and incorporated herein by reference).                                                                                                                                                                                                                                                                                  |
| 3.2.2    |   | Articles Supplementary of  Golf Trust of America, Inc. relating to the Series B Junior  Participating Preferred Stock, as filed with the State Department of  Assessments and Taxation of the State of Maryland on August 27, 1999  (previously filed as Exhibit 3.1 to our company's Current Report on  Form 8–K, filed August 30, 1999, and incorporated herein by  reference).                                                                                                                                                                                                                                                         |
| 3.3      |   | Bylaws of Golf Trust of  America, Inc., as amended by the Board of Directors on April 2, 2001 and  as currently in effect (previously filed as Exhibit 3.3 to our company's  Quarterly Report on Form 10–Q (Commission File No. 000–22091),  filed May 15, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                              |
| 4.1      |   | Form of Share Certificate  for the Common Stock (previously filed as Exhibit 4.3 to our company's  Current Report on Form 8–K, filed August 30, 1999, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.2      |   | Form of Share Certificate  for the Series A Preferred Stock (previously filed as Exhibit 3.2  to our company's Current Report on Form 8–K, filed April 13,  1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.3      |   | Shareholder Rights  Agreement, by and between our company and ChaseMellon Shareholder Services,  L.L.C., as rights agent, dated August 24, 1999 (previously filed as  Exhibit 4.1 to our company's Current Report on Form 8–K,  filed August 30, 1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                  |
| 4.4+     |   | Voting Agreement, between  Golf Trust of America, Inc. and the holder of all of its outstanding shares  of Series A Preferred Stock, AEW Targeted Securities Fund, L.P., dated  February 22, 2001 (previously filed as Exhibit 4.2 to our company's  Current Report on Form 8–K, filed March 14, 2001, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                            |
| 4.5      |   | Voting Agreement, by and  among Golf Trust of America, Inc., Golf Trust of America, L.P., GTA GP, Inc.  and the holders of operating partnership units named therein, dated as of  February 14, 2001 (previously filed as Exhibit 4.3 to our company's  Current Report on Form 8–K, filed March 14, 2001, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                              |
| 10.1.1   |   | First Amended and  Restated Agreement of Limited Partnership (the "Partnership  Agreement") of Golf Trust of America, L.P. (the "Operating  Partnership"), dated February 12, 1997 (previously filed as  Exhibit 10.1 to our company's Annual Report on Form 10–K,  filed March 31, 1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                                           |
| 10.1.2   |   | First Amendment to the  Partnership Agreement, dated as of February 1, 1998 (previously filed as  Exhibit 10.1.2 to our company's Annual Report on Form 10–K,  filed March 31, 1998, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.1.3   |   | Second Amendment and  Consent to the Partnership Agreement dated as of February 14, 2001  (previously filed as Exhibit 10.3 to our company's Current Report on  Form 8–K, filed March 14, 2001, and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.1.4*  |   | Exhibit A to the Partnership  Agreement (Schedule of Partnership Interests), as revised through  November 9, 2001                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1.5   |   | Designation of  Class B Common OP units of the Operating Partnership, dated  February 1, 1998, which has been added as the first entry in  Exhibit D to the Partnership Agreement (included within the First  Amendment to the Partnership Agreement, which was previously filed as  Exhibit 10.1.2 to our company's Annual Report on Form 10–K,  filed March 31, 1998, and incorporated herein by reference).                                                                                                                                                                                                                  |
| 10.1.6   |   | Designation of  Series A Preferred OP units of the Operating Partnership, dated  April 2, 1999, which has been added to Exhibit D to the Partnership  Agreement (previously filed as Exhibit 10.3 to our company's Current  Report on Form 8–K, filed April 13, 1999, and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                        |
| 10.1.7   |   | Designation of  Series B Preferred OP units of the Operating Partnership, dated  May 11, 1999, which has been added to Exhibit D to the Partnership  Agreement (previously filed as Exhibit 10.1.6 to our company's Annual Report  on Form 10–K, filed March 30, 2000, and incorporated herein  by reference).                                                                                                                                                                                                                                                                                                                       |
