**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, DC 20549**

**FORM 10-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: March 31, 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 Number001-14494**

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**GOLF TRUST OF AMERICA, INC.**

(Exact name of registrant as specified in itscharter)

| **Maryland**                     |   | **33-0724736**          |
|----------------------------------|--------|-------------------------|
| (State or other  jurisdiction of |   | (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 telephone number, including area code)

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Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such report(s) and (2) has been subject to such filing requirementsfor 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 May 9, 2007, there were 7,317,163 common shares outstanding of theregistrant’s only class of common stock. On May 9, 2007, there were 800,000shares outstanding of the registrant’s 9.25% Series A CumulativeConvertible Preferred Stock, which is the registrant’s only class ofoutstanding preferred stock.

 

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**GOLF TRUST OFAMERICA, INC.**

**Form 10-Q QuarterlyReport****For the Three Months Ended March31, 2007**

**INDEX**
| **PART I. FINANCIAL INFORMATION** |       |
|-----------------------------------|------------|
| **Item 1.**                       | ** ** | **Liquidation  Basis Financial Statements** |   |
|                              |       | Condensed Consolidated  Statements of Net Assets as of March 31, 2007 (unaudited) and December 31,  2006 |   |
|                              |       | Condensed Consolidated  Statements of Changes in Net Assets (unaudited) for the Three Months Ended  March 31, 2007 and 2006 |   |
|                              |       | Condensed Consolidated  Statements of Cash Flows (unaudited) for the Three Months ended March 31,  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**                    |       |   |   |
| **Exhibit Index**                 |       |   |   |

