**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549**

**FORM10-Q**
| **(Mark One)**                                     |                                                                                               |
|----------------------------------------------------|----------------------------------------------------------------------------------------------------|
|                                               |                                                                                               |
| x                                                  | **Quarterly report  pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934**  |
|                                               | ** **                                                                                         |
| **for the  quarterly period ended: June 30, 2007** |
| ** **                                         | ** **                                                                                         |
| o                                                  | **Transition report  pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934** |

 

**for the transition periodfrom              to              **

**Commission File Number 001-14494**

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**GOLF TRUSTOF AMERICA, INC.**(Exact name of registrantas specified in its charter)

| **Maryland**                                                 |   | **33-0724736**          |
|--------------------------------------------------------------|--------|-------------------------|
| (State or other  jurisdiction of                             |   | (I.R.S. Employer        |
| incorporation or  organization)                              |   | Identification  Number) |
|                                                         |   |                    |
| **10  North Adger’s Wharf, Charleston, South Carolina** |   | **29401**               |
| (Address of principal  executive offices)                    |   | (Zip Code)              |

 

**(843) 723-4653**(Registrant’s telephonenumber, including area code)

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Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such report(s) and (2) has been subject to such filingrequirements for the past 90 days. Yes x  No o.

Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o  Accelerated filer  o  Non-accelerated filer x

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes o No x

On August 9, 2007, there were 7,317,163 shares outstanding of theregistrant’s common stock.

 

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**GOLF TRUST OF AMERICA, INC.**

**Quarterly Report onForm 10-Q****For the Three Months Ended June30, 2007**

**INDEX**
| **PART I. FINANCIAL INFORMATION** |       |
|-----------------------------------|------------|
| ** **                        |       |
| **Item 1.**                       | ** ** | **Liquidation Basis Financial Statements** |   |
| ** **                        | ** ** | ** ** |   |
|                              |       | Condensed  Consolidated Statements of Net Assets as of June 30, 2007 (unaudited) and  December 31, 2006 |   |
|                              |       |   |   |
|                              |       | Condensed  Consolidated Statements of Changes in Net Assets (unaudited) for the Three  Months Ended June 30, 2007 and 2006 |   |
|                              |       |   |   |
|                              |       | Condensed  Consolidated Statements of Changes in Net Assets (unaudited) for the Six  Months Ended June 30, 2007 and 2006 |   |
|                              |       |   |   |
|                              |       | Condensed  Consolidated Statements of Cash Flows (unaudited) for the Six Months ended  June 30, 2007 and 2006 |   |
|                              |       |   |   |
|                              |       | 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** |   |
| ** **                        | ** ** | ** ** |   |
| **Item 4.**                       | ** ** | **Controls and  Procedures** |   |
| ** **                        | ** ** | ** ** |   |
| **PART II. OTHER  INFORMATION**   |       |
| ** **                        |       |
| **Item 1.**                       | ** ** | **Legal Proceedings** |   |
| ** **                        | ** ** | ** ** |   |
| **Item 1A.**                      | ** ** | **Risk Factors** |   |
| ** **                        | ** ** | ** ** |   |
| **Item 2.**                       | ** ** | **Unregistered  Sales of Equity Securities and Use of Proceeds** |   |
| ** **                        | ** ** | ** ** |   |
| **Item 3.**                       | ** ** | **Defaults  upon Senior Securities** |   |
| ** **                        | ** ** | ** ** |   |
| **Item 4.**                       | ** ** | **Submission  of Matters to a Vote of Security Holders** |   |
| ** **                        | ** ** | ** ** |   |
| **Item 5.**                       | ** ** | **Other Information** |   |
| ** **                        | ** ** | ** ** |   |
| **Item  6.**                      | ** ** | **Exhibits** |   |
| ** **                        | ** ** | ** ** |   |
| **Signatures**                    |       |

 

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**Cautionary Note RegardingForward-Looking Statements**

Thefollowing report contains forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933, as amended (the “Securities Act”),and Section 21E of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”).  Forward-looking statements arestatements that predict or describe future events or trends and that do notrelate solely to historical matters.  Allof our projections in this Quarterly Report on Form 10-Q are forward-lookingstatements, including our projections regarding the amount and timing ofliquidating distributions.  You cangenerally identify forward-looking statements as statements containing thewords “believe”, “expect”, “will”, “anticipate”, “intend”, “estimate”, “project”,“assume” or other similar expressions. You should not place undue reliance on our forward-looking statementsbecause the matters they describe are subject to known (and unknown) risks,uncertainties and other unpredictable factors, many of which are beyond our control.  Our forward-looking statements are based onthe limited information currently available to us and speak only as of the dateon which this Quarterly Report on Form 10-Q was filed with the Securities andExchange Commission (the “SEC”).  Ourcontinued internet posting or subsequent distribution of this dated report doesnot imply continued affirmation of the forward-looking statements included init.  We undertake no obligation, and weexpressly disclaim any obligation, to issue any updates to our forward-lookingstatements, even if subsequent events cause our expectations to changeregarding the matters discussed in those statements.  Future events are inherently uncertain.  Accordingly, our projections in thisQuarterly Report on Form 10-Q are subject to particularly highuncertainty.  Our projections should notbe regarded as legal promises, representations or warranties of any kindwhatsoever.  Over time, our actualresults, performance or achievements will likely differ from the anticipatedresults, performance or achievements that are expressed or implied by ourforward-looking statements, and such differences might be significant andharmful to our stockholders’ interests. Many important factors that could cause such a difference are describedunder the caption “Risk Factors” in Part II, Item 1A of this QuarterlyReport on Form 10-Q, each of which you should review carefully.

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF NET ASSETS (LIQUIDATION BASIS)**

**AS OF JUNE 30, 2007 (unaudited)AND DECEMBER 31, 2006**
| ** **                                                                                             | ** ** | **June 30,  2007** | ** ** | **December 31,  2006*** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------------|------------|
| ** **                                                                                             | ** ** | **(in thousands)** | ** ** |
| **ASSETS**                                                                                             | ** ** | ** **              | ** ** | ** **                   | ** ** |
| Real estate—held for  sale                                                                        |       | $                       | 52,767     |                         | $          | 55,592 |   |
| Cash and cash  equivalents                                                                             |       | 2,803                   |       | 2,224                        |       |
| Receivables—net                                                                                   |       | 2,829                   |       | 2,892                        |       |
| Other assets                                                                                           |       | 5,077                   |       | 5,370                        |       |
| Total assets                                                                                           |       | 63,476                  |       | 66,078                       |       |
| **LIABILITIES**                                                                                        | ** ** | ** **              | ** ** | ** **                   | ** ** |
| Debt                                                                                                   |       | 5,495                   |       | 4,872                        |       |
| Accounts payable and  other liabilities                                                                |       | 14,015                  |       | 13,408                       |       |
| Other obligations                                                                                      |       | 10,057                  |       | 10,648                       |       |
| Reserve for estimated  costs during the period of liquidation                                          |       | 4,939                   |       | 3,285                        |       |
| **Total liabilities**                                                                                  |       | 34,506                  |       | 32,213                       |       |
| Commitments and  contingencies                                                                         |       |                    |       |                         |       |
| Preferred stock, $.01  par value, 10,000,000 shares authorized, 800,000 shares issued and  outstanding |       | 17,500                  |       | 20,000                       |       |
| Total liabilities and  preferred stock                                                                 |       | 52,006                  |       | 52,213                       |       |
| **NET ASSETS IN LIQUIDATION**(available  to holders of common stock and OP units)                      |       | $                       | 11,470     |                         | $          | 13,865 |   |

 

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*** Derivedfrom audited condensed consolidated financial statements**

See accompanying notes tocondensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CHANGES IN NET ASSETS (LIQUIDATION BASIS)**

**FOR THE THREE MONTHS ENDED JUNE30, 2007 AND 2006**
| ** **                                                                                | ** ** | **Three Months Ended  June 30, 2007** | ** ** | **Three Months Ended  June 30, 2006** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                                                | ** ** | **(in thousands, unaudited)**                   | ** ** |
| Net assets in  liquidation, beginning of period                                           |       | $                                                         | 13,360     |                                                      | $          | 13,432 |   |
| **Changes in net assets in  liquidation:**                                                | ** ** | ** **                                                | ** ** | ** **                                                | ** ** |
| Adjustments to  liquidation reserve:                                                      |       |                                                      |       |                                                      |       |
| Operating (loss)  income                                                                  |       | (456                                                      | )          | 22                                                        |       |
| Net interest  expense                                                                     |       | (363                                                      | )          | (330                                                      | )          |
| Decrease  (increase) in reserve for estimated liquidation costs and capital  expenditures |       | (61                                                       | )          | 274                                                       |       |
| Subtotal of  adjustments to liquidation reserve                                           |       | (880                                                      | )          | (34                                                       | )          |
| (Decrease)  increase in fair value of real estate                                         |       | (3,510                                                    | )          | 34                                                        |       |
| Forgiveness of  preferred stock obligation                                                |       | 2,500                                                     |       | —                                                    |       |
| **Changes in net assets in  liquidation**                                                 |       | (1,890                                                    | )          | —                                                    |       |
| **Net assets in liquidation, end of period**                                              |       | $                                                         | 11,470     |                                                      | $          | 13,432 |   |

 

See accompanying notes to condensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CHANGES IN NET ASSETS (LIQUIDATION BASIS)**

**FOR THE SIX MONTHS ENDED JUNE 30,2007 AND 2006**
| ** **                                                                    | ** ** | **Six Months Ended  June 30, 2007** | ** ** | **Six Months Ended  June 30, 2006** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **(in thousands, unaudited)**                 | ** ** |
| Net assets in  liquidation, beginning of period                               |       | $                                                       | 13,865     |                                                    | $          | 13,782 |   |
| **Changes in net assets in  liquidation:**                                    | ** ** | ** **                                              | ** ** | ** **                                              | ** ** |
| Adjustments to  liquidation reserve:                                          |       |                                                    |       |                                                    |       |
| Operating income                                                              |       | 2,096                                                   |       | 3,520                                                   |       |
| Net interest  expense                                                         |       | (743                                                    | )          | (648                                                    | )          |
| Other expense                                                                 |       | (59                                                     | )          | —                                                  |       |
| Increase in  reserve for estimated liquidation costs and capital expenditures |       | (2,679                                                  | )          | (3,596                                                  | )          |
| Subtotal of  adjustments to liquidation reserve                               |       | (1,385                                                  | )          | (724                                                    | )          |
| (Decrease)  increase in fair value of real estate                             |       | (3,510                                                  | )          | 374                                                     |       |
| Forgiveness of  preferred stock obligation                                    |       | 2,500                                                   |       | —                                                  |       |
| **Changes in net assets in  liquidation**                                     |       | (2,395                                                  | )          | (350                                                    | )          |
| **Net assets in liquidation, end of period**                                  |       | $                                                       | 11,470     |                                                    | $          | 13,432 |   |

 

See accompanying notes to condensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS (LIQUIDATION BASIS)**

**FOR THE SIX MONTHS ENDED JUNE 30,2007 AND 2006**
| ** **                                                                                                                                          | ** ** | **Six Months  Ended  June 30,  2007** | ** ** | **Six Months  Ended  June 30,  2006** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                                          | ** ** | **(in thousands, unaudited)**         | ** ** |
| **Cash flows from changes in net  assets in liquidation and operating activities:**                                                                 | ** ** | ** **                                      | ** ** | ** **                                      | ** ** |
| Changes in net assets  in liquidation                                                                                                               |       | $                                               | (2,395     | )                                               | $          | (350 | ) |
| Adjustments to  reconcile change in net assets in liquidation to net cash provided by  operating activities:                                        |       |                                            |       |                                            |       |
| Increase in  liquidation reserve and changes in fair value of real estate and non-real  estate assets and forgiveness of preferred stock obligation |       | 3,689                                           |       | 3,256                                           |       |
| Provision for  bad debts                                                                                                                            |       | (55                                             | )          | 279                                             |       |
| Non-cash  interest                                                                                                                                  |       | 314                                             |       | 369                                             |       |
| Other changes in  operating assets and liabilities                                                                                                  |       | 852                                             |       | 760                                             |       |
| Decrease in  liquidation liabilities                                                                                                                |       | (963                                            | )          | (1,472                                          | )          |
| Net cash  provided by operating activities                                                                                                          |       | 1,442                                           |       | 2,842                                           |       |
| **Cash flows from investing  activities:**                                                                                                          | ** ** | ** **                                      | ** ** | ** **                                      | ** ** |
| Resort and golf  course improvements                                                                                                                |       | (275                                            | )          | (143                                            | )          |
| Proceeds from  asset sales                                                                                                                          |       | —                                          |       | 1,038                                           |       |
| Net cash (used  in) provided by investing activities                                                                                                |       | (275                                            | )          | 895                                             |       |
| **Cash flows from financing  activities:**                                                                                                          | ** ** | ** **                                      | ** ** | ** **                                      | ** ** |
| Proceeds from  debt                                                                                                                                 |       | 320                                             |       | —                                          |       |
| Repayments on  debt and capital lease obligations                                                                                                   |       | (908                                            | )          | (701                                            | )          |
| Net cash used in  financing activities                                                                                                              |       | (588                                            | )          | (701                                            | )          |
| Net increase in cash                                                                                                                                |       | 579                                             |       | 3,036                                           |       |
| Cash and cash  equivalents, beginning of period                                                                                                     |       | 2,224                                           |       | 2,822                                           |       |
| Cash and cash  equivalents, end of period                                                                                                           |       | $                                               | 2,803      |                                            | $          | 5,858 |   |
| **Supplemental Disclosure of Cash  Flow Information:**                                                                                              | ** ** | ** **                                      | ** ** | ** **                                      | ** ** |
| Interest paid  during the period                                                                                                                    |       | $                                               | 316        |                                            | $          | 383 |   |
| **Non-cash  transactions:**                                                                                                                         | ** ** | ** **                                      | ** ** | ** **                                      | ** ** |
| Assets acquired through  capital leases                                                                                                             |       | $                                               | 498        |                                            | $          | 181 |   |

 

See accompanying notes tocondensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**Form 10-Q Quarterly Report**

**For the Three and Six MonthsEnded June 30, 2007**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**(unaudited)**

**1.  Plan of Liquidation and the Resort**

OnFebruary 25, 2001, the Company’s board of directors (the “Board”) adopted, andon May 22, 2001 the Company’s common and preferred stockholders approved, aplan of liquidation for the Company.  Theplan of liquidation contemplates the sale of all of the Company’s assets andthe payment of, or provision for, the Company’s liabilities and expenses, andauthorizes the Company to establish a reserve to fund the Company’s contingentliabilities.  As of August 9, 2007, theCompany had sold 45 of the 47 (eighteen-hole equivalent) golf courses in whichthe Company once held interests pursuant to the plan of liquidation.

OnJuly 15, 2004, the Company entered into a settlement agreement (the “SettlementAgreement”) with Golf Trust of America, L.P. and GTA-IB, LLC (“GTA-IB”), andGolf Host Resorts, Inc., our former unaffiliated borrower (“GHR”), Golf Hosts,Inc., Golf Host Management, Inc., Golf Host Condominium, Inc. and Golf HostCondominium, LLC, and took control of the Innisbrook Resort and Golf Club (the “Resort”).** **The settlement wasaccounted for using methods consistent with purchase accounting in accordancewith Statement of Financial Accounting Standards, or SFAS, No. 141 “BusinessCombinations”.  As a result of thesettlement, the financial results of GTA-IB, the Company’s wholly ownedsubsidiary that held title to the Resort, are consolidated in the Company’sfinancial statements commencing July 16, 2004.

On January 21, 2005, we engaged Houlihan Lokey asour then financial advisor for an initial term of nine months to providefinancial advisory services to us in furtherance of our stockholder-approvedplan of liquidation.  Our liquidation mayoccur through the sale of our assets, merger or otherwise in order to allow usto maximize value to our stockholders. In addition, subject to appropriate approvals, we may pursue arecapitalization.  The engagement was extendedon a month-to-month basis until June 29, 2006. Since an exit transactionhad not occurred by June 29, 2006, the Company terminated the engagementwith Houlihan Lokey.  A tail periodfollowing the termination of the engagement during which Houlihan Lokey mightstill have been due a transaction fee expired on February 28, 2007;therefore, no obligation for financial advisor fees to them existed after thatdate.  Following this termination ofHoulihan Lokey, the Company continued to market the Resort for sale.

As a result ofthis effort, the Company announced on June 25, 2007, that the Company andcertain of its affiliated entities entered into an Asset Purchase Agreementwith Salamander Innisbrook Securities, LLC, Salamander Innisbrook Condominium,LLC and Salamander Innisbrook, LLC (collectively, “Salamander”), providing forthe acquisition by Salamander of the business of the Resort (the “Business”),certain related assets and liabilities and the Company’s equity interest inGolf Host Securities, Inc.  The saleof the Resort was completed on July 16, 2007 and, in addition to the assumptionof certain liabilities relating to the Resort and the Business, Salamander paidto GTA-IB $35,000,000 in cash, and $4,000,000 to be used to settle certainobligations. See Note 10, *Subsequent Events*,for more information regarding the sale.