| 10.1.8   |   | Designation of  Series C Preferred OP units of the Operating Partnership, dated  July 28, 1999, which has been added to Exhibit D to the Partnership  Agreement (previously filed as Exhibit 10.1.7 to our company's Annual  Report on Form 10–K, filed March 30, 2000, and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                      |
| 10.2.1   |   | Credit Agreement, dated  as of June 20, 1997, by and among Golf Trust of America, L.P., as  Borrower, Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as  Guarantors, the Lenders referred to therein, and NationsBank N.A., as Agent  (previously filed as Exhibit 10.1 to our company's Current Report on  Form 8–K, dated June 20, 1997 and filed August 12, 1997,  and incorporated herein by reference).                                                                                                                                                                                                                 |
| 10.2.2   |   | Amended and Restated  Credit Agreement, dated as of July 8, 1998, by and among Golf Trust of  America, L.P., as Borrower, Golf Trust of America, Inc., GTA GP, Inc. and GTA  LP, Inc., as Guarantors, the Lenders referred to therein, and NationsBank  N.A., as Agent (previously filed as Exhibit 10.2.2 to our company's  Amended Annual Report on Form 10–K/A, filed April 1, 1999,  and incorporated herein by reference).                                                                                                                                                                                                                |
| 10.2.3   |   | Amended and Restated  Credit Agreement, dated as of March 31, 1999, by and among Golf Trust of  America, L.P., as Borrower, Golf Trust of America, Inc., GTA GP, Inc. and GTA  LP, Inc., as Guarantors, the Lenders referred to therein, NationsBank, N.A.,  as Administrative Agent, First Union National Bank as Syndication Agent, and  BankBoston, N.A., as Documentation Agent (previously filed as Exhibit 10.2.3  to our company's Annual Report on Form 10–K, filed March 30,  2000, and incorporated herein by reference).                                                                                                                 |
| 10.2.4   |   | Second Amended and  Restated Credit Agreement, dated as of July 25, 2001, by and among Golf  Trust of America, L.P., as Borrower, Golf Trust of America, Inc., GTA  GP, Inc., GTA LP, Inc., Sandpiper–Golf Trust, LLC, GTA Tierra  Del Sol, LLC, and GTA Osage, LLC, as Guarantors, the Lenders referred to  therein, and Bank of America, N.A., as Administrative Agent, First Union  National Bank, as Syndication Agent, and Fleet National Bank, as  Documentation Agent (previously filed as Exhibit 10.1 to our company's  Current Report on Form 8–K, filed August 1, 2001, and  incorporated herein by reference). |
| 10.3     |   | Credit Agreement, dated  as of March 31, 1999, by and among Golf Trust of America, L.P., as  Borrower, Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as  Guarantors, the Lenders referred to therein, and NationsBank, N.A., as  Administrative Agent for the Lenders (previously filed as Exhibit 10.3 to our  company's Annual Report on Form 10–K, filed March 30, 2000,  and incorporated herein by reference).                                                                                                                                                                                                                   |
| 10.4     |   | Loan Agreement (the  "Participating Mortgage"), dated as of June 20, 1997, by and  between Golf Host Resorts, Inc., as Borrower, and Golf Trust of America,  L.P., as Lender (previously filed as Exhibit 10.2 to our company's  Current Report on Form 8–K, dated June 20, 1997 and filed  August 12, 1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                             |
| 10.5     |   | Form of Participating  Lease Agreement (previously filed as Exhibit 10.2 to our company's  Registration Statement on Form S–11, filed January 15, 1997,  and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.6     |   | 1997 Non–Employee  Directors' Plan of Golf Trust of America, Inc. (previously filed as  Exhibit 10.7 to our company's Registration Statement on Form S–11  (Commission File No. 333–15965) Amendment No. 1 (filed  January 15, 1997) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                     |
| 10.7     |   | 1997 Stock Incentive Plan  (the "Original 1997 Plan") of Golf Trust of America, Inc.  (previously filed as Exhibit 10.6 to our company's Registration  Statement on Form S–11 (Commission File No. 333–15965)  Amendment No. 1 (filed January 15, 1997) and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                            |
| 10.8     |   | 1997 Stock–Based  Incentive Plan of Golf Trust of America, Inc. (the "New 1997 Plan")  (previously filed as Exhibit 10.3 to our company's Quarterly Report on  Form 10–Q (Commission File No. 000–22091), filed  August 15, 1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                   |
| 10.9     |   | Form of Nonqualified  Stock Option Agreement for use under the New 1997 Plan (previously filed as  Exhibit 10.4 to our company's Quarterly Report on Form 10–Q  (Commission File No. 000–22091), filed August 15, 1997, and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                                                                           |