**Cautionary Note Regarding Forward-LookingStatements**

Thefollowing report contains forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933, as amended, or the SecuritiesAct, and Section 21E of the Securities Exchange Act of 1934, as amended,or the Exchange Act. Forward-looking statements are statements that predict ordescribe future events or trends and that do not relate solely to historicalmatters. All of our projections in this Quarterly Report are forward-lookingstatements, including our projections regarding the amount and timing ofliquidating distributions. You can generally identify forward-lookingstatements as statements containing the words “believe,” “expect,” “will,” “anticipate,”“intend,” “estimate,” “project,” “assume” or other similar expressions. Youshould not place undue reliance on our forward-looking statements because thematters they describe are subject to known (and unknown) risks, uncertaintiesand other unpredictable factors, many of which are beyond our control. Ourforward-looking statements are based on the limited information currentlyavailable to us and speak only as of the date on which this Quarterly Reportwas filed with the Securities and Exchange Commission, or 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 we expressly disclaim any obligation, toissue any updates to our forward-looking statements, even if subsequent eventscause our expectations to change regarding the matters discussed in thosestatements. Future events are inherently uncertain. Moreover, it isparticularly difficult to predict, with any certainty, (i) business activitylevels at the Innisbrook Resort and Golf Club, or the Resort, (ii) when a saleof the Resort will occur, (iii) if the sale price will be approximatelyequivalent to the Resort’s carrying value, (iv) whether we can manage theResort without Westin, and (v) what the consequences of our default under theterms of the Series A Preferred Stock will be. Accordingly, our projections in this Quarterly Report are subject toparticularly high uncertainty. Our projections should not be regarded as legalpromises, representations or warranties of any kind whatsoever. Over time, ouractual results, performance or achievements will likely differ from theanticipated results, performance or achievements that are expressed or impliedby our forward-looking statements, and such differences might be significantand harmful to our stockholders’ interests. Certainfactors that might cause such a difference include, among others, thefollowing: changes in general economic conditions that may influence groupconferences and guests’ vacations plans; changes in travel patterns; changes inconsumer tastes in destinations or accommodations for group conferences andvacations; changes in rental pool participation by the current condominiumowners; settlement of the class action lawsuit involving the rental poolagreements; our ability to continue to operate the Resort without the WestinManagement Agreement or brand; and the resale of condominiums to owners whoelect neither to participate in the Rental Pool nor to become Club members. Manyimportant factors that could cause such a difference are described under thecaption “Risk Factors,” in our Annual Report on Form 10-K for the year endedDecember 31, 2006, in subsequent reports on Form 10-Q and in Part II, Item1A of this Quarterly Report, 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 MARCH 31, 2007 (unaudited)AND DECEMBER 31, 2006**
| ** **                                                                                            | ** ** | **March 31,  2007** | ** ** | **December 31,  2006*** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|------------------------------|------------|
| ** **                                                                                            | ** ** | **(in thousands)**  | ** ** |
| **ASSETS**                                                                                            |       |                     |       |                         |       |
| Real estate—held for  sale                                                                       |       | $                        | 56,199     |                         | $          | 55,592 |   |
| Cash and cash  equivalents                                                                            |       | 2,960                    |       | 2,224                        |       |
| Receivables—net                                                                                  |       | 4,776                    |       | 2,892                        |       |
| Other assets                                                                                          |       | 5,496                    |       | 5,370                        |       |
| Total assets                                                                                          |       | 69,431                   |       | 66,078                       |       |
| **LIABILITIES**                                                                                       |       |                     |       |                         |       |
| Debt                                                                                                  |       | 5,280                    |       | 4,872                        |       |
| Accounts payable and  other liabilities                                                               |       | 14,892                   |       | 13,408                       |       |
| Other obligations                                                                                     |       | 10,450                   |       | 10,648                       |       |
| Reserve for estimated  costs during the period of liquidation                                         |       | 5,449                    |       | 3,285                        |       |
| **Total liabilities**                                                                                 |       | 36,071                   |       | 32,213                       |       |
| Commitments and  contingencies                                                                        |       |                     |       |                         |       |
| Preferred stock, $.01 par  value, 10,000,000 shares authorized, 800,000 shares issued and outstanding |       | 20,000                   |       | 20,000                       |       |
| Total liabilities and  preferred stock                                                                |       | 56,071                   |       | 52,213                       |       |
| **NET ASSETS IN LIQUIDATION**(available  to holders of common stock and OP units)                     |       | $                        | 13,360     |                         | $          | 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 MARCH31, 2007 AND 2006**
| ** **                                                                    | ** ** | **Three Months Ended  March 31, 2007** | ** ** | **Three Months Ended  March 31, 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                                                              |       | 2,553                                                      |       | 3,498                                                      |       |
| Net interest  expense                                                         |       | (380                                                       | )          | (318                                                       | )          |
| Other expense                                                                 |       | (59                                                        | )          | —                                                     |       |
| Increase in  reserve for estimated liquidation costs and capital expenditures |       | (2,619                                                     | )          | (3,870                                                     | )          |
| Subtotal of  adjustments to liquidation reserve                               |       | (505                                                       | )          | (690                                                       | )          |
| Increase in fair value  of real estate                                        |       | —                                                     |       | 340                                                        |       |
| **Changes in net assets in  liquidation**                                     |       | (505                                                       | )          | (350                                                       | )          |
| **Net assets in liquidation, end of period**                                  |       | $                                                          | 13,360     |                                                       | $          | 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 THREE MONTHS ENDED MARCH31, 2007 AND 2006**
| ** **                                                                                                             | ** ** | **Three Months  Ended  March 31,  2007** | ** ** | **Three Months  Ended  March 31,  2006** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                                                             | ** ** | **(in thousands, unaudited)**            | ** ** |
| **Cash flows from changes in net  assets in liquidation and operating activities:**                                    |       |                                               |       |                                               |       |
| Changes in net assets  in liquidation                                                                                  |       | $                                                  | (505       | )                                                  | $          | (350 | ) |
| Adjustments to  reconcile change in net assets in liquidation to net cash provided by (used  in) operating activities: |       |                                               |       |                                               |       |
| Increase in  liquidation reserve and changes in fair value of real estate and non-real  estate assets                  |       | 2,619                                              |       | 3,530                                              |       |
| Provision for  bad debts                                                                                               |       | 38                                                 |       | 164                                                |       |
| Non-cash  interest                                                                                                     |       | 161                                                |       | 193                                                |       |
| Other changes in  operating assets and liabilities                                                                     |       | (540                                               | )          | 267                                                |       |
| Decrease in  liquidation liabilities                                                                                   |       | (419                                               | )          | (960                                               | )          |
| Net cash  provided by operating activities                                                                             |       | 1,354                                              |       | 2,844                                              |       |
| **Cash flows from investing  activities:**                                                                             |       |                                               |       |                                               |       |
| Resort and golf  course improvements                                                                                   |       | (170                                               | )          | (46                                                | )          |
| **Cash flows from financing  activities:**                                                                             |       |                                               |       |                                               |       |
| Repayments on  debt and capital lease obligations                                                                      |       | (448                                               | )          | (304                                               | )          |
| Net increase in cash                                                                                                   |       | 736                                                |       | 2,494                                              |       |
| Cash and cash  equivalents, beginning of period                                                                        |       | 2,224                                              |       | 2,822                                              |       |
| Cash and cash  equivalents, end of period                                                                              |       | $                                                  | 2,960      |                                               | $          | 5,316 |   |
| **Supplemental Disclosure of Cash  Flow Information:**                                                                 |       |                                               |       |                                               |       |
| Interest paid  during the period                                                                                       |       | $                                                  | 199        |                                               | $          | 190 |   |
| **Non-cash  transactions:**                                                                                            |       |                                               |       |                                               |       |
| Cancellation of  note receivable                                                                                       |       | $                                                  | —     |                                               | $          | — |   |
| Assets acquired through  capital leases                                                                                |       | $                                                  | 498        |                                               | $          | — |   |