The Company alsoannounced on June 25, 2007 that the Company had entered into an optionagreement (the “AEW Option Agreement”) with AEW Targeted Securities Fund, L.P.,its preferred stockholder (“AEW”), to purchase, on or before August 1, 2007,all 800,000 shares of the Company’s Series A Cumulative Convertible RedeemablePreferred Stock (the “Series A Preferred Stock”) held by AEW (the “Option”),including, without limitation, all of AEW’s rights to Liquidation Preferences(as defined in the Company’s Articles Supplementary, including, withoutlimitation, Liquidation Preferences in respect of any accrued and unpaiddividends) payable in respect of such shares as of the Company’s exercise ofthe Option for a price of $17,500,000, subject to upward adjustment; provided,however, that the Option would only be exercisable by the Company in the eventthat the Business of the Resort was purchased pursuant to the essential termsand conditions, including purchase price, of the Asset Purchase Agreement, asdescribed above.

Following the saleof the Resort and the redemption of the Series A Preferred Stock, the onlyremaining assets of the Company are (a) cash, (b) the Company’s interest in certainproceeds from the sale of a tract of undeveloped land located 

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within the Resort,referred to herein as “Parcel F”, (c) certain holdbacks and escrowed fundsrelated to the sale of the Resort, and (d) two private courses located inColumbia, South Carolina, referred to herein as “Stonehenge”.

Although theCompany has operated under the plan of liquidation since May 22, 2001, pursuantto which it has successfully sold 33 of the 34 properties owned by the Companyon that date, the Board now believes that it is in the best interests of thestockholders of the Company to actively consider and pursue alternativebusiness strategies in order to maximize stockholder value.  The Board and management currently areworking together to develop a recommended alternative strategy (an “AlternativeStrategy”).  The Alternative Strategycould include, among other things, the pursuit of acquisitions, a sale of theCompany or certain of its assets, mergers, joint ventures or other businesscombinations and partnerships.****  It is expected that theAlternative Strategy would focus on ways to extract value by capitalizing onexisting strengths, such as the potential tax benefits from the Company’s netoperating loss carryforwards as permitted by applicable law.  The Board is also actively developing aproposal to restructure both the existing management team and the compositionof the Board itself to align respective skills to ensure optimum************consideration and implementation of an Alternative Strategy.****

The implementationof an Alternative Strategy by the Company would be inconsistent with the planof liquidation and would require that the plan of liquidation beterminated.  Based on its recentdeliberations, the Board expects to submit to the stockholders of the Companyas soon as practical in the third quarter of 2007 a proposal to terminate theplan of liquidation (the “Termination Proposal”).  The Board expects that the TerminationProposal would include a description of the recommended Alternative Strategy,any proposed changes to the composition of management and the Board and relatedinformation.  The Board expects that theTermination Proposal would describe the types of transactions to be pursued andthe process to be followed to identify and evaluate potential transactions, butwould not reference any specific potential business combinations or othertransactions.  In the event that thestockholders approve the Termination Proposal, the Board expects that anypotential transactions would be presented subsequently to the stockholders forconsideration and approval as they may be identified and as may be appropriateunder applicable law.

In the event thatthe stockholders do not approve the Termination Proposal, the plan ofliquidation would remain in place, and the Company would continue to implementthe plan of liquidation.  These financialstatements, notes thereto and the assumptions therein are based on the currentstockholder approved plan of liquidation until such time as the stockholdershave approved a new strategy.

See Notes 9, *Preferred Stock*, and 10, *Subsequent Events*,for further discussion regarding the sale of the Resort and relatedobligations.

**2.  Organization and Basis of Presentation**

TheCompany was incorporated in Maryland on November 8, 1996 as a real estate investmenttrust (“REIT”).  As of fiscal year 2002,the Company no longer has its REIT status as a result of its repossession andoperation of golf courses following the default of its original third-partylessees.  At June 30, 2007, the Companyowned the Resort and Stonehenge, which together represented six golfcourses.  Stonehenge is owned and managedby the Company, while the Resort was managed by Westin from the inception dateof the Company’s ownership, July 15, 2004, until October 31, 2006.  Subsequent to October 31, 2006, the Resorthad been managed directly by the Company without the assistance of anythird-party manager.  The four golfcourses at the Resort were managed by Troon Golf, L.L.C. (“Troon”).  See Notes 4, *Commitmentsand Contingencies*, and 10, *Subsequent Events*,for further discussion.

Priorto July 15, 2004, the Resort served as collateral for a 30-yearparticipating mortgage wherein the Company was the lender to an unaffiliatedborrower.  Upon the execution of theSettlement Agreement with its former borrower on July 15, 2004, theCompany obtained ownership of the Resort. The Company presently holds Stonehenge in fee simple.  The Resort is located in Florida andStonehenge is in South Carolina.  Thetitle to Stonehenge is held by Golf Trust of America, L.P., a Delaware limitedpartnership and the Company’s operating partnership.  The Company refers to Golf Trust of America,L.P. as the “Operating Partnership”, and the Company refers to the OperatingPartnership and itself (together with all subsidiaries) collectively as “we”, “us”or the “Company”.  The title to theResort, prior to its sale, was held by GTA-IB, a wholly owned subsidiary ofGTA-IB Golf Resort, LLC, which in turn is 100% owned by the OperatingPartnership.  Through 

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its wholly owned subsidiaries GTA GP, Inc. andGTA LP, Inc., the Company holds 100 percent of the interest in theOperating Partnership at June 30, 2007. GTA GP, Inc. is the sole generalpartner of the Operating Partnership and owns a 0.2 percent interest therein.GTA LP, Inc. is the sole limited partner in the Operating Partnership and ownsa 99.8 percent interest therein.

*Principlesof Consolidation*

Theaccompanying condensed consolidated financial statements include the accountsof GTA GP, Inc., GTA LP, Inc., the Operating Partnership and their wholly-ownedsubsidiaries. All significant intercompany transactions and balances have beeneliminated in consolidation.

*Adjustmentsto Liquidation Basis of Accounting*

As aresult of the adoption by the Board of the plan of liquidation and approval ofthe plan of liquidation by the Company’s stockholders, the Company adopted theliquidation basis of accounting for all periods subsequent to May 22,2001.  Accordingly, on May 22, 2001,the Company’s assets were adjusted to their estimated fair value and theCompany’s liabilities, including estimated costs associated with implementingthe plan of liquidation, were adjusted to their estimated settlementamounts.  The valuation of real estateheld for sale as of June 30, 2007 relies on estimates of sales values based onindications of interest from the marketplace and/or executed asset purchaseagreements as applicable, certain assumptions by management specificallyapplicable to each property, and on the property value ranges.  The valuation of the Company’s other assetsand liabilities under the liquidation basis of accounting is based onmanagement’s estimates as of June 30, 2007.

For the three months ended June 30, 2007, net assetsin liquidation decreased by approximately $1,890,000.  This decrease resulted from (a) a decrease ofapproximately $400,000 in the forecast of the Company’s cumulative netoperating results, which includes its Resort and golf course assets, the Resortcondominium sales operations and the overhead and interest expense of theCompany’s corporate operations, (b) an increase of $25,000 in the accrual forcapital expenditures at Stonehenge, (c) an increase of $180,000 for otherincurred liquidation expenses, (d) an increase of $250,000 in the accrual forlegal fees primarily for fees incurred in preparation for and during the trialrelated to the Young complaints, (e) an increase of $25,000 in the accrual forprofessional fees for accounting services, (f) a decrease in the carrying valueof the debt to our preferred stockholder of $2,500,000 (see Notes 9, *Preferred Stock*, and 10, *Subsequent Events*,for further discussion), and (g) a decrease of $3,510,000 in the carrying valueof the business of the Resort based on the estimated net loss on the saletransaction (see Note 10, *Subsequent Events*,for further discussion).  Also,approximately $97,000 was reallocated from the accrual for financial advisorfees to (i) a $50,000 increase in the accrual for legal fees and (ii) a $47,000increase in the accrual for other liquidation expenses.  The forecast of the Company’s cumulative netoperating results is impacted by, among other things, changes in theanticipated sale date of Stonehenge, the final results of the post-closingsettlement of the working capital adjustment for the Resort and the estimatedtime and expense required to wind-down the operations of the Company.

For the six months ended June 30, 2007, net assets inliquidation decreased by approximately $2,395,000.  This decrease was a result of the changesdescribed above that were recorded in the three months ended June 30, 2007 plusthe changes recorded in the three months ended March 31, 2007 which were (a) adecrease of approximately $500,000 in the forecast of the Company’s cumulativenet operating results, which includes its Resort and golf course assets, theResort condominium sales operations and the overhead and interest expense ofthe Company’s corporate operations and (b) an increase of $5,000 in the accrualfor capital expenditures at Stonehenge.

Thenet assets of approximately $11,470,000 at June 30, 2007 would result in aliquidation distribution per share of approximately $1.59.  This $1.59 estimate for liquidationdistribution per share includes projections of costs and expenses expected tobe incurred during the period required to complete the plan of liquidation,that is, until the Company sells its remaining assets, namely Stonehenge andthe Company’s interest in Parcel F, which was not sold in the Resort saletransaction.  The actual per sharedistributions that the Company makes to the holders of the Company’s commonstock could be materially lower than the amount the Company currently estimatesof $1.59 due to factors such as (a) the timing of any sale of the propertiesand the corresponding transaction costs, (b) the performance of the underlyingassets, and (c) a change in the underlying assumptions of the cash flow amountprojected.  The $1.59 estimate is derivedby dividing the net assets in liquidation by the number of shares of commonstock and common Operating Partnership units outstanding (7,317,000 less85,000) after consideration of those shares that will be canceled prior to thedistribution of the net assets.  The 85,000shares of common stock were pledged to the Company as security for the paymentand performance of the obligations and liabilities of the pledgor under acommon stock redemption agreement executed concurrently with a 2001 asset sale.  Because this redemption agreement provides inpart that these shares will be tendered to us if and when the total amountof liquidating distributions paid to the holders of common stock pursuant tothe plan of liquidation is less than $10.74 per share, we expect these sharesto be tendered to us and canceled.

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*Reservefor Estimated Costs During the Period of Liquidation*

Under the liquidation basis of accounting, the Companyis required to estimate and accrue the costs associated with implementing andcompleting the plan of liquidation. These amounts can vary significantly due to, among other things, thetiming and realized proceeds from golf course sales, the costs of retainingpersonnel and others to oversee the liquidation, including the costs ofinsurance, the timing and amounts associated with discharging known andcontingent liabilities, transaction costs related to any sales and the costsassociated with cessation of the Company’s operations.  These costs are estimates only and areexpected to be paid out over the liquidation period, which contemplates the sale of the Resort, which occurred on July16, 2007, the sale of Stonehenge by December 31, 2007 (although no assetpurchase agreement has been executed for Stonehenge as of August 9, 2007) andthe cessation of the Company’s operations by March 31, 2008.  The Company can provide no assurance thatthose dates will be met.  As a result,the Company has accrued the projected costs, including corporate overhead andspecific liquidation costs of severance, financial advisors and otherprofessional fees and other miscellaneous wind-down costs, expected to beincurred during the projected period required to complete the liquidation ofthe Company’s remaining assets.  TheCompany has also accrued the projected operating results of the Resort and theother property that the Company owns and manages through the actual and/orprojected remaining holding periods. These projections could change materiallybased on the timing of any anticipated sale, the performance of the underlying assets,  transaction costs related to any sales,corporate operating expenses including public company costs and any change inthe underlying assumptions of the cash flow amount projected.  These accruals will be adjusted from time totime as projections and assumptions change.

The following is asummary of the changes in the Reserve for Estimated Costs During the Period ofLiquidation (Liquidation Reserve) (unaudited): 
| ** **             | ** ** | **December 31,  2006** | ** ** | **Transfers and  Payments** | ** ** | **Operating  Income(Loss) and  Interest** | ** ** | **Adjustments** | ** ** | **June 30,  2007** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------------|------------|------------------------------------------------|------------|-----------------|------------|-------------------------|------------|
| Severance              |       | $                           | 1,748,000  |                             | $          | —                                         |       | $               | —     |                    | $          | — |   | $ | 1,748,000 |   |
| Professional fees      |       | 1,250,000                   |       | (674,000                         | )          | —                                         |       | 325,000         |       | 901,000                 |       |
| Financial advisor fees |       | 297,000                     |       | (67,000                          | )          | —                                         |       | (97,000         | )          | 133,000                 |       |
| Capital expenditures   |       | 47,000                      |       | (61,000                          | )          | —                                         |       | 30,000          |       | 16,000                  |       |
| Other                  |       | (57,000                     | )          | (223,000                         | )          | 1,294,000                                      |       | 1,127,000       |       | 2,141,000               |       |
| Total                  |       | $                           | 3,285,000  |                             | $          | (1,025,000                                     | )          | $               | 1,294,000  |                    | $          | 1,385,000 |   | $ | 4,939,000 |   |

 

Included in the accrued severance amounts above areperformance milestone payments aggregating approximately $1,317,000 (theaccrued interest on these amounts is included in Accounts Payable and OtherLiabilities) due to the Company’s executives pursuant to their amended andrestated employment agreements.  Sincethere were no remaining conditions to these payments, these milestones paymentsplus accrued interest were paid to the Company’s executives on July 16, 2007following the closing of the sale of the Resort.  The adjustment to the other liquidation reserveof approximately $1,127,000 is to consider the forecast of the Company’scumulative net operating results, which includes the Resort and its condominiumsales operations (until the closing of the sale of these assets on July 16,2007), an estimate of the closing costs in a future sale of Stonehenge, certainincurred but unbilled liquidation expenses, and an estimate of the overhead andinterest expense of the Company’s corporate operations through the contemplatedliquidation period.  The increase in theprofessional fee accrual of $325,000 is primarily for fees incurred inpreparation for and during the trial related to the Young complaints.  The increase of $30,000 in the accrual forcapital expenditures is for anticipated projects at Stonehenge.  As described above, these projections couldchange materially and will be adjusted from time to time as projections andassumptions change.

Since the Company is presentingliquidation basis financial statements that only reflect the changes in netassets in liquidation, the operating results of the Company are summarized andreflected in the table below:

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| ** **                                                      | ** ** | **For the three months ended  June 30,** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2007**                                                          | ** ** | **2006** | ** ** |
|                                                            |       |                                                              |       |   |   |
| Revenue from Resort and  managed golf course operations         |       | $                                                                 | 9,747,000  |   | $ | 13,155,000 |   |
| Expenses:                                                       |       |                                                              |       |   |   |
| General and  administrative                                     |       | 243,000                                                           |       | 248,000 |   |
| Direct expenses from  Resort and managed golf course operations |       | 9,960,000                                                         |       | 12,885,000 |   |
| Total operating  expenses                                       |       | 10,203,000                                                        |       | 13,133,000 |   |
| Operating (loss) income                                         |       | (456,000                                                          | )          | 22,000 |   |
| Interest expense—net                                       |       | (363,000                                                          | )          | (330,000 | ) |
| Operating (loss) income and interest expense—net           |       | $                                                                 | (819,000   | ) | $ | (308,000 | ) |

 
| ** **                                                      | ** ** | **For the six months ended  June 30,** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2007**                                                        | ** ** | **2006** | ** ** |
|                                                            |       |                                                            |       |   |   |
| Revenue from Resort and  managed golf course operations         |       | $                                                               | 25,025,000 |   | $ | 31,161,000 |   |
| Expenses:                                                       |       |                                                            |       |   |   |
| General and  administrative                                     |       | 541,000                                                         |       | 500,000 |   |
| Direct expenses from  Resort and managed golf course operations |       | 22,388,000                                                      |       | 27,141,000 |   |
| Total operating  expenses                                       |       | 22,929,000                                                      |       | 27,641,000 |   |
| Operating income                                                |       | 2,096,000                                                       |       | 3,520,000 |   |
| Interest expense—net                                       |       | (743,000                                                        | )          | (648,000 | ) |
| Other expense                                                   |       | (59,000                                                         | )          | — |   |
| Operating income and interest expense—net                  |       | $                                                               | 1,294,000  |   | $ | 2,872,000 |   |

 

**3.  Summary of Significant Accounting Policies**

*Interim Statements*

The accompanying condensedconsolidated financial statements for the three and six months ended June 30,2007 have been prepared in accordance with (a) accounting principlesgenerally accepted in the United States of America (“GAAP”), and under theliquidation basis of accounting following our stockholders’ approval of theplan of liquidation on May 22, 2001, and (b) the instructions toForm 10-Q and Article 10 of Regulation S-X.  These financial statements have not beenaudited by a registered independent public accounting firm; however, theyinclude adjustments (consisting of normal recurring adjustments) which are, inthe judgment of management, necessary for a fair presentation of the netassets, financial condition, results of operations and cash flows for suchperiods.  However, these results are notnecessarily indicative of results for any other interim period or for the fullyear. In particular, revenues from golf course operations are seasonal.