| 10.10    |   | Form of Employee  Incentive Stock Option Agreement for use under the New 1997 Plan (previously  filed as Exhibit 10.5 to our company's Quarterly Report on Form 10–Q  (Commission File No. 000–22091), filed August 15, 1997, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                     |
| 10.11    |   | General Provisions  Applicable to Restricted Stock Awards Granted Under the New 1997 Plan  (previously filed as Exhibit 10.14 to our company's Registration  Statement on Form S–11 (Commission File No. 333–36847),  dated September 30, 1997 and filed as of October 1, 1997, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                              |
| 10.12    |   | Form of Restricted Stock  Award Agreement for use under the New 1997 Plan (previously filed as  Exhibit 10.15 to our company's Registration Statement on Form S–11  (Commission File No. 333–36847), dated September 30, 1997 and  filed as of October 1, 1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                               |
| 10.13    |   | 1998 Stock–Based  Incentive Plan of Golf Trust of America, Inc. (previously filed as  Exhibit A to our company's definitive Proxy Statement, dated  April 1, 1999 and filed March 29, 1999, and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.14    |   | Employee Stock Purchase  Plan of Golf Trust of America, Inc. (previously filed as Exhibit 4.1 to  our company's Registration Statement on Form S–8 (Commission File  No. 333–46659), filed February 20, 1998, and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.15    |   | Subscription Agreement  for use with the Employee Stock Purchase Plan (previously filed as  Exhibit 4.2 to our company's Registration Statement on Form S–8  (Commission File No. 333–46659), filed February 20, 1998, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                            |
| 10.16.1  |   | First Amended and  Restated Employment Agreement between our company and W. Bradley Blair,  II, dated November 7, 1999 (previously filed as Exhibit 10.15 to  our company's Annual Report on Form 10–K, filed March 30,  2000, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                     |
| 10.16.2  |   | Second Amended and  Restated Employment Agreement between Golf Trust of America, Inc. and  W. Bradley Blair, II, dated as of February 25, 2001 (previously  filed as Exhibit 10.4 to our company's Current Report on Form 8–K,  filed March 14, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                              |
| 10.17.1  |   | Second Amended and  Restated Employment Agreement between our company and Scott D. Peters,  dated November 7, 1999 (previously filed as Exhibit 10.16 to our  company's Annual Report on Form 10–K, filed March 30, 2000,  and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                         |
| 10.17.2  |   | Third Amended and  Restated Employment Agreement between Golf Trust of America, Inc. and  Scott D. Peters, dated as of February 25, 2001 (previously filed as  Exhibit 10.5 to our company's Current Report on Form 8–K,  filed March 14, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                    |
| 10.18    |   | Stock Purchase Agreement,  dated April 2, 1999, by and among Golf Trust of America, Inc., Golf  Trust of America, L.P., GTA GP, Inc., GTA LP, Inc. and AEW Targeted  Securities Fund, L.P. (previously filed as Exhibit 10.1 to our company's  Current Report on Form 8–K, filed April 13, 1999, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                       |
| 10.19    |   | Registration Rights  Agreement, dated April 2, 1999, by and between Golf Trust of America,  Inc. and AEW Targeted Securities Fund, L.P. (previously filed as  Exhibit 10.2 to our company's Current Report on Form 8–K,  filed April 13, 1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                          |
| 10.20.1+ |   | Purchase and Sale  Agreement, between Golf Trust of America, L.P., as seller, and Legends Golf  Holding, LLC, as buyer, dated as of February 14, 2001 (previously filed  as Exhibit 10.1 to our company's Current Report on Form 8–K, filed  March 14, 2001, and incorporated herein by reference and as Exhibit 10.1  to our company's Current Report on Form 8–K, filed August 14, 2001  and incorporated herein by reference).                                                                                                                                                                                                              |
| 10.20.2  |   | First Amendment to  Purchase Agreement, Fifth Amendment to Lease Agreement (Bonaventure Golf  Club) and Settlement Agreement dated as of July 30, 2001, by and among  Golf Trust of America, L.P., Legends Golf Holding, LLC, Legends at  Bonaventure, Inc., Larry Young and Danny Young (previously filed as  Exhibit 10.2 to our company's Current Report on Form 8–K, filed  August 14, 2001 and incorporated herein by reference).                                                                                                                                                                                                              |
| 10.21    |   | Confidentiality and  Standstill Letter Agreement between Golf Trust of America, Inc. and The  Legends Group, dated as of February 14, 2001 (previously filed as  Exhibit 10.2 to our company's Current Report on Form 8–K,  filed March 14, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                       |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