 

See accompanying notes tocondensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**Form 10-Q QuarterlyReportFor the Three Months Ended March 31, 2007 and 2006NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

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

OnFebruary 25, 2001, the Company’s board of directors adopted, and on May 22,2001 the Company’s common and preferred stockholders approved, a plan ofliquidation for the Company. The plan of liquidation contemplates the sale ofall of the Company’s assets and the payment of, or provision for, the Company’sliabilities and expenses, and authorizes the Company to establish a reserve tofund the Company’s contingent liabilities. As of May 9, 2007, the Company hadsold 41 of the 47 (eighteen-hole equivalent) golf courses in which the Companyonce held interests pursuant to the plan of liquidation.

OnJuly 15, 2004, the Company entered into a settlement agreement, or theSettlement Agreement, with GTA-IB LLC, or GTA-IB, and Golf Host Resorts, Inc.,or GHR or our former unaffiliated borrower, Golf Hosts, Inc., Golf HostManagement, Inc., Golf Host Condominium, Inc. and Golf Host Condominium, LLCand took control of the Westin Innisbrook Golf 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 the settlement, the financial results of GTA-IB,the Company’s wholly owned subsidiary that now holds title to the Resort, areconsolidated in the Company’s financial 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 may occur through the sale of our assets,merger or otherwise in order to allow us to maximize value to our stockholders.In addition, subject to appropriate approvals, we may pursue arecapitalization. At the end of the initial term, if the Special Committee wasactively considering a specific proposed transaction, or a specific proposedtransaction was in the process of being consummated, then the initial termwould be automatically extended on a month-to-month basis until the earlier tooccur of either the consummation of that transaction or termination or failurethereof. The engagement was extended on a month-to-month basis untilJune 29, 2006. Since an exit transaction had not occurred by June 29,2006, the Company terminated the engagement with Houlihan Lokey. The tailperiod following the termination of the engagement during which Houlihan Lokeymight still have been due a transaction fee expired on February 28, 2007;therefore, no obligation for financial advisor fees currently exists. TheCompany continues to market the Resort for sale.

For aperiod of time during the early stages of the Houlihan Lokey engagement, theCompany’s board of directors also formed a Special Committee comprised of allthree of the Company’s then independent directors to consider certain mattersrelating to the liquidation and financial advisor services in evaluating anexit transaction. The Company continues to negotiate with prospective buyers ofthe Resort and related business. As of the filing date of this quarterlyreport, the Company has not entered into a definitive agreement for the sale ofthe Resort.

**2.  Organization and Basis of Presentation**

TheCompany was incorporated in Maryland on November 8, 1996 as a real estateinvestment trust, or REIT. As of fiscal year 2002, the Company no longer hasits REIT status as a result of its repossession and operation of golf coursesfollowing the default of its original third-party lessees. As of May 9, 2007,the Company owned two properties which represent six golf courses.  One of these properties (2.0 golf courses) isowned and managed by the Company, while the Resort was managed by Westin fromthe inception date of the Company’s ownership, July 15, 2004, until October 31,2006. Subsequent to October 31, 2006, the Resort has been managed directly bythe Company without the assistance of any third-party manager.  The four golf courses at the Resort arecurrently managed by Troon Golf, L.L.C., or Troon.  See Note 4 for further discussion.  Prior to July 15, 2004, the Resortserved as collateral for a 30-year participating mortgage wherein the Companywas the lender to an unaffiliated borrower. Upon the execution of theSettlement Agreement with its former borrower on July 15, 2004, the Companyobtained ownership of the Resort. The Company presently holds its twoproperties (6.0 golf courses) in fee simple. Four of the Company’s golf coursesare located in Florida and two are in South Carolina. The title to the Company’stwo golf courses in South Carolina is held by Golf Trust of America, L.P., aDelaware limited partnership and the Company’s operating partnership. TheCompany refers to Golf Trust of America, L.P. as its “operating partnership” or“OP” and the Company refers to the operating partnership and itself (togetherwith all subsidiaries) collectively as “we”, “us” or our “Company.” The titleto the Resort is held by GTA-IB, LLC, a wholly owned subsidiary of GTA-IB GolfResort, LLC, which in turn is 100% owned by Golf Trust of America, L.P. Throughits wholly owned subsidiaries GTA GP, Inc., or GTA GP, and GTALP, Inc., or GTA LP, the Company holds 100 percent of the interest inGolf Trust of America, L.P. as of May 9, 2007. GTA GP is the sole generalpartner of Golf Trust of America, L.P. and owns a 0.2 percent interesttherein. GTA LP is the sole limited partner in Golf Trust of America, L.P. andowns a 99.8 percent interest therein.