Certain information and footnotedisclosures normally included in financial statements in accordance with GAAPhave been omitted as allowed in quarterly reports by the rules of the SEC.  The Company’s management believes that thedisclosures included in the accompanying interim financial statements andfootnotes are adequate to make the information not misleading, but alsobelieves that these statements should be read in conjunction with the summaryof significant accounting policies and notes to financial statements included inour Form 10-K for the year ended December 31, 2006, filed onApril 2, 2007.

*Recent Accounting Pronouncements*

In July 2006, the FASBissued FASB Interpretation No. 48, “Accounting for Uncertainty in IncomeTaxes-an Interpretation of FASB Statement No. 109” (FIN 48), whichclarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements.  FIN48 prescribes a recognition threshold and measurement attribute for therecognition and measurement of a tax position taken, or expected to be taken,in a tax return.  The provisions of FIN48 were effective for

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theCompany as of January 1, 2007 and required application of FIN 48 to allexisting tax positions upon initial adoption. The adoption of the standard had no effect on the Company’s financialcondition or results of operations.

***4.  Commitments andContingencies***

*Property TaxLawsuit*

GTA-IB has filedlawsuits against the property appraiser of Pinellas County, Florida tochallenge the 2004, 2005 and 2006 real estate assessment on the Resortproperty.  Pinellas County filed a motionto dismiss, which was denied by the court. Discovery is in process and no trial date has been set. If PinellasCounty were to prevail, management believes that there would be no materialadverse effect upon our financial statements, as the entire Pinellas Countyassessment is fully accrued and accounted for at June 30, 2007 and was paidconcurrent with the sale of the Resort on July 16, 2007.  See Note 10, *SubsequentEvents*, for further discussion.

***WallSprings Conservatory, Inc. Complaint***

On July 13, 2006, Wall Springs Conservatory, Inc.(“Wall Springs”) filed suit against GTA-IB, as successor in interest to GHR, inthe circuit court of Pinellas County for declaratory relief regarding theallocation of certain full golf memberships at the Resort.  On July 14, 2006, Wall Springs alsofiled suit against us in the small claims division of the Pinellas County Courtin connection with an easement agreement. We answered both claims, also asserting affirmative defenses andcounterclaims in each action.  We thenfiled a motion to transfer the small claims matter to Circuit Court, which wasgranted on September 27, 2006.  Wethen moved to consolidate these two cases. Our motion to consolidate was granted by the Circuit Court onMarch 1, 2007.  At this time, theCompany is unable to assess the likely outcome of this litigation.

***LakeOzark Industries, Inc. and Everett Holding Company, Inc. v. GolfTrust of America, et al.***

The titled actionwas brought in the Circuit Court of Miller County, Missouri, by a contractor,Lake Ozark Construction Industries, Inc. (“LOCI”) and its assertedassignee of lien and account rights, Everett Holding Company, Inc., in thefall of 1999 against numerous defendants, including the OperatingPartnership.  Plaintiffs assert LOCIperformed construction services on, or that LOCI benefited, the property ofvarious defendants, including the Operating Partnership.  With respect to the Operating Partnership,plaintiffs seek to foreclose a mechanic’s lien upon property formerly owned byit.  The lien is for the principal amountof approximately $1,276,000, plus interest at 10% per annum and attorneyfees.  Plaintiffs calculate interest toMay 20, 1999, just prior to the lien filing, to be approximately $151,000and interest thereafter to be $354 per day. The Court entered a written order granting the Operating Partnership’sMotion for Summary Judgment in April 2002 and a final judgment in November2003.  Plaintiffs appealed the ruling tothe Missouri Court of Appeals.  The Courtof Appeals on April 5, 2005 reversed the Circuit Court judgment in favorof us and remanded the case to the Circuit Court for further proceedings.  On May 31, 2005, the Court of Appealsfiled a modified Opinion, which again reversed the Circuit Court judgment infavor of us and remanded the case to the Circuit Court for furtherproceedings.  As of August 9, 2007, thetrial date has not yet been set. At this time, the Company is unable to assessthe likely outcome of this litigation.

*Environmental Remediation*

The Florida Department of Environmental Protection (“DEP”)conducted a site inspection at the Resort on June 24, 2003.  The Resort was found to have improperlydisposed of waste paint and solvents and failed to properly store waste lampsand used oil and oil filters in properly labeled containers.  The predecessor owner entered into a ConsentOrder wherein the DEP agreed to a reduced civil penalty of $22,000, and allowedthe predecessor owner to offset 80% of this reduced civil penalty with creditsobtained through the implementation of a pollution control project and aprocess of ongoing self-monitoring and reporting of environmental conditions tothe DEP.  The DEP determined that anabove ground self-contained storage tank system at the Resort qualifies forthis credit.  The Resort installed thesystem and, on an ongoing basis, continues to monitor the environmentalconditions at the Resort and to report these conditions to the DEP.  As part of the ongoing self-monitoring andreporting process, the Resort engaged a third party, URS Corporation, todevelop a Site Assessment Report and monitor the environmental conditionsnoted in the DEP Consent Order.  Thefinal formal proposal from URS Corporation was received on April 6, 2007 andwas subsequently approved by the DEP. The estimated costs in the proposal for the remediation wasapproximately $59,000.  URS Corporationcompleted the remediation work in May 

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2007.  This amount was accrued as “Other Expense”  in the first quarter of 2007.  After the excavation is finished, additionaltesting will be completed. If tests remain favorable, this should conclude theprocess.  Obligations with respect tothis matter were assumed by Salamander in connection with the sale of theResort.

***OrdinaryCourse Litigation***

Owners and operators ofgolf courses are subject to a variety of legal proceedings arising in theordinary course of operating a golf course, including proceedings relating topersonal injury and property damage. Since the Company is now either the owner and/or the operator of all ofits remaining golf courses, the Company maintains insurance for these purposes,subject to deductibles and exclusions deemed reasonable by the Company.  The Company is not currently subject to anymaterial claims of this type.

***Westinand Troon Management Fees***

The July 15, 2004 management agreement betweenGTA-IB and Westin Management Company South (“Westin”) provided that Westinwould manage the Resort for a fee equal to 2.2% of gross revenue of the Resort(the “Westin Management Agreement”). Contemporaneously with the signing of the Westin Management Agreement,Westin and GTA-IB, for the limited purposes described in the Westin ManagementAgreement, entered into a separate agreement with Troon, which provided thatTroon would manage the golf facilities of the Resort for a fee, payable byGTA-IB, equal to 2% of gross golf revenue (the “Troon Management Agreement”).  These agreements also provided for theopportunity for Westin and Troon to earn supplemental fees based on financialperformance metrics.  The WestinManagement Agreement had a termination date of December 31, 2017; however,by mutual agreement, on September 28, 2006, the Company, Westin and GTA-IBentered into a Termination and Release Agreement (the “Westin TerminationAgreement”) pursuant to which the Company, GTA-IB and Westin agreed toterminate the Westin Management Agreement as of October 31, 2006, or theTermination Date.  In addition to thetermination of the Westin Management Agreement, the Westin Termination Agreementprovides that (a) on or prior to October 3, 2006, the Company woulddeposit $600,000 in the Resort’s operating account (which the Company did)  to be used in part to pay to Westin certainunpaid fees and charges that had accrued under the Westin Management Agreement,(b) on or prior to the earlier of March 31, 2008, or any sale of theResort by the Company, the Company would pay to Westin the termination feeprovided under Section 4.4.2 of the Westin Management Agreement calculatedas of the Termination Date, or approximately $5,594,000 (which was subsequentlydiscounted approximately $191,000 by Westin in July 2007 and paid concurrentwith the closing of the sale of the Resort; see Note 10, *SubsequentEvents*, for further discussion), and (c) Westin would permitthe Company and GTA-IB to continue to access Westin’s “SAP” accounting system(which they did) for the operation of the Resort for a period of three monthsafter the Termination Date for a total charge of $6,000.  The Company and GTA-IB independently managedthe Resort as of the Termination Date.

GTA-IB and Troon agreed to extend the Troon ManagementAgreement for ten-day incremental periods subsequent to November 30, 2006.  On February 22, 2007, GTA-IB sent Troon anotice of termination in regards to the Troon Management Agreement.  The Troon Management Agreement was terminatedon July 13, 2007 and the supplemental and management fees due totalingapproximately $977,000 were paid on July 16, 2007 concurrent with the closingof the sale of the Resort.  See Note 10, *Subsequent Events*, for further discussion. These amountswere fully accrued as of June 30, 2007.

***RefundableInitiation Fees***

Certain membership initiation fees at Stonehenge arerefundable based on specific conditions. The estimated present value of the potential refunds over the thirty-yearrequired membership term, as defined in the Club Membership Manual, is recordedas an accrued liability on our books at June 30, 2007 and is valued at$125,000. Additionally, certain initiation fees may be refundable prior to theexpiration of the thirty-year term under specific membership replacementconditions.  There is no liabilityrecorded to consider the refundability of refunds issued under these conditionsdue to the fact that four new members have to join in the specific membershipcategory for a resigned member to receive a refund.  A refund issued under these specificcircumstances would be considered a reduction of membership revenue for thatperiod.  All new initiation fees receivedare initially recorded as deferred revenue and amortized over the average lifeof a membership which, based on historical information, is deemed to be nineyears.

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**5.  Receivables—net**

Receivables—net consists of approximately $2,829,000in member, trade and other miscellaneous receivables of our managed golf courses,the Resort and its related entity Golf Host Securities, Inc. at June 30, 2007,as compared to the receivables at December 31, 2006, which includeapproximately $2,892,000 of member, trade and other miscellaneous receivablesof our managed golf courses, the Resort and its related entity Golf HostSecurities, Inc.

**6.  Debt**
|                           | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Revolving line of credit  |       | $                           | 4,100,000  |                            | $          | 4,100,000 |   |
| Capital lease obligations |       | 1,075,000                   |       | 772,000                         |       |
| Non-revolving loan        |       | 320,000                     |       | —                          |       |
| Total                     |       | $                           | 5,495,000  |                            | $          | 4,872,000 |   |

 

*RevolvingLine of Credit*

On March 18, 2004, the Company entered into aloan agreement and related mortgage with Textron Financial Corporation (“Textron”)for a revolving line of credit with a maximum permissible outstanding loanamount of $2,100,000.  On August 4,2005, the line was increased to $4,200,000 and the term was extended toMarch 18, 2009.  This loan is collateralizedby a security interest in the Company’s golf courses in Stonehenge.  The interest rate is the prime rate plus1.75% per annum paid monthly.  This loanrequires that the operations at Stonehenge for the immediately preceding twelvemonth period be sufficient to meet a debt service coverage ratio, as defined inthe mortgage, of at least 1.20, as measured monthly.  At June 30, 2007, the Company did not meetthe debt service coverage ratio (in part due to the ramped up efforts toimprove the playing quality of the golf courses by spending a significant sumon additional maintenance labor, beautification efforts and repair andmaintenance projects on the golf courses that do not qualify forcapitalization); however, due to the fact that the Company has consistentlypaid our interest obligations throughout the term of the loan, Textron waivedthe covenant violation subject to re-evaluation at December 31, 2007.

In certain instances, theloan may be assumed by a buyer of Stonehenge pursuant to assumptionprovisions in the loan amendment.  Theinterest rate continues to be the prime rate (8.25% per annum at June 30, 2007)plus 1.75% per annum, paid monthly.  TheCompany paid a one-time commitment fee to Textron of $42,000 to obtain theincrease in this credit line.  Inaddition, the Company will pay to Textron a fee of 0.25% per annum of theunused balance of this line of credit.

In connection with theexecution of the Textron loan amendment, the Company, through its subsidiariesStonehenge LLC and the Operating Partnership (collectively, the “Borrower”),entered into a Notice of Future Advance, Note, Mortgage and Loan ModificationAgreement with Textron (the “Amended Mortgage”) modifying the March 2004Mortgage, Security Agreement and Fixture Filing (as modified by the AmendedMortgage, the “Security Agreement”).  TheSecurity Agreement contains events of default provisions that include, amongothers, non-payment of principal, interest or fees, violation of covenants,inaccuracy of representations and warranties, cross defaults, bankruptcy andinsolvency proceedings, termination, dissolution or liquidation of StonehengeLLC or the Operating Partnership, failure to cure the loss of certain licenses,permits or contracts, curtailment of utilities or services at Stonehenge andmaterial judgments.  In the event of theoccurrence of an event of default, Textron is entitled to, among other things,accelerate all obligations of the Borrower under the aforesaid loan documentsand sell certain of the Borrower’s assets, namely Stonehenge and relatedassets, to satisfy the Borrower’s obligations.

*CapitalLease Obligations*

At June 30, 2007, theCompany had capital lease agreements for certain golf course and otherequipment at the Resort.  These leaseagreements expire at various dates through 2012.

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|                                            | ** ** | **Capital** | ** ** |
|--------------------------------------------|------------|-------------|------------|
| July 1 through December 31, 2007 |       | $           | 262,000    |   |
| 2008                                       |       | 459,000     |       |
| 2009                                       |       | 238,000     |       |
| 2010                                       |       | 126,000     |       |
| Thereafter                                 |       | 155,000     |       |
| Total                                      |       | 1,240,000   |       |
| Less amount representing interest          |       | (165,000    | )          |
| Total                                      |       | $           | 1,075,000  |   |

 

*PatriotBank Loan*

On April 10, 2007, GTA-IB and certain of itsaffiliates entered into a Business Loan Agreement (the “Loan Agreement”) withPatriot Bank, a community bank, to borrow, on a non-revolving basis, up to aprincipal amount of $1,200,000 (the “Loan”). The Loan was secured by a first priority mortgage on three wholly-ownedcondominium units located at the Resort. On the closing date, the Companyborrowed, pursuant to the Loan Agreement, approximately $20,000 to pay theclosing costs related to the Loan. Subject to compliance with the Loan Agreement, the Company had the rightto draw down the remainder of the principal amount available under the LoanAgreement over time to finance renovations of the Company’s restaurants,information technology infrastructure upgrades at the Resort, other propertyimprovements at the Resort and short-term working capital shortfalls of theCompany or the Resort.

The Loan bore interest at thefloating Wall Street Journal Prime rate and provided for interest only paymentsthrough December 31, 2007.  Beginningwith the monthly payment due on January 31, 2008, the Loan Agreement requiredprincipal and interest payments based on a twenty year amortizationschedule.  There was no prepaymentpenalty for early repayment.

Among other terms, the Loan Agreement contained representations,warranties and covenants of the Company with respect to matters such asownership of the condominium units serving as collateral, the future deliveryof reports to the lender, the absence of defaults by the Company under otheragreements and compliance with applicable laws and government regulations.

As of June 30, 2007, the amount outstanding againstthe Loan was approximately $320,000.  TheLoan was repaid and cancelled on July 16, 2007, concurrent with the closing ofthe sale of the Resort.  See Note 10, *Subsequent Events*, for further discussion.

**7.  Accounts Payable and Otherliabilities**

Accounts payable andother liabilities consist of the following:
|                               | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|-------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Accounts payable              |       | $                           | 6,432,000  |                            | $          | 5,904,000 |   |
| Accrued payroll               |       | 1,385,000                   |       | 1,250,000                       |       |
| Accrued expenses              |       | 1,992,000                   |       | 2,151,000                       |       |
| Deferred revenue and deposits |       | 4,206,000                   |       | 4,103,000                       |       |
| Total                         |       | $                           | 14,015,000 |                            | $          | 13,408,000 |   |

 

SeeNote 10 for discussion regarding the payment of accounts payable following theclosing of the sale of the Resort on July 16, 2007.

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**8.  Other Obligations**
|                                       | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Westin termination fee                |       | $                           | 5,403,000  |                            | $          | 5,594,000 |   |
| Troon supplemental fee                |       | 800,000                     |       | 800,000                         |       |
| Master lease refurbishment obligation |       | 3,854,000                   |       | 4,254,000                       |       |
| Total                                 |       | $                           | 10,057,000 |                            | $          | 10,648,000 |   |

 

*MasterLease Refurbishment Obligation*

In connection with the Settlement Agreement, the Companyassumed control and operation of the rental pool lease operations at the Resort(the “Rental Pool”).  The Rental Pool wasoperated and controlled by GHR prior to that time.  On a year-to-year basis, approximately 500 ofthe 938 condominium units at the Resort were leased by the Company from thecondominium owners and used as hotel accommodations for the Resort pursuant torental pool lease arrangements.  TheCompany was the lessee under these rental pool lease operation agreements.  Those agreements provided that the Companywould distribute a percentage of room revenues to participating condominiumowners who permitted the Company to lease their units as hotel accommodations.