 

----

*              Filed herewith

 

+              Portions of this exhibit have beenomitted pursuant to a request for confidential treatment.

 

 

**Signatures**

 

                Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
|   |   | GOLF TRUST OF AMERICA, INC.,  registrant               |
|--------|--------|-------------------------------------------------------------|
|   | By:    | /s/ W. Bradley Blair, II                                    |
|   |   |                                                        |
|   |   | W. Bradley Blair, II*President and Chief Executive Officer* |
|   |   |                                                        |
|        |        |                                                             |  |  |

 
|                                                                                              | /s/ W. Bradley Blair, II |   |   |   | November  14, 2001 |   |
|---------------------------------------------------------------------------------------------------|--------------------------|--------|--------|--------|--------------------|--------|
| W. Bradley Blair, II*President,  Chief Executive Officer and  Chairman of the Board of Directors* |                     | Date   |
|                                                                                              |                     |   |
|                                                                                              | /s/ Scott D. Peters      |   |   |   | November 14, 2001  |   |
| Scott D. Peters*Senior  Vice President and  Chief Financial Officer*                              |                     | Date   |
|                                                                                                   |                          |        |        |        |                    |        |  |  |

 

**EXHIBIT INDEX**

 

                Pursuantto Item 601(a)(2) of Regulation S-K, this exhibit index immediatelyprecedes the exhibits.

 

                Thefollowing exhibits are part of this Quarterly Report on Form 10-Q (and arenumbered in accordance with Item 601 of Regulation S-K). Items marked withan asterisk (*) are filed herewith.