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*Principlesof Consolidation*

Theaccompanying condensed consolidated financial statements include the accountsof GTA GP, GTA LP, Golf Trust of America, L.P. 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 Company’s board of directors of a plan ofliquidation of the Company and approval of that plan by the Company’sstockholders, the Company adopted the liquidation basis of accounting for allperiods subsequent to May 22, 2001. Accordingly, on May 22, 2001, theCompany’s assets were adjusted to their estimated fair value and the Company’sliabilities, including estimated costs associated with implementing the plan ofliquidation, were adjusted to their estimated settlement amounts. The valuationof real estate held for sale as of March 31, 2007 relies on estimates of salesvalues based on indications of interest from the marketplace, certainassumptions by management specifically applicable to each property, and on theproperty value ranges. The valuation of the Company’s other assets andliabilities under the liquidation basis of accounting is based on management’sestimates as of March 31, 2007.

For the three months ended March 31, 2007, net assetsin liquidation decreased by approximately $505,000.  This decrease resulted from (a) a decrease ofapproximately $500,000 in the forecast of the Company’s cumulative netoperating results which includes its remaining golf course assets, the Resortcondominium sales operations, and the overhead and interest expense of theCompany’s corporate operations and (b) an increase of $5,000 in the accrual forcapital expenditures at Stonehenge.   Theforecast of the Company’s cumulative net operating results is impacted bychanges in the anticipated close dates of the Company’s remaining assets,namely the Resort.  The anticipated closedate for a sale of the Resort is now on or before July 31, 2007 a change froman anticipated close date of on or before June 30, 2007 as of December 31, 2006.

Thenet assets of approximately $13,360,000 at March 31, 2007 would result in aliquidation distribution per share of approximately $1.85. This $1.85 estimatefor liquidation distribution per share includes projections of costs andexpenses expected to be incurred during the period required to complete theplan of liquidation, that is, until the Company sells its remaining two assets,including the Resort. These actual per share distributions that we make to theholders of the Company’s common stock could be materially lower than the amountthe Company currently estimates of $1.85 due to factors such as (i) the timingof any sale of the properties and the corresponding transaction costs, (ii) theperformance of the underlying assets, and (iii) a change in the underlyingassumptions of the cash flow amount projected. The $1.85 estimate is derived bydividing the net assets in liquidation by the number of shares of common stockand common operating partnership units outstanding (7,317,000 less 85,000)after consideration of those shares that will be canceled prior to thedistribution of the net assets.  The85,000 shares of common stock were pledged to the Company as security for thepayment and performance of the obligations and liabilities of the pledgor undera common stock redemption agreement executed concurrently with a 2001 assetsale. Because this redemption agreement provides in part that these shareswill be tendered to us if and when the total amount of liquidatingdistributions paid to the holders of common stock pursuant to the plan ofliquidation is less than $10.74 per share, we expect these shares to betendered to us and canceled.

*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 dueto, among other things, the timing and realized proceeds from golf coursesales, the costs of retaining personnel and others to oversee the liquidation,including the costs of insurance, the timing and amounts associated withdischarging known and contingent liabilities, transaction costs related to anysales, and the costs associated with cessation of the Company’s operations.These costs are estimates only and are expected to be paid out over theliquidation period which contemplates an anticipated sale of the Resort by July 31, 2007 and, if the Company deemsappropriate, the transfer of our remaining assets to a liquidating trust withina reasonable period thereafter. The Company can provide no assurance that thosedates will be met.  As a result, theCompany 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. The Company has also accrued the projectedoperating results of the Resort and the other property that the Company ownsand manages through the projected remaining holding period of July 31, 2007.These projections could change materially based on the timing of anyanticipated sale, the performance of the underlying assets, the conclusion ofthe Company’s negotiations with AEW (discussed below), transaction costsrelated to any sales, and any change in the underlying assumptions of the cashflow amount projected. These accruals will be adjusted from time to time asprojections and assumptions change.