In connection with theCompany taking control of the Resort from its unaffiliated borrower effectiveJuly 16, 2004, the Company recorded a liability to recognize itsobligations under the refurbishment program (the “Refurbishment Program”)pursuant to the Amended and Restated Innisbrook Rental Pool Master LeaseAgreement, dated January 1, 2004 (the “MLA”). This program entitles condominium owners who participate in the RentalPool to 50% reimbursement of the refurbishment costs of their unit subject tothe terms and conditions of the MLA. Interest on this liability is accrued at arate of 5% and is paid quarterly. Principal payments began in the first quarterof 2005 and will be paid quarterly through the fourth quarter of 2009.  In addition, GTA IB agreed to providerefurbishment reimbursement for units placed into the Rental Pool during 2005at a level of 25% of the applicable condominium owner’s investment in therefurbishment.  Interest on the 2005phase of the Refurbishment Program liability is accrued at a rate of 2.5% perannum and paid quarterly. Principal payments for the 2005 phase of the RefurbishmentProgram begin in the first quarter of 2008 and will be paid quarterly throughthe fourth quarter of 2012.  As of June30, 2007, the Company estimates the settlement value of this liability uponsale of the Resort to be $3,854,000. This liability was transferred to Salamander upon the sale of the Resorton July 16, 2007, including such liabilities since January 1, 2007.  See Note 10, *SubsequentEvents*, for further discussion.

Minimumprincipal payments on the Refurbishment Program at the Resort are as follows:
| Year                                        | ** ** | **Amount** | ** ** |
|---------------------------------------------|------------|------------|------------|
| ** **                                  | ** ** | ** ** | ** ** |
| April 1 through December 31, 2007 |       | $          | 712,000    |   |
| 2008                                        |       | 1,790,000  |       |
| 2009                                        |       | 2,151,000  |       |
| 2010                                        |       | 22,000     |       |
| Thereafter                                  |       | 59,000     |       |
| Total undiscounted principal payments       |       | 4,734,000  |       |
| Less: net present value discount            |       | (880,000   | )          |
| Total                                       |       | $          | 3,854,000  |   |

 

*Westin TerminationFee*

The Westin Management Agreement that the Companyexecuted with Westin on July 15, 2004 provided that the Company would payto Westin, subject to the terms and conditions set forth in that agreement, atermination fee of not less than $5,500,000. The estimated settlement value of this liability upon sale of the Resortis approximately $5,403,000 as of June 30, 2007.  The termination fee was paid to Westinconcurrent with the sale of the Resort on July 16, 2007.  See Notes 4, *Commitmentsand Contingencies*, and 10, *Subsequent Events*,for further discussion.

17

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*Troon SupplementalFee*

The Troon Management Agreement that Westin executedwith Troon was effective as of July 15, 2004.  That agreement provided that the Companywould pay to Troon, subject to the terms and conditions set forth in thatagreement, a supplemental fee of $800,000 for outstanding management feesoriginally payable to Troon prior to July 15, 2004.  The supplemental fee was paid to Troonconcurrent with the sale of the Resort on July 16, 2007.  See Notes 4, *Commitmentsand Contingencies*, and 10, *Subsequent Events*,for further discussion.

**9.  Preferred Stock**

*Series ACumulative Convertible Redeemable Preferred Stock*

On April 2, 1999, the Company completed aregistered offering of 800,000 shares of the Company’s 9.25% Series ACumulative Convertible Preferred Stock, par value $0.01 per share, at a priceof $25.00 per share.  All shares of theSeries A Preferred Stock were sold to AEW. The Series A Preferred Stock was convertible, in whole or in part, atthe option of the holder at any time into the Company’s common stock at animplicit conversion price of $26.25 per share of common stock, subject toadjustment in certain circumstances.  TheCompany contributed the net proceeds to the Operating Partnership in exchangefor 800,000 Series A Preferred Operating Partnership units with analogousterms.

Aggregate Series A Preferred Stock dividends accrueduntil July 20, 2003 at a rate of $462,500 per quarter. EffectiveJuly 21, 2003, the rate increased to $625,000 per quarter (see furtherdiscussion of this increase below).  Asof March 31, 2007, the Company had not paid 22 quarters of Series A PreferredStock dividends (including the dividend otherwise payable in respect of thequarter ended March 31, 2007).  Under theCompany’s Series A Preferred Stock charter document, because the Company had atleast six quarters of unpaid Series A Preferred Stock dividends, the holder ofthe Series A Preferred Stock, AEW or its transferee, had the right toelect two additional directors to the Board whose terms as directors wouldcontinue until the Company fully paid all accrued but unpaid Series A PreferredStock dividends.  This right went intoeffect at the Company’s annual meeting that was held on November 17, 2003and AEW did not exercise that right.

On February 22, 2001, the Company entered into avoting agreement with AEW.  Thatagreement required AEW to vote in favor of the plan of liquidation and requiredthe Company to redeem all of the shares of Series A Preferred Stock (for $25per share plus dividends accrued and unpaid thereon through the date of thefinal redemption payment) promptly after the Company determined in good faiththat it has received sufficient net proceeds from the disposition of the Company’sassets and/or operations to redeem all of the Series A Preferred Stock withoutviolating any legal or contractual obligations.

Moreover, under the Company’s voting agreement withAEW, since the Company did not fully redeem the Series A Preferred Stock byMay 22, 2003, AEW or its transferee had the right to require the Companyto redeem the Series A Preferred Stock in full within 60 days thereafter,which right AEW exercised.  Since theCompany defaulted on that obligation, from July 21, 2003 until the SeriesA Preferred Stock was redeemed, the stated dividend rate of the Series APreferred Stock increased from 9.25% to 12.50% per annum (equivalent to aquarterly dividend of $625,000). Although the Company was permitted to continue to accrue such dividendswithout paying the same on a current basis, the dividends would have beenrequired to be paid in full prior to any distribution to the Company’s commonstockholders (but after payment of all obligations to the Company’s creditors),which would have reduced the Company’s cash available for liquidatingdistributions to common stockholders.

On June 25, 2007, the Company and AEW entered into theAEW Option Agreement, which, among other things:

·                  granted the Company the Option,exercisable by the Company in its sole discretion, to purchase, on or beforeAugust 1, 2007, all 800,000 shares of the Series A Preferred Stock held by AEWincluding, without limitation, all of AEW’s rights to Liquidation Preferences(as defined in the Company’s Articles Supplementary, including, withoutlimitation, Liquidation Preferences in respect of any accrued and unpaiddividends) payable in respect of such shares as of the Company’s exercise ofthe Option for a price of $17,500,000 (the “Exercise Price”), subject to upwardadjustment; provided, however, that the Option could only be exercised by theCompany in the event that the Business of the Resort was purchased pursuant tothe essential terms and conditions, including purchase price, of the AssetPurchase Agreement; and

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·                  provided that at such time as theCompany exercised the Option and paid the Exercise Price in accordance with theprovisions of the AEW Option Agreement, all rights of AEW pursuant to anyagreements between AEW and the Company, the Company’s Articles Supplementary orotherwise would terminate, and the Series A Preferred Stock purchased would beauthorized and unissued shares of Series A Preferred Stock to which AEW wouldno longer have any ownership rights.

Asdescribed below, the Company exercised the Option and redeemed the Series APreferred Stock for the Exercise Price in connection with the closing of thesale of the Resort.

**10.  Subsequent Events**

GTA announced onJune 25, 2007 that the Company and certain of its affiliated entities enteredinto an Asset Purchase Agreement with Salamander providing for the acquisitionby Salamander of the Business of the Resort, certain related assets andliabilities and the Company’s equity interest in Golf HostSecurities, Inc.

On July 16, 2007, the Company and its affiliatescompleted the sale of the Business of the Resort and all of GTA-IB Golf Resort,LLC’s equity interest in Golf Host Securities, Inc. to Salamander pursuantto the Asset Purchase Agreement.  Thepurchase price received by the Company from Salamander was approximately$35,000,000 in cash, plus (a) $4,000,000 to be used to settle certainobligations, and (b) the assumption of certain liabilities.  The purchaseprice is subject to certain post-closing working capital adjustments, as setforth in the Asset Purchase Agreement. The Asset Purchase Agreement also provided for a holdback for accountsreceivable and a $2,000,000 escrow for GTA-IB’s and the Company’sindemnification liabilities.

As part of the sale of the Business, Salamander hasassumed operation and control of the Rental Pool.  The Rental Poolobligated the Company to make quarterly distributions of a percentage of roomrevenues to participating owners under the MLA.  The MLA also entitledparticipating owners to 50% reimbursement of the refurbishment costs of theirunits.  In addition to reimbursement bySalamander of such obligations since January 1, 2007 in the amount ofapproximately $844,000, obligations in connection with the RefurbishmentProgram, along with all other obligations under the MLA, were assumed bySalamander upon the closing of the Asset Purchase Agreement.  Also, all capital and operating leaseobligations of the Resort were assumed by Salamander upon the closing of theAsset Purchase Agreement.

On July 13, 2007, the Company and certain of itsaffiliated entities and Troon entered into a Facilities Management AgreementTermination Agreement (the “Troon Termination Agreement”) pursuant to which theTroon Management Agreement was terminated. The Troon Termination Agreement also provided for the payment to Troonof $177,000 in accrued and unpaid fees and reimbursable expenses and thesupplemental fee of $800,000 contemporaneous with the sale of the Resort.

Contemporaneouslywith the closing of the sale of the Resort, (a) the Company exercised theOption and repurchased the outstanding Series A Preferred Stock at the ExercisePrice of $17,500,000 (see Note 9, *Preferred Stock*,for further discussion), (b) all outstanding accrued and unpaid amounts werepaid to Pinellas County for property taxes, in the approximate amount of$343,000, (c) a termination fee of $5,403,000 was paid to Westin, (d) thesupplemental fee and management fees totaling $977,000 were paid to Troon (seeNotes 2, *Organization and Basis for Presentation*,and 8, *Investment in Resort and Related Obligations*,for further discussion), and (e) the Patriot Bank loan was repaid andcancelled.  With regard to the propertytaxes, the Company intends to continue to pursue the respective lawsuits torecover these amounts from the Pinellas County. See Note 4, *Commitments andContingencies*, for further discussion.

Subsequent to the closing of the sale of the Resort,the Company paid outstanding accrued and unpaid (a) legal fees totalingapproximately $3,261,000, (b) Board fees and expenses totaling approximately$263,000, and (c) milestone payments due to our current/former executiveofficers totaling approximately $1,317,000 plus accrued interest.  See Note 2, *Organizationand Basis for Presentation*, for further discussion regarding themilestone payments.

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Below is the proforma impact of the sale of the Resort and the exerciseof the Option to purchase the outstanding Series A Preferred Stock (see Note 9,*Preferred Stock*) on the Company’s June30, 2007 condensed consolidated statement of net assets.
| ** **                                                                                            | ** ** | **June 30,  2007** | ** ** | **Proforma  Adjustments** | ** ** | **Proforma  June 30, 2007** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|---------------------------------------|------------|
| ** **                                                                                            | ** ** | **(in thousands)** | ** ** |
| **ASSETS**                                                                                            | ** ** | ** **              | ** ** | ** **                | ** ** | ** **                            | ** ** |
| Real estate—held for sale                                                                        |       | $                       | 52,767     |                      | $          | (45,967                               | )          | $ | 6,800 |   |
| Cash and cash equivalents                                                                             |       | 2,803                   |       | 8,241                     |       | 11,044                                |       |
| Receivables—net                                                                                  |       | 2,829                   |       | (2,445                    | )          | 384                                   |       |
| Escrow                                                                                                |       | —                  |       | 2,000                     |       | 2,000                                 |       |
| Accounts receivable reserve receivable from Buyer                                                     |       | —                  |       | 252                       |       | 252                                   |       |
| Working capital true-up receivable from Buyer                                                         |       | —                  |       | 1,625                     |       | 1,625                                 |       |
| Other assets                                                                                          |       | 5,077                   |       | (1,846                    | )          | 3,231                                 |       |
| Total assets                                                                                          |       | 63,476                  |       | (38,140                   | )          | 25,336                                |       |
| **LIABILITIES**                                                                                       | ** ** | ** **              | ** ** | ** **                | ** ** | ** **                            | ** ** |
| Debt                                                                                                  |       | 5,495                   |       | (1,395                    | )          | 4,100                                 |       |
| Accounts payable and other liabilities                                                                |       | 14,015                  |       | (8,592                    | )          | 5,423                                 |       |
| Other obligations                                                                                     |       | 10,057                  |       | (10,057                   | )          | —                                |       |
| Reserve for estimated costs during the period of  liquidation                                         |       | 4,939                   |       | (596                      | )          | 4,343                                 |       |
| **Total liabilities**                                                                                 |       | 34,506                  |       | (20,640                   | )          | 13,866                                |       |
| Commitments and contingencies                                                                         |       |                    |       |                      |       |                                  |       |
| Preferred stock, $.01 par value, 10,000,000 shares  authorized, 800,000 shares issued and outstanding |       | 17,500                  |       | (17,500                   | )          | —                                |       |
| Total liabilities and preferred stock                                                                 |       | 52,006                  |       | (38,140                   | )          | 13,866                                |       |
| **NET  ASSETS IN LIQUIDATION**(available to holders of common stock  and OP units)                    |       | $                       | 11,470     |                      | $          | —                                |       | $ | 11,470 |   |

 

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**GOLF TRUST OF AMERICA, INC.Form 10-Q Quarterly ReportFor the Three and Six Months Ended June 30, 2007 and 2006**

**ITEM 2. MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

We wereincorporated in Maryland on November 8, 1996.  We have been engaged in a liquidation of ourassets pursuant to a plan of liquidation approved by our stockholders.  However, as previously announced anddescribed more fully below, we are currently considering additional strategicoptions to maximize stockholder value. We were originally formed to be a REIT; however, as of fiscal year 2002we no longer have our REIT status as a result of our repossession and operationof certain golf courses following the default of their original third-partylessees.  As of July 31, 2007, we own oneproperty in South Carolina, Stonehenge, held by us in fee simple, representingtwo golf courses.  The Operating Partnershipholds title to Stonehenge.  Through ourwholly owned subsidiaries, GTA GP, Inc. and GTA LP, Inc., we held100 percent of the interests in the Operating Partnership as of August 9,2007.  GTA GP, Inc. is the solegeneral partner of the Operating Partnership and owns a 0.2 percentinterest therein.  GTA LP, Inc. isthe sole limited partner in the operating partnership and owns a99.8 percent interest therein.

**Significant Events Since theFiling of our Quarterly Report on Form 10-Q on May 15, 2007**

Significantevents occurring since May 15, 2007 (the filing date of our Quarterly Report onForm 10-Q) include:

·                                          On July 16,2007, the Company, the Operating Partnership and GTA-IB, GTA-IB Golf Resort,LLC, GTA-IB Condominium, LLC and GTA-IB Management, LLC (the OperatingPartnership’s subsidiaries) completed the sale of the Resort and all of GTA-IBGolf Resort, LLC’s equity interest in Golf Host Securities, Inc. to Salamanderpursuant to the Asset Purchase Agreement dated June 25, 2007.  The purchase price was approximately$35,000,000 in cash, plus (a) $4,000,000 to be used to settle certainobligations of the Resort, and (b) the assumption of certain liabilities.  The purchase price is subject to certainpost-closing working capital adjustments, as set forth in the Asset PurchaseAgreement.  As part of the sale of theBusiness, Salamander assumed operation and control of the Rental Pool, which isa securitized pool of condominiums owned by participating persons and rented ashotel rooms to guests of the Resort.  TheRental Pool obligated GTA-IB to make quarterly distributions of a percentage ofroom revenues to participating owners under the MLA.  The MLA also entitled participating owners to50% reimbursement of the refurbishment costs of their units.  In addition to reimbursement by Salamander ofsuch obligations since January 1, 2007 in the amount of approximately $844,000,obligations in connection with the Refurbishment Program, along with all otherobligations under the MLA, were assumed by Salamander upon the closing of thesale of the Resort.

·                                     Uponthe closing of the sale of the Resort, the Company exercised the Option andpurchased all 800,000 shares of the Series A Preferred Stock held by AEWpursuant to the AEW Option Agreement, dated June 25, 2007.  The Option was exercised at the ExercisePrice of $17,500,000, subject to certain post-closing adjustments, as set forthin the AEW Option Agreement.

·                                     OnJuly 13, 2007, GTA-IB entered into the Troon Termination Agreement with Troon,pursuant to which the Troon Management Agreement, dated as of July 15, 2004, asamended, that contemplated the management and operation of the golf facilitiesof the Resort, was terminated on July 15, 2007. Under the Troon Termination Agreement (a) Troon was entitled to retainall sums received by it prior to the termination, and (b) GTA-IB paid Troon$177,000 in connection with accrued fees and reimbursable expenses and asupplemental fee of $800,000 due pursuant to the Troon ManagementAgreement.  These amounts were previouslyaccrued and recorded in our financial statements and were paid upon the closingof the sale of the Resort.

·                                     Pursuantto the Westin Termination Agreement, between the Company, GTA-IB and Westin,dated September 28, 2006, Westin was entitled to a termination fee.  In connection with the closing of the sale of

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the Resort, the Company made a payment to Westin infull satisfaction of that obligation in the amount of approximately $5,403,000,which was net of a discount from Westin of approximately $191,000.  The net amount was previously accrued andrecorded in our financial statements.