 
| **No.**  |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 2.1      |   | Plan of Liquidation and  Dissolution, as approved by our company's shareholders on May 22, 2001  (previously filed as Exhibit 2.1 to our company's Current Report on Form 8–K,  filed May 30, 2001, and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.1.1    |   | Articles of Amendment and  Restatement of Golf Trust of America, Inc., as filed with the State  Department of Assessments and Taxation of Maryland on January 31, 1997,  (previously filed as Exhibit 3.1A to our company's Registration Statement on  Form S–11 (Commission File No. 333–15965) Amendment No. 2 (filed  January 30, 1997) and incorporated herein by reference).                                                                                                                                                                                                                                                                             |
| 3.1.2    |   | Articles of Amendment of  Golf Trust of America, Inc., as filed with the State Department of  Assessments and Taxation of Maryland on June 9, 1998 (previously filed  as Exhibit 3.2B to our company's Quarterly Report on Form 10–Q,  filed August 14, 1998 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                            |
| 3.1.3    |   | Articles of Amendment of  Golf Trust of America, Inc., as filed with the State Department of  Assessments and Taxation of Maryland on May 25, 2001 (previously filed  as Exhibit 3.1 to our company's Current Report on Form 8–K, filed  May 30, 2001 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                        |
| 3.2.1    |   | Articles Supplementary of  Golf Trust of America, Inc. relating to the Series A Preferred Stock, as  filed with the State Department of Assessments and Taxation of the State of  Maryland on April 2, 1999 (previously filed as Exhibit 3.1 to our  company's Current Report on Form 8–K, filed April 13, 1999,  and incorporated herein by reference).                                                                                                                                                                                                                                                                                  |
| 3.2.2    |   | Articles Supplementary of  Golf Trust of America, Inc. relating to the Series B Junior  Participating Preferred Stock, as filed with the State Department of  Assessments and Taxation of the State of Maryland on August 27, 1999  (previously filed as Exhibit 3.1 to our company's Current Report on  Form 8–K, filed August 30, 1999, and incorporated herein by  reference).                                                                                                                                                                                                                                                         |
| 3.3      |   | Bylaws of Golf Trust of  America, Inc., as amended by the Board of Directors on April 2, 2001 and  as currently in effect (previously filed as Exhibit 3.3 to our company's  Quarterly Report on Form 10–Q (Commission File No. 000–22091),  filed May 15, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                              |
| 4.1      |   | Form of Share Certificate  for the Common Stock (previously filed as Exhibit 4.3 to our company's  Current Report on Form 8–K, filed August 30, 1999, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.2      |   | Form of Share Certificate  for the Series A Preferred Stock (previously filed as Exhibit 3.2 to our  company's Current Report on Form 8–K, filed April 13, 1999, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.3      |   | Shareholder Rights  Agreement, by and between our company and ChaseMellon Shareholder Services,  L.L.C., as rights agent, dated August 24, 1999 (previously filed as  Exhibit 4.1 to our company's Current Report on Form 8–K,  filed August 30, 1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                  |
| 4.5      |   | Voting Agreement, between  Golf Trust of America, Inc. and the holder of all of its outstanding shares  of Series A Preferred Stock, AEW Targeted Securities Fund, L.P., dated  February 22, 2001 (previously filed as Exhibit 4.2 to our company's Current  Report on Form 8–K, filed March 14, 2001, and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                     |
| 4.5      |   | Voting Agreement, by and  among Golf Trust of America, Inc., Golf Trust of America, L.P., GTA GP, Inc.  and the holders of operating partnership units named therein, dated as of  February 14, 2001 (previously filed as Exhibit 4.3 to our company's Current  Report on Form 8–K, filed March 14, 2001, and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                  |
| 10.1.1   |   | First Amended and  Restated Agreement of Limited Partnership (the "Partnership  Agreement") of Golf Trust of America, L.P. (the "Operating  Partnership"), dated February 12, 1997 (previously filed as  Exhibit 10.1 to our company's Annual Report on Form 10–K, filed  March 31, 1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                     |
| 10.1.2   |   | First Amendment to the  Partnership Agreement, dated as of February 1, 1998 (previously filed as  Exhibit 10.1.2 to our company's Annual Report on Form 10–K, filed  March 31, 1998, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.1.3   |   | Second Amendment and  Consent to the Partnership Agreement   dated as of February 14, 2001 (previously filed as  Exhibit 10.3 to our company's Current Report on Form 8–K,  filed March 14, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.1.4*  |   | Exhibit A to the Partnership  Agreement (Schedule of Partnership Interests), as revised through  November 9, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.1.5   |   | Designation of Class B  Common OP units of the Operating Partnership, dated February 1, 1998, which  has been added as the first entry in Exhibit D to the Partnership Agreement  (included within the First Amendment to the Partnership Agreement, which was  previously filed as Exhibit 10.1.2 to our company's Annual Report on Form 10–K,  filed March 31, 1998, and incorporated herein by reference).                                                                                                                                                                                                                                                 |
| 10.1.6   |   | Designation of Series A  Preferred OP units of the Operating Partnership, dated April 2, 1999, which  has been added to Exhibit D to the Partnership Agreement (previously filed as  Exhibit 10.3 to our company's Current Report on Form 8–K,  filed April 13, 1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                             |
| 10.1.7   |   | Designation of Series B  Preferred OP units of the Operating Partnership, dated May 11, 1999,  which has been added to Exhibit D to the Partnership Agreement  (previously filed as Exhibit 10.1.6 to our company's Annual Report on  Form 10–K, filed March 30, 2000, and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                            |
| 10.1.8   |   | Designation of Series C  Preferred OP units of the Operating Partnership, dated July 28, 1999,  which has been added to Exhibit D to the Partnership Agreement  (previously filed as Exhibit 10.1.7 to our company's Annual Report on  Form 10–K, filed March 30, 2000, and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                           |
| 10.2.1   |   | Credit Agreement, dated  as of June 20, 1997, by and among Golf Trust of America, L.P., as Borrower,  Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as Guarantors,  the Lenders referred to therein, and NationsBank N.A., as Agent (previously  filed as Exhibit 10.1 to our company's Current Report on Form 8–K,  dated June 20, 1997 and filed August 12, 1997, and incorporated  herein by reference).                                                                                                                                                                                                                                |
| 10.2.2   |   | Amended and Restated  Credit Agreement, dated as of July 8, 1998, by and among Golf Trust of  America, L.P., as Borrower, Golf Trust of America, Inc., GTA GP, Inc. and GTA  LP, Inc., as Guarantors, the Lenders referred to therein, and NationsBank  N.A., as Agent (previously filed as Exhibit 10.2.2 to our company's Amended  Annual Report on Form 10–K/A, filed April 1, 1999, and  incorporated herein by reference).                                                                                                                                                                                                                               |
| 10.2.3   |   | Amended and Restated  Credit Agreement, dated as of March 31, 1999, by and among Golf Trust of  America, L.P., as Borrower, Golf Trust of America, Inc., GTA GP, Inc. and GTA  LP, Inc., as Guarantors, the Lenders referred to therein, NationsBank, N.A.,  as Administrative Agent, First Union National Bank as Syndication Agent, and  BankBoston, N.A., as Documentation Agent (previously filed as Exhibit 10.2.3  to our company's Annual Report on Form 10–K, filed March 30, 2000, and  incorporated herein by reference).                                                                                                                                |
| 10.2.4   |   | Second Amended and  Restated Credit Agreement, dated as of July 25, 2001, by and among Golf  Trust of America, L.P., as Borrower, Golf Trust of America, Inc., GTA  GP, Inc., GTA LP, Inc., Sandpiper–Golf Trust, LLC, GTA Tierra  Del Sol, LLC, and GTA Osage, LLC, as Guarantors, the Lenders referred to therein,  and Bank of America, N.A., as Administrative Agent, First Union National  Bank, as Syndication Agent, and Fleet National Bank, as Documentation Agent  (previously filed as Exhibit 10.1 to our company's Current Report on  Form 8–K, filed August 1, 2001, and incorporated herein by  reference). |
| 10.3     |   | Credit Agreement, dated  as of March 31, 1999, by and among Golf Trust of America, L.P., as  Borrower, Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as  Guarantors, the Lenders referred to therein, and NationsBank, N.A., as  Administrative Agent for the Lenders (previously filed as Exhibit 10.3  to our company's Annual Report on Form 10–K, filed March 30,  2000, and incorporated herein by reference).                                                                                                                                                                                                              |
| 10.4     |   | Loan Agreement (the  "Participating Mortgage"), dated as of June 20, 1997, by and  between Golf Host Resorts, Inc., as Borrower, and Golf Trust of America,  L.P., as Lender (previously filed as Exhibit 10.2 to our company's  Current Report on Form 8–K, dated June 20, 1997 and filed  August 12, 1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                             |
| 10.5     |   | Form of Participating  Lease Agreement (previously filed as Exhibit 10.2 to our company's  Registration Statement on Form S–11, filed January 15, 1997,  and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.6     |   | 1997 Non–Employee  Directors' Plan of Golf Trust of America, Inc. (previously filed as  Exhibit 10.7 to our company's Registration Statement on Form S–11  (Commission File No. 333–15965) Amendment No. 1 (filed  January 15, 1997) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                     |
| 10.7     |   | 1997 Stock Incentive Plan  (the "Original 1997 Plan") of Golf Trust of America, Inc.  (previously filed as Exhibit 10.6 to our company's Registration  Statement on Form S–11 (Commission File No. 333–15965)  Amendment No. 1 (filed January 15, 1997) and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                                            |
| 10.8     |   | 1997 Stock–Based  Incentive Plan of Golf Trust of America, Inc. (the "New 1997 Plan")  (previously filed as Exhibit 10.3 to our company's Quarterly Report on Form  10–Q (Commission File No. 000–22091), filed August 15,  1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                             |