·                                     OnJuly 9, 2007, our financial advisor, Robert A. Stanger & Co., Inc.,presented a fairness opinion to the Board stating that, subject to certainassumptions and conditions set forth in the opinion, the consideration (asdefined therein) received by the Company pursuant to the Resort saletransaction was fair, from a financial point of view, to the commonstockholders of the Company.

·                                     OnApril 10, 2007,  GTA-IB and certain ofits affiliates entered into a Loan Agreement with Patriot Bank, a communitybank, to borrow, on a non-revolving basis, up to a principal amount of$1,200,000.  The Loan was secured by afirst priority mortgage on three wholly-owned condominium units located at theResort.  Upon the closing of the sale ofthe Resort, the Company repaid in full all amounts outstanding under the Loanof approximately $304,000.

·                                     Subsequentto the closing of the sale of the Resort, the Company paid outstanding accruedand unpaid (a) legal fees totaling approximately $3,261,000, (b) Board fees andexpenses totaling approximately $263,000, and (c) milestone payments due to ourcurrent/former executive officers totaling approximately $1,317,000 plusaccrued interest.

·                                     Asa result of the sale of the Resort, the Company’s liquidity improvedsignificantly.  Net cash proceeds fromthe sale and after all the payouts required at closing were approximately$10,501,000, subject to certain holdbacks for accounts receivable ofapproximately $251,000, an escrow for the Company’s indemnification liabilityof approximately $2,000,000 and post-closing working capital adjustments ofapproximately $2,221,000.  The Company’sobligations under the Refurbishment Program under the MLA were assumed bySalamander and eliminated from the Company’s balance sheet.  As described above, the Company used aportion of the sale proceeds to satisfy its obligations to Westin, Troon,Patriot Bank and with respect to certain accounts payable, including paymentsto executives and former executives for earned and unpaid milestone paymentsand to its former legal counsel.  Inaddition, the redemption of the Series A Preferred Stock eliminated from itsbalance sheet $17,500,000 of accrued liabilities for the liquidation value andaccrued and unpaid dividends on the Series A Preferred Stock.

**Possible Change in BusinessStrategy**

Following the saleof the Resort and the redemption of the Series A Preferred Stock, the onlyremaining assets of the Company are (a) cash, (b) the Company’s interest incertain proceeds from the sale of Parcel F, (c) certain holdbacks and escrowedfunds related to the sale of the Resort, and (d) Stonehenge.

Although theCompany has operated under the plan of liquidation since May 22, 2001, pursuantto which it has successfully sold 33 of the 34 properties owned by the Companyon that date, the Board now believes that it is in the best interests of thestockholders of the Company to actively consider and pursue alternativebusiness strategies in order to maximize stockholder value.  The Board and management currently areworking together to develop a recommended Alternative Strategy.  The Alternative Strategy could include, amongother things, the pursuit of acquisitions, a sale of the Company or certain ofits assets, mergers, joint ventures or other business combinations andpartnerships.****  It is expected that theAlternative Strategy would focus on ways to extract value by capitalizing onexisting strengths, such as the potential tax benefits from the Company’s netoperating loss carryforwards, as permitted by applicable law.  The Board is also actively developing aproposal to restructure both the existing management team and the compositionof the Board itself to align respective skills to ensure optimum********considerationand implementation of an Alternative Strategy.****

The implementationof an Alternative Strategy by the Company would be inconsistent with the planof liquidation and would require that the plan of liquidation beterminated.  Based on its recentdeliberations, the Board expects to submit to the stockholders of the Companyas soon as practical in the third quarter of 2007 a proposal to terminate theplan of 

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liquidation.  The Board expects that the TerminationProposal would include a description of the recommended Alternative Strategy,any proposed changes to the composition of management and the Board and relatedinformation.  The Board expects that the TerminationProposal would describe the types of transactions to be pursued and the processto be followed to identify and evaluate potential transactions, but would notreference any specific potential business combinations or other transactions.  In the event that the stockholders approvethe Termination Proposal, the Board expects that any potential transactionswould be presented subsequently to the stockholders for consideration andapproval as they may be identified and as may be appropriate under applicablelaw.

In the event thatthe stockholders do not approve the Termination Proposal, the plan ofliquidation would remain in place, and the Company would continue to implementthe plan of liquidation.

**AssetsHeld for Sale**

As noted above, asof August 9, 2007, our only remaining assets are the Country Clubs of Wildewoodand Woodcreek Farms, or Stonehenge, which include two 18-hole golf courses inColumbia, South Carolina, and our interest in Parcel F, which is a parcel ofland adjacent to the Resort, which was not included in the sale of theResort.  As of August 9, 2007, we havenot entered into any binding agreements with prospective purchasers for thesale of Stonehenge.  Pursuant to theParcel F sale agreement, the closing of the sale of Parcel F is expected tooccur on or about August 31, 2007.  Ourinterest in Parcel F is currently valued at approximately $2.9 million.

**CurrentStrategic Choices**

As described above, the Company is exploring a fullrange of Strategic Alternatives, and anticipates presenting the Board’srecommendation to its stockholders in its third fiscal quarter of 2007.  Since we adopted the plan of liquidation inMay 2001, we believe we have made significant progress in liquidating ourassets.  We have successfully closed onthe sale of 33 of the 34 properties that we owned, leaving Stonehenge stillremaining in our portfolio.  If theCompany ultimately continues the liquidation of its assets pursuant to the planof liquidation, we anticipate making one or more liquidating distributions tothe holders of our common stock.  If wepursue another Strategic Alternative, the details of the recommendedalternative and its impact on the plan of liquidation, Board and managementcomposition and stockholder distributions will be disclosed, and stockholderapproval of such alternative will be sought.

**PotentialUse of a Liquidating Trust**

If the Companycontinues to pursue the sale of our remaining assets and the wind-up of theCompany, as contemplated by our plan of liquidation, we may elect to contributeour remaining assets and liabilities to a liquidating trust.  For a more complete description of ourpotential use of a liquidating trust, please refer to “Potential use of aLiquidating Trust; Related Income Tax Risks to our Stockholders” in Part 1,Item 1 of our Form 10-K for the year ended December 31, 2006, filedon April 2, 2007.

**Applicationof Critical Accounting Policies**

Upon approval byour stockholders of the plan of liquidation on May 22, 2001, we adoptedthe liquidation basis of accounting for periods beginning after May 22,2001.  Pending any change in the Company’sstrategic direction, as discussed above, the Company will continue using theliquidation basis of accounting for the presentation of its financialstatements.  The changes in Net Assets inLiquidation for Golf Trust of America, Inc., excluding the Resort and GolfHost Securities, Inc., are discussed below. This discussion of changes in net assets, instead of a discussion ofoperating results, is consistent with the presentation of the liquidation basisfinancial statements in Item 1 of this Quarterly Report on Form 10-Q.  The results of operations for the Resort arediscussed separately below under the caption “Resort results of operations forthe three months ended June 30, 2007 and 2006”. Please refer to “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Application of Critical Accounting Policies”in our Form 10-K for the year ended December 31, 2006, filed onApril 2, 2007, for a complete description of our critical accountingpolicies.

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

The change in ourreserve for estimated liquidation costs for the three and six months ended June30, 2007 is summarized in Note 2 to our Condensed Consolidated FinancialStatements contained in Item 1 above.

**Changes in Net Assets inLiquidation**

***January 1, 2007 to June 30, 2007***

The change in ournet assets for the three and six months ended June 30, 2007 is summarized inNote 2 to our Condensed Consolidated Financial Statements contained inItem 1 above.

**Resort Results of Operations for the Three and Six Months ended June30, 2007 and 2006**

***Results of Operations***

Because the Resort is a destination golf resort, webelieve it appeals to a different market than the market to which stand-alonehotels located in downtown metropolitan areas would appeal.  The Resort provides recreation, condominiumaccommodations and food and beverage dining and catering options to businessmeeting or group travelers, transient guests who play golf, guests who purchasegolf packages and guests who bring their families to the Resort.  As a destination golf resort, the Resort’sperformance is sensitive to weather conditions and seasonality.

The Resort had lower realized revenue, fewer room nightsand fewer golf rounds during the three months and six months ended June 30,2007 than during the corresponding periods in 2006.  The decrease in realized revenue is directlyattributable to the reduction in aggregate room nights, described below, forboth the group and transient market sectors. The decrease in aggregate room nights in the group sector was primarilydue to 3,000 room nights that booked in the first quarter of 2006 that theResort chose to decline for the first quarter of 2007 because it was notprofitable business for the Resort.  Thebalance of the variance was due to groups that are on a regional rotation fortheir respective meetings.  The Resortwas not able to replace these room nights with other group bookings.  Under the Westin Management Agreement, whichterminated on October 31, 2006, the Resort had access to the Westin GlobalSales Office (the “GSO”), which provided group booking leads to theResort.  Since the group booking windowis typically six to eighteen months out, the Resort was negatively impacted bythe loss of the leads historically provided by the GSO, which were not able tobe replicated by other lead sources in the short window of time between thetermination of the Westin Management Agreement on October 31, 2006 and the peakseason of 2007, January through April. Since the termination of the Westin Management Agreement, the Resortmanagement teams had made efforts to replicate the GSO lead source with otherindependent lead sources but the impact of these efforts was not realized inthe short-term.

Transient room nights were also down due to the loss ofthe Westin central reservations services and other transient booking sourcesand the benefit of an international marketing campaign that was available whenthe Resort was under the Westin international hotel chain flag.  As we continued to establish Innisbrook as anindependent brand and gain exposure in the internet booking arena, we believedwe would realize less of a variance in the room nights in the transientsector.  The Resort did realize an increasein the overall average daily room rate of approximately $8.37, for the sixmonths ended June 30, 2007 as compared to the six months ended June 30, 2006,from targeting a more profitable type of guest, which helped mitigate some ofthe revenue lost due to the reduction in both room nights and golf rounds.

During the six months ended June 30, 2007, each of themarket segments at the Resort discussed below produced a greater aggregatespending level per room night as compared to the six months ended June 30,2006.  While overall room nights, mealsserved and golf rounds played decreased 28.7%, 30.9% and 5.8% respectively,during the first six months of 2007 as compared to the same period in 2006,overall gross revenue per room night increased by $90.66 to $584.77 from $494.11while per meal revenue increased by $4.47 to $35.10 from $30.63 and gross golfrevenue per round played increased by $6.23 to $138.22 from $131.99.  The fluctuation in gross revenue is discussedin further detail below.

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The following table shows utilization of the Resortfacilities broken down by department, results of operations and selected RentalPool statistical data during the three month and six month periods ended June30, 2007 and June 30, 2006.  Thisinformation is shown in thousands, except for statistical data such as theutilization data in the table below:

|                                        | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|----------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                             | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **Increase  (Decrease)** | ** ** | **Percentage  Change** | ** ** | **2007** | ** ** | **2006** | ** ** | **Increase  (Decrease)** | ** ** | **Percentage  Change** | ** ** |
| **Utilization  of Resort facilities:** | ** ** | ** **                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available room  nights                 |       | 53,423                                              |       | 53,108                                            |       | 315 |   | 0.6 |                 % | 104,530 |   | 104,175 |   | 355 |   | 0.3 | % |
| Actual room  nights                    |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Group                                  |       | 9,207                                               |       | 14,768                                            |       | (5,561 | ) | (37.7 | )% | 25,491 |   | 37,861 |   | (12,370 | ) | (32.7 | )% |
| Transient                              |       | 6,824                                               |       | 8,650                                             |       | (1,826 | ) | (21.1 | )% | 13,876 |   | 17,333 |   | (3,457 | ) | (19.9 | )% |
| Total room  nights                     |       | 16,031                                              |       | 23,418                                            |       | (7,387 | ) | (31.5 | )% | 39,367 |   | 55,194 |   | (15,827 | ) | (28.7 | )% |
| Food and  beverage meals               |       | 71,058                                              |       | 96,548                                            |       | (25,490 | ) | (26.4 | )% | 176,391 |   | 255,257 |   | (78,866 | ) | (30.9 | )% |
| Golf rounds                            |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Resort guests                          |       | 18,936                                              |       | 20,290                                            |       | (1,354 | ) | (06.7 | )% | 39,775 |   | 43,711 |   | (3,936 | ) | (9.0 | )% |
| Member/guests                          |       | 9,013                                               |       | 8,711                                             |       | 302 |   | 03.5 | % | 21,735 |   | 21,569 |   | 166 |   | 0.8 | % |
| Total golf  rounds                     |       | 27,949                                              |       | 29,001                                            |       | (1,052 | ) | (03.6 | )% | 61,510 |   | 65,280 |   | (3,770 | ) | (5.8 | )% |
| Gross revenue  per room night          |       | $                                                   | 539.89     |                                              | $          | 438.08 |   | $ | 101.81 |   | 23.2 | % | $ | 584.77 |   | $ | 494.11 |   | $ | 90.66 |   | 18.3 | % |
|                                        |            |                                                     |            |                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                  | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                  | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** | **2007** | ** ** | **2006** | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** |
| **Results  of operations:**                 | ** ** | ** **                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues                                    |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Hotel                                       |       | $                                                   | 2,354      |                                              | $          | 3,444 |   | $ | (1,090 | ) | (31.6 | )% | $ | 6,955 |   | $ | 9,289 |   | $ | (2,334 | ) | (25.1 | )% |
| Food and  beverage                          |       | 2,205                                               |       | 2,686                                             |       | (481 | ) | (17.9 | )% | 6,192 |   | 7,818 |   | (1,626 | ) | (20.8 | )% |
| Golf                                        |       | 3,468                                               |       | 3,527                                             |       | (59 | ) | (1.7 | )% | 8,502 |   | 8,616 |   | (114 | ) | (1.3 | )% |
| Other                                       |       | 628                                                 |       | 602                                               |       | 26 |   | 4.3 | % | 1,372 |   | 1,549 |   | (177 | ) | (11.4 | )% |
| Total revenues                              |       | 8,655                                               |       | 10,259                                            |       | (1,604 | ) | (15.6 | )% | 23,021 |   | 27,272 |   | (4,251 | ) | (15.6 | )% |
| Expenses                                    |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Hotel                                       |       | 2,215                                               |       | 2,843                                             |       | (628 | ) | (22.1 | )% | 5,578 |   | 6,950 |   | (1,372 | ) | (19.7 | )% |
| Food and  beverage                          |       | 1,868                                               |       | 1,878                                             |       | (10 | ) | (0.5 | )% | 4,500 |   | 5,011 |   | (511 | ) | (10.2 | )% |
| Golf                                        |       | 1,908                                               |       | 1,911                                             |       | (3 | ) | (0.2 | )% | 3,921 |   | 3,767 |   | 154 |   | 4.1 | % |
| Other                                       |       | 2,609                                               |       | 2,540                                             |       | 69 |   | 2.7 | % | 5,241 |   | 5,377 |   | (136 | ) | (2.5 | )% |
| General and  administrative                 |       | 840                                                 |       | 1,410                                             |       | (570 | ) | (40.4 | )% | 1,960 |   | 3,152 |   | (1,192 | ) | (37.8 | )% |
| Depreciation and  amortization              |       | 566                                                 |       | 533                                               |       | 33 |   | 06.2 | % | 1,102 |   | 1,024 |   | 78 |   | 7.6 | % |
| Total expenses                              |       | 10,006                                              |       | 11,115                                            |       | (1,109 | ) | (10.0 | )% | 22,302 |   | 25,281 |   | (2,979 | ) | (11.8 | )% |
| Operating  income(loss)                     |       | (1,351                                              | )          | (856                                              | )          | (495 | ) | (57.8 | )% | 719 |   | 1,991 |   | (1,272 | ) | (63.9 | )% |
| Other income                                |       | (191                                                | )          | —                                            |       | (191 | ) | (100.0 | )% | (132 | ) | — |   | (132 | ) | (100.0 | )% |
| Interest  expense, net                      |       | 234                                                 |       | 370                                               |       | (136 | ) | (36.8 | )% | 494 |   | 743 |   | (249 | ) | (33.5 | )% |
| Net income(loss)                            |       | $                                                   | (1,394     | )                                                 | $          | (1,226 | ) | $ | (168 | ) | (13.7 | )% | $ | 357 |   | $ | 1,248 |   | $ | (891 | ) | (71.4 | )% |
| ** **                                  | ** ** | ** **                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Selected  Rental Pool statistical data:** | ** ** | ** **                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Average daily  distribution                 |       | $                                                   | 15.91      |                                              | $          | 22.65 |   | $ | (6.74 | ) | (29.8 | )% | $ | 23.79 |   | $ | 31.17 |   | $ | (7.38 | ) | (23.7 | )% |
| Average room  rate                          |       | 146.83                                              |       | $                                                 | 147.04     |   | $ | 0.21 |   | 0.1 | % | $ | 176.66 |   | $ | 168.29 |   | $ | 8.37 |   | 5.0 | % |
| Occupancy  percentage                       |       | 30.0                                                | %          | 44.1                                              | %          | (14.1 | )% | (31.9 | )% | 37.7 | % | 53.0 | % | (15.3 | ) | (28.9 | )% |
| Average number  of available units          |       | 587                                                 |       | 584                                               |       | 3 |   | 0.5 | % | 578 |   | 576 |   | 2 |   | 0.3 | % |

 

***Three Months ended June 30, 2007 and 2006***

During the three months ended June 30, 2007, there were7,387, or 31.5%, fewer occupied room nights as compared to the three monthsended June 30, 2006.  There were 1,826fewer transient room nights and 5,561 less group room nights during 

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thethree months ended June 30, 2007 as compared to the three months ended June 30,2006.  Group room nights consist ofconference room nights, or room nights which are booked and correlate to ameeting or convention at the Resort, and transient room nights are room nightswhich are booked and do not correlate to a meeting or convention at theResort.  Transient room nights are oftenbooked within 30 days or less from the date of the visit, while group roomnights are typically booked no less than 120 days in advance of the dateof a visit.  Larger groups typically book16 to 18 months in advance of a stay. Transient room nights are often booked as part of golf packages andInternet bookings, among others. Management believes that the decrease in the room nights, as describedin the introductory paragraph above, is attributable to the change in lead andreservation channels from the Westin central reservation system and theirinternational marketing programs and other sources available through Westin toindependent lead and reservation channels. This type of change takes time to re-establish the Innisbrook name as anindependent brand and gain appropriate exposure in the Internet and Media marketseparate from the Westin identity.  Inaddition, the Resort staff continued to learn how to maximize the reservationchannels available to it as an independent property.