| 10.9     |   | Form of Nonqualified  Stock Option Agreement for use under the New 1997 Plan (previously filed as  Exhibit 10.4 to our company's Quarterly Report on Form 10–Q  (Commission File No. 000–22091), filed August 15, 1997, and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                                                                                |
| 10.10    |   | Form of Employee  Incentive Stock Option Agreement for use under the New 1997 Plan (previously  filed as Exhibit 10.5 to our company's Quarterly Report on Form 10–Q  (Commission File No. 000–22091), filed August 15, 1997, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                     |
| 10.11    |   | General Provisions  Applicable to Restricted Stock Awards Granted Under the New 1997 Plan  (previously filed as Exhibit 10.14 to our company's Registration Statement on  Form S–11 (Commission File No. 333–36847), dated  September 30, 1997 and filed as of October 1, 1997, and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                             |
| 10.12    |   | Form of Restricted Stock  Award Agreement for use under the New 1997 Plan (previously filed as Exhibit  10.15 to our company's Registration Statement on Form S–11 (Commission  File No. 333–36847), dated September 30, 1997 and filed as of  October 1, 1997, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                         |
| 10.13    |   | 1998 Stock–Based  Incentive Plan of Golf Trust of America, Inc. (previously filed as Exhibit A  to our company's definitive Proxy Statement, dated April 1, 1999 and  filed March 29, 1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.14    |   | Employee Stock Purchase  Plan of Golf Trust of America, Inc. (previously filed as Exhibit 4.1 to our  company's Registration Statement on Form S–8 (Commission File  No. 333–46659), filed February 20, 1998, and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.15    |   | Subscription Agreement  for use with the Employee Stock Purchase Plan (previously filed as Exhibit  4.2 to our company's Registration Statement on Form S–8  (Commission File No. 333–46659), filed February 20, 1998, and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.16.1  |   | First Amended and  Restated Employment Agreement between our company and W. Bradley Blair,  II, dated November 7, 1999 (previously filed as Exhibit 10.15 to  our company's Annual Report on Form 10–K, filed March 30,  2000, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                     |
| 10.16.2  |   | Second Amended and  Restated Employment Agreement between Golf Trust of America, Inc. and  W. Bradley Blair, II, dated as of February 25, 2001(previously  filed as Exhibit 10.4 to our company's Current Report on Form 8–K,  filed March 14, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                               |
| 10.17.1  |   | Second Amended and  Restated Employment Agreement between our company and Scott D. Peters,  dated November 7, 1999 (previously filed as Exhibit 10.16 to our  company's Annual Report on Form 10–K, filed March 30, 2000,  and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                         |
| 10.17.2  |   | Third Amended and  Restated Employment Agreement between Golf Trust of America, Inc. and  Scott D. Peters, dated as of February 25, 2001 (previously filed as  Exhibit 10.5 to our company's Current Report on Form 8–K,  filed March 14, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                    |
| 10.18    |   | Stock Purchase Agreement,  dated April 2, 1999, by and among Golf Trust of America, Inc., Golf Trust of  America, L.P., GTA GP, Inc., GTA LP, Inc. and AEW Targeted Securities Fund,  L.P. (previously filed as Exhibit 10.1 to our company's Current Report  on Form 8–K, filed April 13, 1999, and incorporated herein by  reference).                                                                                                                                                                                                                                                                                                            |
| 10.19    |   | Registration Rights  Agreement, dated April 2, 1999, by and between Golf Trust of America, Inc.  and AEW Targeted Securities Fund, L.P. (previously filed as Exhibit 10.2  to our company's Current Report on Form 8–K, filed April 13,  1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                               |
| 10.20.1+ |   | Purchase and Sale  Agreement, between Golf Trust of America, L.P., as seller, and Legends Golf  Holding, LLC, as buyer, dated as of February 14, 2001 (previously filed  as Exhibit 10.1 to our company's Current Report on Form 8–K, filed  March 14, 2001, and incorporated herein by reference and as Exhibit 10.1  to our company's Current Report on Form 8–K, filed August 14, 2001  and incorporated herein by reference).                                                                                                                                                                                                              |
| 10.20.2  |   | First Amendment to  Purchase Agreement, Fifth Amendment to Lease Agreement (Bonaventure Golf  Club) and Settlement Agreement dated as of July 30, 2001, by and among  Golf Trust of America, L.P., Legends Golf Holding, LLC, Legends at  Bonaventure, Inc., Larry Young and Danny Young (previously filed as  Exhibit 10.2 to our company's Current Report on Form 8–K, filed  August 14, 2001 and incorporated herein by reference).                                                                                                                                                                                                              |
| 10.21    |   | Confidentiality and  Standstill Letter Agreement between Golf Trust of America, Inc. and The  Legends Group, dated as of February 14, 2001 (previously filed as  Exhibit 10.2 to our company's Current Report on Form 8–K,  filed March 14, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                       |
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*              Filed herewith

 

+              Portions of this exhibit have beenomitted pursuant to a request for confidential treatment.