Total revenue for the Resort was $1,604,000 less duringthe three months ended June 30, 2007 than in the same period of 2006.  An overall increase in spending by the Resort’sguests helped to mitigate the reduction in gross revenue that resulted from thelower number of room nights and decreases in banquet and catering sales inthree months ended June 30, 2007 as compared to same period of 2006.  During the same periods, the average roomrate decreased by $0.21 per room night from $147.04 in 2006 to $146.83 in2007.  Gross revenue per room night duringthe three months ended June 30, 2007 was $539.89, as compared to $438.08 forthe same period in 2006.

The most significant decrease in revenues at the Resortduring the three months ended June 30, 2007 occurred in the Hoteldepartment.  Revenues attributable tothat category for the three months ended June 30, 2007 decreased by approximately$1,090,000, or 31.6%, as compared to the same period in 2006. Hotel revenuedecreased primarily because of the decrease in aggregate room nights notedabove.  Food and Beverage revenuesdecreased by approximately $481,000, or 17.9%, as a result of 25,490, or 26.4%,fewer meals being served, also referred to as covers, as compared to the threemonths ended June 30, 2006.  Thisaggregate decrease in covers served was primarily attributable to the Resort’sbanquets, catering and outlets, with a combined decrease of approximately22,830 covers.  Covers attributed to theResort’s room and pool service decreased by approximately 2,660.  While the aggregate number of coversdecreased, revenue per cover increased from $27.82 to $31.03.  The combination of decreased number of coversand increased revenue per cover produced the $481,0001 negative variance forthe three months ended June 30, 2007 as compared to the three months ended June30, 2006.

Golf revenue decreased by approximately $59,000,primarily as a result of 1,052 fewer rounds of golf played during the threemonths ended June 30, 2007 as compared to the same period in 2006.  Gross golf revenue for the quarter ended June30, 2007 averaged $124.08 per round, as compared to $121.62 per round for thesame period in 2006.  The net decrease inaggregate rounds played was attributed to 1,354 fewer rounds played by theResort’s transient guests, including packages, offset by an aggregate increaseof 302 rounds played by Resort members. The number of total golf rounds played in the three months ended June30, 2007 was 27,949, compared to 29,001 rounds played in the same period of2006.  Golf revenue does not necessarilyincrease or decrease exactly in proportion to occupied room nights because golfrevenue also includes member dues and fees and day golf group fees, neither ofwhich is directly related or dependent upon occupied room nights.

Consistent with pastperiods, we continued to monitor total operating expenses in an attempt toensure that we controlled expenses and that the expenses bore a directcorrelation to the room nights, food and beverage covers and golf rounddemand.  Aggregate total operatingexpenses do not generally increase or decrease on a one-to-one basis with totaloperating revenue because the Resort must carry a minimum fixed operating staffand other support expenses at all times. In those operating departments where the variable costs can best bemanaged, we manage these costs consistent with room, food and beverage and golfdemand.  Total Resort operating expenses,before depreciation and amortization and excluding the Rental Pool amortizationin hotel operations, decreased by approximately $1,142,000, or 10.8%, for thethree months ended June 30, 2007 as compared to the same period in 2006.  This decrease is primarily attributable tothe decrease in room nights and food and beverage covers discussed above.

Depreciation andamortization expense, excluding the Rental Pool amortization included in hotelexpenses, was approximately $566,000 and $533,000 for the three months endedJune 30, 2007 and 2006, respectively.

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Interest expense, net of interest income, wasapproximately $234,000 and $370,000 for the three months ended June 30, 2007and 2006, respectively, and reflects amortization of the discount of our RentalPool refurbishment liability in the amount of $153,000 and the interest portionof lease payments amounting to approximately $29,000.  The defaulted participating mortgage loanthat was assumed by us from GHR, our unaffiliated borrower, has an outstandingbalance at June 30, 2007 of $39,240,000 and became non-interest bearing uponour assumption on July 15, 2004.

Other income of $191,000 in the three months ended June30, 2007 represents the recognition of the discount in the termination feenegotiated with Westin in connection with the sale of the Resort, as describedabove.

The net loss for the three months ended June 30, 2007 wasapproximately $1,394,000, compared to a net loss for the three months endedJune 30, 2006 of approximately $1,226,000.

During the three months ended June 30, 2007,approximately $259,000 was disbursed for capital projects.  Of those disbursed funds, $247,000 was usedto pay lease payments on existing and additional equipment consisting ofbellman vehicles, golf cart leases, golf course equipment leases, telephoneequipment leases and cable leases and the balance was for various capitalimprovement projects and replacements throughout the Resort.

***Six Months ended June 30, 2007 and 2006***

During the six months ended June 30, 2007, there were15,827, or 28.7%, fewer occupied room nights as compared to the six monthsended June 30, 2006.  There were 3,457fewer transient room nights and 12,370 less group room nights during the sixmonths ended June 30, 2007 as compared to the six months ended June 30, 2006.

Total revenue for the Resort was $4,251,000 less duringthe six months ended June 30, 2007 than in the same period of 2006.  An overall increase in spending by the Resort’sguests, both for rooms (improved average room rates) and by package guests forfood and beverages, helped to mitigate the reduction in gross revenue thatresulted from the lower number of room nights and decreases in banquet andcatering sales in during six months ended June 30, 2007 as compared to sameperiod of 2006.  During the same periods,the average room rate increased by $8.37 per room night from $168.29 in 2006 to$176.66 in 2007.  Gross revenue per roomnight during the six months ended June 30, 2007 was $584.77, as compared to$494.11 for the same period in 2006.

The most significant decrease in revenues at the Resortduring the six months ended June 30, 2007 occurred in the Hoteldepartment.  Revenues attributable tothat category for the six months ended June 30, 2007 decreased by approximately$2,334,000, or 25.1%, as compared to the same period in 2006.  Hotel revenue decreased primarily because ofthe decrease in aggregate room nights noted above.  Food and Beverage revenues decreased byapproximately $1,626,000, or 20.8%, as a result of 78,866, or 30.9%, fewercovers, as compared to the six months ended June 30, 2006.  This aggregate decrease in covers served wasprimarily attributable to the Resort’s banquets, catering and restaurantoutlets, with a combined decrease of approximately 72,214 covers.  Covers attributed to the Resort’s room andpool service decreased by approximately 6,652. While the aggregate number of covers decreased, revenue per coverincreased from $30.63 to $35.10.  Thecombination of decreased number of covers and increased revenue per coverproduced the $1,626,000 negative variance for the six months ended June 30,2007 as compared to the six months ended June 30, 2006.

Golf revenue decreased by approximately $114,000,primarily as a result of 3,770 fewer rounds of golf played during the sixmonths ended June 30, 2007 as compared to the same period in 2006.  Management believes that approximately 1,200or 31.8% of that reduction in rounds for the six months period resulted fromthe fact that the PGA tournament was moved from October, during which it hasbeen held annually since 2001, to March beginning in 2007.  As a consequence of the Copperhead coursebeing used by the PGA for the tournament, the Resort was unable to sell itsgolf packages during the week of the March tournament.  March is historically one of its mostsuccessful months during the year.  Grossgolf revenue for the six months ended June 30, 2007 averaged $138.22 per round,as compared to $131.99 per round for the same period in 2006.  The net decrease in aggregate rounds playedwas attributed to 3,936 fewer rounds played by the Resort’s transient guests,including packages, offset by an aggregate increase of 166 rounds played byResort members.  The number of total golfrounds played in the six months ended June 30, 2007 was 61,510, compared to65,280 rounds played in the same period of 2006.  Golf revenue does not necessarily increase ordecrease exactly in proportion to occupied room nights because golf revenuealso includes member dues and fees and day golf group fees, neither of which isdirectly related or dependent upon occupied room nights.

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Total Resort operatingexpenses, before depreciation and amortization and excluding the Rental Poolamortization in hotel operations, decreased by approximately $3,057,000, or12.6%, for the six months ended June 30, 2007 as compared to the same period in2006.  This decrease is primarilyattributable to the decrease in room nights and food and beverage coversdiscussed above.

Depreciation and amortizationexpense, excluding the Rental Pool amortization included in hotel expenses, wasapproximately $1,102,000 and $1,024,000 for the six months ended June 30, 2007and 2006, respectively.

Interest expense, net of interest income, wasapproximately $494,000 and $743,000 for the six months ended June 30, 2007 and2006, respectively, and reflects amortization of the discount of our RentalPool refurbishment liability in the amount of $314,000 and the interest portionof lease payments amounting to approximately $49,000.

Other income of $132,000 in the six months ended June 30,2007 represents the accrual of the environmental remediation expense of $59,000as more fully discussed in Note 8 to the Condensed Combined FinancialStatements in Item 1 of the Quarterly Report on Form 10-Q filed May 15, 2007,offset by the favorable negotiated reduction in the Westin termination fee ofapproximately $191,000.

The net income for the six months ended June 30, 2007 wasapproximately $357,000, compared to a net income for the six months ended June30, 2006 of approximately $1,248,000.

During the six months ended June 30, 2007, approximately$617,000 was disbursed for capital projects. Of those disbursed funds, $469,000 was used to pay lease payments onexisting and additional equipment consisting of bellman vehicles, golf cartleases, golf course equipment leases, telephone equipment leases and cableleases and the balance was for various capital improvement projects andreplacements throughout the Resort.

**Liquidity and Capital Resources**

As a result of our need for liquidity at that time, onMarch 18, 2004 we entered into a loan agreement and related mortgage withTextron for a revolving line of credit. On August 4, 2005, we executed loan documents with Textron to amendthe terms of the existing revolving loan. Pursuant to this amendment, themaximum permissible outstanding loan amount was increased from $2,100,000 to$4,200,000.  The interest rate pursuantto the amended Textron loan documents continues to be the prime rate plus 1.75%per annum, paid monthly.  The amendmentextended the term of the loan from March 18, 2006 to March 18,2009.  This loan is collateralized by asecurity interest in Stonehenge.  Theloan requires that the operations at Stonehenge for the immediately precedingtwelve month period must be sufficient to meet a monthly debt service coverageratio, as defined in the mortgage, of at least 1.20.  At June 30, 2007, the Company did not meetthe debt service coverage ratio (in part due to the ramped up efforts toimprove the playing quality of the golf courses by spending a significant sumon additional maintenance labor, beautification efforts and repair andmaintenance projects on the golf courses that do not qualify forcapitalization); however, due to the fact that the Company has consistentlypaid our interest obligations throughout the term of the loan, Textron waivedthe covenant violation subject to re-evaluation at December 31, 2007.

Subject to certain conditions, a buyer of Stonehengemay assume this loan pursuant to the loan assumption provisions in theamendment.  We paid a one-time commitmentfee to Textron of $42,000, which represents 2% of the new funds approved toobtain the increase in this credit line. In addition, we will pay to Textron a fee of 0.25% per annum of theunused balance of the available line.  Asof the date of this report, we have drawn down a total of $4,100,000 on theline of credit. Subject to our satisfaction of the applicable terms, conditionsand covenants of this loan, there is $100,000 available that could be drawnunder this loan.

As described above, the sale of the Resortsignificantly improved the Company’s liquidity. We anticipate that cash on hand, combined with cash flow from Stonehenge’soperations, will be sufficient to meet the Company’s operating needs throughthe contemplated period of liquidation.

We could realize additional liquidity through ourinterest in the proceeds from the sale of Parcel F.  The anticipated timeline to realize the proceedsfrom our interest in the sale proceeds of Parcel F was dependent on thedecision of the 

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Second District Court ofAppeals as to whether or not the Court would rehear the plaintiffs’ claims inthe Land Use Lawsuits.  (See detaileddiscussion of the Land Use Lawsuits in Part II, Item 1 of this QuarterlyReport on Form 10-Q.)  TheCourt rejected the plaintiffs’ request to rehear their claims and the closingof the pending sale of Parcel F is expected to occur on or about August 31,2007.

***Six Months ended June 30, 2007 and 2006***

Cashprovided by operating activities for the six months ended June 30, 2007 was $1,442,000,compared to cash flow used provided by operating activities for the six monthsended June 30, 2006 of $2,842,000.  Theprimary components of the cash fluctuations in operating activities wereliquidation liability payments and adjustments and working capital changes. Inthe six months ended June 30, 2007, a write-down of the Resort of $3,510,000net of the discount on the obligation to our preferred stockholder of$2,500,000 was included in operating activities as a change in fair value ofreal estate and non-real estate assets. Liquidation liability paymentsdecreased for the six months ended June 30, 2007 as compared to the six monthsended June 30, 2006, primarily due to a decrease in legal fees incurred inconnection with negotiations with potential purchasers of the Resort, amongother matters.

Wemade $214,000 in capital expenditures at the Resort and $27,000 at Stonehenge duringthe six months ended June 30, 2007, as compared to $97,000 at the Resort and$46,000 at Stonehenge and Tierra del Sol Country Club (which the Company soldto Encargo Limited, LLC on May 8, 2006) during the six months  ended June 30, 2006.

Duringthe six months ended June 30, 2007, the Resort paid approximately $194,000 tosatisfy its capital lease obligationsand approximately $714,000 against its refurbishment obligation to certainRental Pool participants.  During the six months ended June 30, 2006, theResort paid approximately $159,000 to satisfy its capital lease obligations andapproximately $542,000 against its refurbishment obligation to certain rentalpool participants.

**TaxConsideration**

We do notcurrently project any income tax liability for the remainder of our liquidationas a result of our net operating loss carryforwards, which we currently expectto be sufficient to offset any taxable income for the remainder of ourliquidation.  Should the Company pursuealternative strategic options, management will assess the income tax impact ofsuch options at that time.

**OffBalance Sheet Arrangements**

As ofJune 30, 2007, we have no off balance sheet arrangements that have or arereasonably likely to have a current or future material effect on our financialcondition, revenues, expenses, results of operations, liquidity, capitalexpenditures or capital resources.

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**ContractualObligations, Contingent Liabilities and Commitments**

The following table summarizes our contractualobligations at June 30, 2007, and the effect such obligations are expected tohave on our liquidity and cash flow (or upon our successors in interest underthe applicable contracts, if the contracts are not terminated) in futureperiods: 
| ** **                                                                                                                           | ** ** | **Payments Due by Period (in thousands)** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| **Contractual Obligation**                                                                                                      | ** ** | **Total**                                                          | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **More than  5 years** | ** ** |
| Employment  Agreements and Employment Security Agreements                                                                            |       | $                                                                  | 2,241      |   | $ | 1,810 |   | $ | 431 |   | $ | — |   | $ | — |   |
| Series A  Preferred Stock and accrued dividends(1)                                                                              |       | 17,500                                                             |       | 17,500 |   | — |   | — |   | — |   |
| Textron  revolving line of credit                                                                                                    |       | 4,818                                                              |       | 410 |   | 4,408 |   | — |   | — |   |
| Operating lease  agreements at the managed golf courses                                                                         |       | 206                                                                |       | 127 |   | 67 |   | 12 |   | — |   |
| Advertising,  service, equipment maintenance and other contracts and software license and  support agreements at the managed courses |       | 25                                                                 |       | 25 |   | — |   | — |   |   |   |
| Lease agreements  for GTA corporate office                                                                                           |       | 8                                                                  |       | 5 |   | 3 |   | — |   | — |   |
| Subtotal of our  obligations excluding those of the Resort                                                                           |       | $                                                                  | 24,798     |   | $ | 19,877 |   | $ | 4,909 |   | $ | 12 |   | $ | — |   |
| Master lease  agreement (with the condominium owners)(1)                                                                        |       | $                                                                  | 4,734      |   | $ | 1,607 |   | $ | 3,057 |   | $ | 54 |   | $ | 16 |   |
| Troon management  fee(1)                                                                                                             |       | 177                                                                |       | 177 |   | — |   | — |   | — |   |
| Westin  termination fee(1)                                                                                                           |       | 5,403                                                              |       | 5,403 |   | — |   | — |   | — |   |
| Troon  supplemental fee and management fees(1)                                                                                       |       | 800                                                                |       | 800 |   | — |   | — |   | — |   |
| Operating and  capital leases(1)                                                                                                     |       | 1,561                                                              |       | 750 |   | 593 |   | 124 |   | 94 |   |
| Service  agreements and other(1)                                                                                                     |       | 6,350                                                              |       | 2,796 |   | 2,799 |   | 738 |   | 17 |   |
| Subtotal of the  Resort’s obligations(1)                                                                                        |       | $                                                                  | 19,025     |   | $ | 11,533 |   | $ | 6,449 |   | $ | 916 |   | $ | 127 |   |
| Total of our  consolidated obligations                                                                                               |       | $                                                                  | 43,823     |   | $ | 31,410 |   | $ | 11,358 |   | $ | 928 |   | $ | 127 |   |

 

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(1)             Theseitems were paid or transferred to Salamander upon the closing of the sale ofthe Resort.

Interest isreflected, as applicable, in the commitments and obligations listed above.  The above table does not give effect to thesale of the Resort.

Please refer to “Management’sDiscussion and Analysis of Financial Condition and Results ofOperations—Contractual Obligations, Contingent Liabilities and Commitments” inour Form 10-K for the year ended December 31, 2006, filed onApril 2, 2007, for a description of our contractual obligations.

**Inflation**

We believe thatinflation does not pose a material risk to us. Our main source of cash flow is golf course dispositions which are notparticularly vulnerable to inflation because we can adjust our asking prices ifsupply/demand factors support an interest in the particular golf course.  Although some of our obligations (such as thesalary of our chief executive officer) automatically adjust for inflation, someof our rights are similarly indexed.  Ourroom rates at the Resort and our golf course fees at the Resort and at theother properties that we own and manage are relatively flexible and can beincreased, subject to constraints imposed by competition and, in some cases,patrons’ yearly membership privileges.

**Seasonality**

Since Stonehengeis a private membership club, the monthly member dues are the same throughoutthe year; however, swim and tennis revenues are higher in the summer months.

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**ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

We have not entered into any transactions usingderivative financial instruments.  We aresubject to market risk associated with changes in interest rates applicable tothe revolving line of credit that we obtained on March 18, 2004, andamended on August 4, 2005.  At June30, 2007, the outstanding debt under this line of credit subject to interestrate exposure is $4,100,000.  As of June30, 2007, a 25 basis point movement would have resulted in a $12,000 annualizedincrease or decrease in interest expense and cash flows.

We werealso subject to market risk associated with changes in interest ratesapplicable to the non-revolving line of credit for $1,200,000 that GTA-IBobtained on April 10, 2007; as of June 30,2007, we had approximately $320,000 outstanding under the Loan Agreement withPatriot Bank.  This loan was repaid uponthe closing of the sale of the Resort.

We have not entered into any transactions usingforeign currency or derivative commodity instruments; therefore, we do not faceany foreign currency exchange rate risk or commodity price risk.

Reference is madeto Note 6 to the Condensed Consolidated Financial Statements in Item 1 foradditional debt information.

**ITEM 4.CONTROLS AND PROCEDURES**

Wemaintain disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicatedto our management, including our Chief Executive Officer and our PrincipalAccounting Officer, as appropriate, to allow timely decisions regardingrequired disclosure.  Our managementassesses the costs and benefits of such controls and procedures based upon theprevailing facts and circumstances, including management’s reasonable judgmentof such facts.  Our amended managementagreement with Westin provided us with heightened control and access toinformation; however, prior to October 31, 2006 when we terminated the WestinManagement Agreement, we did not directly assemble the financial informationfor the Resort (although we have taken steps that we deem to be reasonableunder the circumstances to seek to verify such financial information) andconsequently, our disclosure controls and procedures with respect to theResort, while strengthened, were necessarily more limited than those wemaintain with respect to our own corporate operations.  Since July 15, 2004, we have focusedupon integrating operations at the Resort into our disclosure controls andprocedures and internal control procedures. In particular, those controls and procedures have been updated toaccount for the challenges presented by the increased size and scope of ouroperations once we owned the Resort. Effective January 1, 2007, we implemented a new general ledgeraccounting software package (the “GL Software”) at the Resort to replace theformer GL Software of which the majority of the financial reports wereproprietary to Westin.  Our new GLSoftware, know as Aptech, was used at the Resort prior to July 15, 2004 whenWestin required that the Resort adopt their GL Software.  As a result, the accounting staff wasgenerally familiar with the process and procedures in operating the new GLSoftware.  We do not currently believethat the change in the GL Software has materially changed or will materiallychange our internal control over financial reporting or our disclosure controlsand procedures.

Wehave implemented some and continue to work towards implementing variousinitiatives intended to continue to improve our internal controls andprocedures and disclosure controls and procedures.

As ofJune 30, 2007, we carried out an evaluation, under the supervision and with theparticipation of our management, including our Chief Executive Officer andPrincipal Accounting Officer, of the effectiveness of the design and operationof our disclosure controls and procedures (as defined in Exchange ActRule 13a-15(e)).  Managementconcluded that as of June 30, 2007, our disclosure controls and procedures areeffective in timely alerting them to material information relating to us(including our consolidated subsidiaries) required to be included in ourExchange Act reports.

Therehas been no change in our internal control over financial reporting during ourmost recent fiscal quarter that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

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**PART II. OTHER INFORMATION**

**ITEM 1.LEGAL PROCEEDINGS**

We are currentlyinvolved in (or affected by) the following legal proceedings:

***YoungComplaints***

On March 22,2004, a lawsuit was filed in the U.S. District Court for the District of SouthCarolina, Florence Division, by one of our prior directors, Larry D. Young(together with Danny L. Young, Kyle N. Young, the Young Family IrrevocableTrust and The Legends Group, Ltd.), against our independent auditors, BDOSeidman, LLP, and three former BDO partners (the “BDO Defendants”), and theCompany and our executive officers (the “GTA Defendants”).

The complaintalleges that the BDO Defendants engaged in professional malpractice,misrepresentation, breach of fiduciary duty and fraud by counseling plaintiffsto participate in a type of tax shelter transaction allegedly held illegal bythe Internal Revenue Service, and that the GTA Defendants conspired with theBDO Defendants to convince Mr. Young that he would realize a largeprojected tax gain in order to induce Mr. Young (and the other plaintiffs)to enter into the failed tax shelter transaction.  The plaintiffs are seeking damages of atleast $3.7 million, together with legal expenses and other costs.  On November 4, 2004, we filed an answerand counterclaims.  On February 14, 2005,the court granted the motion to compel arbitration of the BDO Defendants as toclaims against them, and it appears that the plaintiffs and the BDO Defendantshave resolved their differences.  OnOctober 18, 2006, the plaintiffs filed a notice of dismissal of their claimsagainst the BDO Defendants.  OnMarch 1, 2007, the U.S. District Court granted the GTA Defendants’ Motionfor Summary Judgment.  As ofMarch 26, 2007, the plaintiffs have no remaining claims against any of theGTA Defendants.  All of GTA Defendants’counterclaims against the plaintiffs remain. Mediation and settlement effortsby the parties were unsuccessful.  Thetrial for the GTA Defendants’ counterclaims against the plaintiffs began onAugust 6, 2007 and concluded on August 10, 2007.  The plaintiffs made a motion for a directedverdict during trial that was granted with respect to one of the GTADefendants’ claims, and denied for the remaining three claims.  The jury returned a verdict for the GTADefendants on their claims for breach of contract and breach of fiduciary duty,and awarded the GTA Defendants actual damages in the amount of $3,726,856.  In addition, the GTA Defendants were awarded$150,000 in attorneys’ fees in connection with the breach of contract claim.  By rule, the plaintiffs have ten days afterthe entry of the judgment on the court’s docket to move for judgmentnotwithstanding the verdict or a new trial. Plaintiffs’ right to appeal, if any, is stayed pending the determinationof any such post-trial motions.  At thistime, the Company is unable to assess the ultimate outcome of this litigationand has not recorded a receivable for the potential recovery of the award.

***Stonehenge (Country Club at Wildewood and Country Clubat Woodcreek Farms)***

On April 22,2002, we filed an action entitled *Golf Trust of America,L.P. and GTA Stonehenge, LLC v. Lyndell Lewis Young and Stonehenge GolfDevelopment, LLC* in the Court of Common Pleas for RichlandCounty.  We asserted causes of actionagainst the defendant for breach of contract, fraud and unfair tradepractices.  We were seeking damages ofapproximately $172,000, which represents prepaid dues that were not disclosedby the defendants. A counterclaim for payment under a consulting agreement,along with claims for payment of operating/maintenance and insurance expenseswas filed by the defendant against us on June 20, 2002.  The Court dismissed the case on May 28,2003.  On March 15, 2005, we tookaction to restore the case.  The Court ofCommon Pleas for Richland County has ordered the case restored to theroster.  As of August 9, 2007, the trialdate has not yet been set.  At this time,the Company is unable to assess the likely outcome of this litigation.

***Land Use Lawsuits***

On March 10,2005, the Company filed a Motion to Intervene in the suit titled *Innisbrook Condominium Association, Inc., C. Frank Wreath,Meredith P. Sauer, and Mark Banning, Plaintiffs vs. Pinellas County, Florida,Golf Host Resorts, Inc. and Innisbrook F LLC, Defendants*, CaseNo. 043388CI-15.  This motion wasfiled in the Circuit Court of the Sixth Judicial Circuit, in and for PinellasCounty, Florida, Civil Division and was granted by the Circuit Court.  In this report, the Company refers to thismatter as the “Initial Land Use Lawsuit”. The plaintiffs in the Initial Land Use Lawsuit have filed a multi-countcomplaint seeking injunctive and declaratory relief with respect to the landuse and development rights of Parcel F, which is owned by GHR.  The Company filed the Motion to Intervene asa defendant in the Initial Land Use Lawsuit in order to protect its propertyand its land use and development rights with respect to Parcel F.  On April 26, 2005, Joseph E.Colwell, Marcia G. Colwell, Kirk E. Covert, Deborah A. Covertand the Autumn Woods Homeowner’s Association, Inc. moved to intervene inthe Initial Land Use Lawsuit, which the Court subsequently allowed.  On April 8, 2005, a separate suit wasfiled by James M. and Mary H. Luckey, and Andrew J. andAphrodite B. McAdams, against Pinellas County, GHR and Bayfair Innisbrook,LLC seeking injunctive and declaratory relief relating to the land use anddevelopment rights of Parcel F. This suit was consolidated with the Initial Land Use Lawsuit.  In this report, the Company 

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refers to this matter asthe “Subsequent Land Use Lawsuit” and to the Initial Land Use Lawsuit and theSubsequent Land Use Lawsuit as the “Land Use Lawsuits”.

FromDecember 19 through December 23, 2005, the Court tried theseconsolidated cases in a non-jury trial. On March 8, 2006, the Court ruled in favor of the defendants on allcounts and denied all claims asserted by the plaintiffs in both Land UseLawsuits.  On March 31, 2006, theplaintiffs in the consolidated cases filed a notice of appeal to the SecondDistrict Court of Appeal.  The AppealCourt affirmed per curium the Circuit Court judgment in favor of the defendantson February 28, 2007 and denied the plaintiffs-appellants’ motion for attorneyfees.  On March 13, 2007, the plaintiffsfiled a motion for the Appeal Court to rehear their claims.  On June 12, 2007 the Second District Court ofAppeal denied the plaintiffs motion for rehearing.  No further avenues of appeal are available tothe plaintiffs.

***WallSprings Conservatory, Inc. Complaint***

On July 13, 2006, Wall Springs filed suit againstGTA-IB, as successor in interest to GHR, in the circuit court of PinellasCounty for declaratory relief regarding the allocation of certain full golfmemberships at the Resort.  OnJuly 14, 2006, Wall Springs also filed suit against us in the small claimsdivision of the Pinellas County Court in connection with an easementagreement.  We answered both claims, alsoasserting affirmative defenses and counterclaims in each action.  We then filed a motion to transfer the smallclaims matter to Circuit Court, which was granted on September 27,2006.  We then moved to consolidate thesetwo cases.  Our motion to consolidate wasgranted by the Circuit Court on March 1, 2007.  At this time, the Company is unable to assessthe likely outcome of this litigation.

***Property Tax Lawsuit***

We filed lawsuitsagainst the property appraiser of Pinellas County, Florida to challenge the2004, 2005 and 2006 real estate assessment on the Resort property.  Pinellas County filed a motion to dismiss,which was denied by the court.  No trialdate has been set. If Pinellas County were to prevail, management believes thatthere would be no material adverse effect upon our financial statements, as theentire Pinellas County assessment is fully accrued at June 30, 2007.  See Note 10, *SubsequentEvents*, to the Condensed Consolidated Financial Statements containedin Item 1 above.

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

The titled actionwas brought in the Circuit Court of Miller County, Missouri by LOCI, and itsasserted assignee of lien and account rights, Everett HoldingCompany, Inc., in the fall of 1999 against numerous defendants, includingthe Operating Partnership.  Plaintiffsassert LOCI performed construction services on, or that benefited, the propertyof various defendants, including the Operating Partnership.  With respect to the Operating Partnership,plaintiffs seek to foreclose a mechanic’s lien upon property formerly owned bythe Operating Partnership.  The lien isfor the principal amount of approximately $1,276,000, plus interest at 10% perannum and attorney fees.  Plaintiffscalculate interest to May 20, 1999, just prior to the lien filing, to beapproximately $151,000 and interest thereafter to be $354 per day.  The Court entered a written order grantingthe Operating Partnership’s Motion for Summary Judgment in April 2002 anda final judgment in November 2003. Plaintiffs appealed the ruling to the Missouri Court of Appeals.  The Court of Appeals on April 5, 2005reversed the Circuit Court judgment in favor of us and remanded the case to theCircuit Court for further proceedings. On May 31, 2005, the Court of Appeals filed a modified Opinion,which again reversed the Circuit Court judgment in favor of us and remanded thecase to the Circuit Court for further proceedings.  As of August 9, 2007, the trial date has notyet been set. At this time, the Company is unable to assess the likely outcomeof this litigation.

***RoutineLitigation***

In addition to litigation between a lessor (such as**the Operating Partnership**) and our former lessees (andtheir affiliates), owners and operators of golf courses are subject to avariety of legal proceedings arising in the ordinary course of operating a golfcourse, including proceedings relating to personal injury and property damage.  We have in the past been, and expect tocontinue in the future to be, subject to proceedings relating to personalinjury and property damage.  Suchproceedings are generally brought against the operator of a golf course, butmay also be brought against the owner of the golf course.  Since we are now either the operator or ownerof our remaining golf courses, we maintain insurance to defend against certainof these actions.

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**ITEM 1A.RISK FACTORS**

**General Risk Factors**

***Thedelayed sale or liquidation of our remaining assets, or our inability to sellor liquidate them, may reduce or delay liquidating distributions.***

Although we havereported the estimated fair value of our remaining assets, including ourinterest in Parcel F and Stonehenge, in this Quarterly Report on Form 10-Q, wecan provide no assurance that these estimates reflect their actual currentmarket value.  Potential unknown factorssuch as (a) our inability to sell Stonehenge at an acceptable price andpursuant to acceptable terms, and (b) the owner of Parcel F’s inability toclose on a sale of Parcel F for the current contracted purchase price (whichwould prevent us from realizing our interest in the proceeds) may adverselyeffect the fair value of these assets or delay the liquidation of these assets. Accordingly, the amount of totalliquidating distributions we make to holders of our common stock over theremainder of the liquidation period may be significantly less than weproject or the timing of those distributions may be later than anticipated.

***Decreasesin the value of Stonehenge caused by economic recession, terrorist activity andother factors beyond our control might reduce the amount for which we can sellour assets.***

The value of ourinterests in Stonehenge might be reduced, and substantially so, by a number offactors that are beyond our control, including the following:

·                  adverse changesin the economy or prolonged recession;

·                  terroristactivity against the United States or our allies or other war-time activities,which could increase public pessimism and decrease leisure spending, therebyreducing revenues of Stonehenge and diminishing the resale value of Stonehenge;

·                  increasedcompetition, including an increase in the amount of golf courses being offeredfor sale in our markets or nationwide;

·                  continuingimbalance in supply and demand in the golf course industry; and

·                  changes in realestate tax rates and other operating expenses.

Any reduction in thevalue of Stonehenge would make it more difficult for us to sell our assets forthe amounts and within the time frames that we have estimated.  Reductions in the amounts that we receivecould substantially decrease or delay our payment of liquidating distributionsto our stockholders.

***Ifour liquidation costs or unpaid liabilities are greater than we expect, ourliquidating distributions might be substantially reduced or delayed.***

Before making the finalliquidating distribution to the holders of our common stock, we will need topay all of our transaction costs pertaining to the liquidation and all validclaims of our creditors, which we expect will be substantial.  Our Board or Directors may also decideto acquire one or more additional insurance policies covering unknown orcontingent claims against us, including, without limitation, additionaldirectors’ and officers’ liability insurance, for which we would pay anadditional premium based on market prices prevailing at the time of any suchpurchase.  In addition, if we form aliquidating trust, we expect to have additional expenses in connectionwith the formation thereof and for items such as insurance for thetrustees.  We have estimated suchtransaction costs in calculating the amount of projected liquidatingdistributions previously reported.  Tothe extent that we have underestimated costs and expenses in calculating ourhistorical projections, our actual aggregate liquidating distributions may besubstantially lower than we have historically projected.

***Weexpect to incur significant compliance costs relating to the Exchange Act andSarbanes-Oxley Act.***

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We and our subsidiary,GTA-IB, are required to comply with the reporting requirements of the ExchangeAct as they apply to non-accelerated filers. As such, both entities must timely file Quarterly Reports on Form 10-Q,Annual Reports on Form 10-K and Current Reports on Form 8-K, amongother actions.  Further, recently enactedand proposed laws, regulations and standards relating to corporate governanceand disclosure requirements applicable to public companies, including theSarbanes-Oxley Act and new SEC regulations, have increased the costs ofcorporate governance, reporting and disclosure practices that are now requiredof us and of GTA-IB.  We were formedprior to the enactment of these new corporate governance standards, and as aresult, we did not have all necessary procedures and policies in place at thetime of their enactment.  Our efforts tocomply with applicable laws and regulations, including requirements of theExchange Act and the Sarbanes-Oxley Act, are expected to involve significant,and potentially increasing, costs.  Costsincurred in complying with these regulations may reduce the amount of cashavailable for liquidating distributions.

The Sarbanes-Oxley Actand related laws, rules and regulations create legal bases for administrativeenforcement, civil and criminal proceedings against us in case ofnon-compliance, thereby increasing our risk of liability and potentialsanctions.  Costs incurred in defendingagainst any such actions or proceedings, and any liability or sanctionsincurred in connection with such actions or proceedings, could negativelyaffect the amount of cash available for liquidating distributions.

***Weare currently unable to reliably project the amount of the total liquidatingdistributions we will make to the holders of our common stock over theremainder of the liquidation period and such holders should not rely on thevaluations or ranges earlier provided as representative of our currentestimation.***

As a result of theforegoing uncertainties, at the present time we will refrain from either makingany adjustments (positive or negative) to any earlier reported range ofdistributions or proposing a new range. We may, however, be able to do so in future periods in the event thatthe quality and reliability of all information necessary to make estimates ofcash flow and, correspondingly, value become more reliable.  You should not rely on the valuations orranges provided in previous reports as representative of our currentestimations.

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

As we contemplate thesale of our remaining assets and our wind-up as contemplated by our plan ofliquidation, we may elect to contribute our remaining assets andliabilities to a liquidating trust.  Ourstockholders would receive interests in the liquidating trust, our corporateexistence would terminate and our shares would no longer trade publicly.

For tax purposes, thecreation of the liquidating trust should be treated as a distribution of ourremaining assets to our stockholders, followed by a contribution of the sameassets to the liquidating trust by our stockholders.  As a result, we will recognize gain or lossinherent in any such assets, with any gains offset by available net operatingloss carryovers.  In addition, astockholder would recognize gain to the extent his share of the cash and thefair market value of any assets received by the liquidating trust was greaterthan the stockholder’s basis in his stock, notwithstanding that the stockholderwould not contemporaneously receive a distribution of cash or any other assetswith which to satisfy the resulting tax liability, and would not be able totransfer its interests in the liquidating trust.

Furthermore, it is possiblethat the fair market value of the assets received by the liquidating trust, asestimated for purposes of determining the extent of the stockholder’s gain atthe time interests in the liquidating trust are distributed to thestockholders, will exceed the cash or fair market value of property ultimatelyreceived by the liquidating trust upon its sale of the assets, in which casethe stockholder may not receive a distribution of cash or other assetswith which to satisfy any tax liability resulting from the contribution of theassets to the liquidating trust.  In thiscase, the stockholder would recognize a loss in a taxable year subsequent tothe taxable year in which the gain was recognized, which loss might be limitedunder the tax code.

If we do notdistribute our assets to a liquidating trust and, instead, continue to operateas a regular corporation until all of our assets are sold, we would recognizegains or losses upon the sale of assets for federal income tax purposes.  Since we are no longer a REIT, we could besubject to income tax on any recognized gains. If we were to recognize taxable gains in a year before consideration ofnet operating loss carryovers, we could be subject to alternative minimum tax.  Generally, for tax years ending afterDecember 31, 2002, the use of net operating loss carryovers to reducealternative minimum taxable income is limited to 90% of alternative minimumtaxable income.  Therefore, tax at a rateof 20% could be imposed on our 

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alternative minimumtaxable income that cannot be reduced by net operating loss carryovers.  If a liquidating trust is formed, our netoperating loss carryovers will not be available to reduce any gains recognizedwithin the trust.  However, the trustwill have a tax basis equal to the fair market value of its assets at the datethe liquidating trust is formed.  Anygain recognized by the trust would thus be the result of either appreciation inthe value of the assets during the time that they are owned by the trust, or aninitial underestimation of the fair market value of the assets at the time thetrust is formed.

***If weare unable to retain certain key executives and staff members to complete theplan of liquidation in a reasonably expeditious manner, our liquidatingdistributions might be reduced or delayed.***

Our ability toconsummate sales transactions favorable to us for Stonehenge will depend to alarge extent on the experience and ability of our president and chief executiveofficer, W. Bradley Blair, II, and his experience and familiarity with ourassets, counter-parties and the market for golf course sales.  We believe that a loss of Mr. Blair’sservices could materially harm our ability to complete the plan of liquidationin a reasonably expeditious manner and the prospects of selling our assets atthe best potential prices.

The resignation of Mr.Blair would pose an even greater risk to us at this time in light of theFebruary 5, 2007 resignation of****Scott D.Peters, our former chief financial officer. If Mr. Blair were to resign, we would likely seek to hire a replacementfor him, the cost of which would depend on our determination of the experienceand skills that must be possessed by his replacement in light of our financialcondition, our assets remaining to be liquidated and the complexity of anyissues bearing on us and the liquidation at that time.

Our ability to completethe plan of liquidation in a timely manner also depends on our ability toretain key non-executive employees. Those employees may seek other employment rather than remainingwith us throughout the process of liquidation.

If we are unable toretain certain key executives and staff members to complete our plan ofliquidation in a reasonably expeditious manner, liquidating distributions mightbe reduced or delayed.

***If weare unable to realize the value of a promissory note taken as part of thepurchase price for any of our remaining properties, our liquidatingdistributions might be reduced.***

In the sale ofStonehenge, we may agree to receive promissory notes from the buyer as aportion of the purchase price. Promissory notes are often illiquid. If we are unable to sell the promissory note without a great discount,or in the case of a short-term note, if we hold it to maturity and the makerultimately defaults, our liquidating distributions may be reduced.  We currently do not have any outstandingnotes receivable.

***Ourcommon stock may be delisted from the Amex, which would make it moredifficult for stockholders to sell their shares.***

Currently, our commonstock trades on the Amex.  We cannotassure you that we will be able to maintain our listing on the Amex or anyother established trading market.  Amongother things, the Amex has considerable discretion with respect to listingstandards, which include qualitative and quantitative criteria, some of whichare beyond our control.  Further, in theevent that we form a liquidating trust, we expect that we would delistfrom the Amex.

We cannot predict thedegree to which delisting would harm our business and the value of yourinvestment.  If our common stock were tobe delisted from the Amex, either as a result of voluntarily action by us or bythe Amex because we no longer meet Amex listing standards, it could severelylimit the liquidity of our common stock and your ability to sell our securitiesin the secondary market.

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

Extraordinarycorporate actions, such as our plan of liquidation, often lead to securitiesclass action lawsuits and derivative litigation being filed againstcompanies such as ours.  We becameinvolved in this type of litigation in connection with our plan of liquidation(and the transactions associated with it) in a legal action we refer to as the *Crossley* litigation. During the second quarter of 2003, the *Crossley*claim was dismissed with prejudice on our motion for summary judgment.  

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Accordingly, the lawsuitwas dismissed and the plaintiff will not be allowed to refile the claim, althoughthe plaintiff could have appealed the dismissal.  We subsequently entered into a non-monetarysettlement with the plaintiff whereby the plaintiff agreed not to appeal thedismissal and we agreed not to seek reimbursement of our legal costs from theplaintiff.  Even though the *Crossley* litigation has been dismissed, we face the riskthat other claims might be brought against us. Any such litigation would likely be expensive and, even if we ultimatelyprevail, the process would divert management’s attention from implementing theplan of liquidation and otherwise operating our business.  If we do not prevail in any such litigation,we might be liable for damages.  It isnot possible to predict the amount of such potential damages, if any, but theycould be significant.  Any damageliability would reduce the net cash available for liquidating distributions toholders of our common stock.

**Risk Factors Relating toStonehenge**

***Weface competition to acquire additional members to Stonehenge and maintain exitingmemberships.***

Membership toStonehenge is affected by competition from comparable courses in thesurrounding areas, including courses that have opened, reopened or beensignificantly upgraded in recent years. Additional memberships, if attained, will result in increased netoperating revenues.  However, preferencesregarding location, aesthetics and other factors affecting the desirability ormarketability of membership to private courses can, and often do, change fromtime to time.  Accordingly, we cannotpredict with any certainty whether or not Stonehenge will undergo short-term orlong-term growth in desirability for prospective members.  Failure to maintain sufficient membershipgrowth could adversely affect the future financial performance of Stonehenge.

***Theoperations of Stonehenge are subject to risks that could have an adverse affecton their financial performance.***

The operations ofStonehenge are subject to operating risks such as adverse weather conditions(including heavy prolonged rains and hurricanes), employee-related issues(including labor shortages and disruptions), blight or other diseases affectinggrass or other vegetation and costs of merchandise, equipment andsupplies.  If the operations of Stonehengeare impeded by any such factors beyond our control, the financial performanceof Stonehenge could be adversely affected.

***Theloss of the liquor licenses of the Stonehenge golf courses could adverselyaffect their financial performance.***

A large portion ofthe revenues from Stonehenge come from their food and beverage operations.  In addition, such operations attractprospective members to Stonehenge.  TheStonehenge courses currently hold liquor licenses for their respectivefacilities.  If, for some reason, any oneof these facilities were to lose their liquor license, revenues from food andbeverage operations would decrease, Stonehenge would be less marketable and thefinancial performance of the golf and related operations of Stonehenge would beadversely affected.

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***The value of Stonehengemay depreciate significantly.***

Improvementsto Stonehenge have a limited useful life that will, over time, depreciate invalue.  Future private coursedevelopments in the area are also likely to decrease the useful life andeconomic value of Stonehenge and other improvements and could eventually makeStonehenge obsolete.  If the value ofStonehenge depreciates considerably, our financial condition and results ofoperations could be adversely affected.

***Liability for uninsuredlosses could adversely impact us.***

Althoughthe activities regularly conducted on the Stonehenge courses are generally notdangerous, conditions or activities could occur on the premises that causepersonal injury or property damage.  Wewill maintain insurance policies that provide coverage within limits that aresufficient, in our business judgment, to protect us from material financialloss due to liability for personal injuries or property damage sustained bypersons on the premises.  However, thereare certain types of injury and property damage that are beyond the scope ofthose insurance polices.  In addition,future increases in the cost of insurance could make adequate insurancecoverage difficult for us to obtain, increasing our potential liability.  The costs of significant litigation and anyaccompanying liability that might arise out of injuries or damages and ofrelated claims in subsequent litigation could have a material adverse effect onour financial condition and results of operations.

Inaddition, types of losses generally catastrophic in nature, such as losses dueto acts of terrorism, earthquakes, floods, hurricanes, pollution orenvironmental matters, may be uninsurable, not economically insurable orinsurable subject to limitations, such as large deductibles or co-payments.  In addition, insurance risks associated withpotential acts of terrorism have sharply increased premiums.  Future uncovered damage to Stonehenge due toforce majeure, and the costs that may be incurred by us in connection withincreased premiums, may also have a material adverse effect on our financialcondition and results of operations.

***Ownership of Stonehengecould result in potential environmental liability.***

Asowner of Stonehenge, we are subject to potential liability under federal andstate environmental laws for contamination that might exist on the property,regardless of whether we caused or were otherwise responsible for thecontamination.  Accordingly, not onlycould substantial legal fees be required to defend against government or privateparty action, but we could also incur significant remediation costs and thevalue of Stonehenge could be substantially reduced.  That increase in costs and decrease in valuewould have a material adverse effect on our financial condition and results ofoperations.

Inaddition, we cannot predict future changes in the interpretation andadministration of current environmental law and the enactment of newenvironmental legislation or regulations. Compliance with new or more stringent laws and the more strictinterpretation of existing laws may require material expenditures by us toensure that the Stonehenge golf courses comply with those laws.  Those increased costs would also have amaterial adverse effect on our financial condition and results of operations.

**ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None.

**ITEM 3.DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

No matters weresubmitted to a vote of security holders during the three months ended June 30,2007.

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**ITEM 5.OTHER INFORMATION**

*Amendmentto the Fifth Amended and Restated Bylaws of the Company*

Article III,Section 2 of the Fifth Amended and Restated Bylaws of the Company, as adoptedby the Board on March 8, 2006 (the “Bylaws”), required that the annualmeeting of stockholders be held at any date and time during the month ofMay.  For the past six years, the Companyhas held its annual meeting of stockholders in November and has amended theBylaws each year to accommodate the desired date for the meeting.  On August 13, 2007, the Board approved anamendment to Article III, Section 2 of the Bylaws, effective immediately, toenable the Board to hold the annual meeting of stockholders at any date andtime designated by the Board in its discretion. A complete copy of the Bylaws, as amended, is attached as Exhibit 3.1 tothis Quarterly Report on Form 10-Q.

The Company willannounce the date, time and location for the 2007 Annual Meeting ofStockholders in a subsequent Current Report on Form 8-K in advance of themeeting.

**ITEM 6.EXHIBITS**

**EXHIBIT INDEX**
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.1         |       | Fifth Amended and Restated Bylaws of the Company, as  amended on August 13, 2007.                                                                                                                                                                                                                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.1        |       | Business Loan Agreement, dated as of April 10, 2007,  by and among GTA-IB, GTA-IB Golf Resort, LLC and GTA-IB Condominium, LLC and  Patriot Bank.                                                                                                                                                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.2        |       | Commercial Security Agreement, dated as of April 10,  2007, between GTA-IB, GTA-IB Golf Resort, LLC and GTA-IB Condominium, LLC and  Patriot Bank.                                                                                                                                                                                                                                                                                                                           |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.3        |       | Promissory Note, dated as of April 10, 2007, between  GTA-IB, GTA-IB Golf Resort, LLC and GTA-IB Condominium, LLC and Patriot Bank.                                                                                                                                                                                                                                                                                                                                          |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.4        |       | Mortgage, dated as of April 10, 2007, between  GTA-IB, GTA-IB Golf Resort, LLC and GTA-IB Condominium, LLC and Patriot Bank.                                                                                                                                                                                                                                                                                                                                                 |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.5        |       | Asset Purchase Agreement, dated as of June 25, 2007,  by and among the Company, the Operating Partnership, GTA-IB Golf Resort, LLC,  GTA-IB, GTA-IB Condominium, LLC and GTA-IB Management, LLC and Salamander  Innisbrook Securities, LLC, Salamander Innisbrook Condominium, LLC and  Salamander Innisbrook, LLC (previously filed as Exhibit 10.1 to the  Company’s Current Report on Form 8-K filed June 26, 2007 and  incorporated herein by reference). |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.6        |       | Option Agreement, dated as of June 25, 2007, by and  between the Company and AEW Targeted Securities Fund, L.P. (previously filed  as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed  June 26, 2007 and incorporated herein by reference).                                                                                                                                                                                                    |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.1        |       | Certification of the registrant’s Chief Executive  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                              |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 31.2        |       | Certification of the registrant’s Principal  Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                                                                                                                                                        |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 32.1        |       | Certification of the registrant’s Chief Executive  Officer and Principal Accounting Officer pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                            |

 

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                       | ** ** | **GOLF TRUST OF  AMERICA, INC.**                   |
|-----------------------|------------|---------------------------------------------------------|
| ** **            | ** ** | ** **                                              |
| Date: August 16, 2007 | By:        | /s/ W. Bradley  Blair, II                          |
|                  |       | W. Bradley  Blair, II                              |
| * *              | * *   | *Chief Executive Officer and President*                 |
| * *              | * *   | * *                                                |
| Date: August 16, 2007 | By:        | /S/ Tracy S.  Clifford                             |
|                  |       | Tracy S. Clifford                                       |
| * *              | * *   | *Principal Accounting Financial  Officer and Secretary* |

 

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