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The Company is currently negotiating with AEW, theholder of all of the Company’s series A preferred stock, regarding the terms ofan amendment of an existing agreement or a new agreement which will allow theCompany to repurchase all of AEW’s series A preferred stock for a price of $20,000,000or less.  As a result of the Company’sassumption that these negotiations will lead to an executed agreement, the Company has not recorded in its netassets a liability for the accrual of preferred dividends payable for thequarter beginning July 1, 2001 or for subsequent quarters.  Further, the carrying amount of the preferredstock remains at $20,000,000 on the Company’s statement of net assets, consistentwith the redemption amount in the prior letter agreement with AEW. In the eventthat either the Company is unable to reach an agreement with AEW, or theCompany is unable to exercise any repurchase right and close the repurchaseunder any agreement the Company may reach with AEW, the Company may be requiredto pay AEW all or a portion of the preferred dividends for which the Companyhas not recorded a liability, reducing its liquidating distributions to holdersof its common stock.  These preferreddividends would reduce the net assets available to stockholders in liquidation,and, correspondingly, the estimated liquidation distribution per share.  See Note 9 for further discussion

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** | ** ** | **March 31,  2007** | ** ** |
|-------------------------|------------|-----------------------------|------------|----------------------------------|------------|------------------------------------------------|------------|-----------------|------------|--------------------------|------------|
| Severance               |       | $                           | 1,748,000  |                             | $          | —                                         |       | $               | —     |                     | $          | — |   | $ | 1,748,000 |   |
| Professional  fees      |       | 1,250,000                   |       | (289,000                         | )          | —                                         |       | —          |       | 961,000                  |       |
| Financial  advisor fees |       | 297,000                     |       | —                           |       | —                                         |       | —          |       | 297,000                  |       |
| Capital  expenditures   |       | 47,000                      |       | (34,000                          | )          | —                                         |       | 5,000           |       | 18,000                   |       |
| Other                   |       | (57,000                     | )          | (132,000                         | )          | 2,114,000                                      |       | 500,000         |       | 2,425,000                |       |
| Total                   |       | $                           | 3,285,000  |                             | $          | (455,000                                       | )          | $               | 2,114,000  |                     | $          | 505,000 |   | $ | 5,449,000 |   |

 

Included in the accrued severance amounts above areperformance milestone payments due, but not yet paid, to the Company’sexecutives pursuant to their amended and restated employment agreements. TheCompany expects that the performance milestone payments aggregatingapproximately $1,317,000, plus accrued interest, will be paid in due course;however, there are no remaining conditions to such payment. Any severancepayments otherwise payable by the Company under the amended and restatedemployment agreements will be reduced by the amount of all earlier performancemilestone payments made. The adjustment to the Liquidation Reserve ofapproximately $500,000 is to consider the forecast of the Company’s cumulativenet operating results which includes its remaining golf course assets, theResort condominium sales operations, and the overhead and interest expense ofthe Company’s corporate operations and the increase of $5,000 in the accrualfor capital expenditures is for projects at Stonehenge.  The forecast of the Company’s cumulative netoperating results and the projected capital expenditure needs are impacted bychanges in the anticipated close dates of the Company’s remaining assets,namely the Resort.  The anticipated closedate for a sale of the Resort is now on or before July 31, 2007 a change froman anticipated close date of on or before June 30, 2007 as of December 31,2006.

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:
| ** **                                                      | ** ** | **For the three months ended   March 31,** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2007**                                                                 | ** ** | **2006** | ** ** |
| Revenues                                                        | ** ** | ** **                                                               | ** ** | ** ** | ** ** |
| Revenue from Resort and  managed golf course operations         |       | $                                                                        | 15,278,000 |   | $ | 18,006,000 |   |
| Expenses                                                        |       |                                                                     |       |   |   |
| General and  administrative                                     |       | 296,000                                                                  |       | 251,000 |   |
| Direct expenses from  Resort and managed golf course operations |       | 12,429,000                                                               |       | 14,257,000 |   |
| Total operating  expenses                                       |       | 12,725,000                                                               |       | 14,508,000 |   |
| Operating income                                                |       | 2,553,000                                                                |       | 3,498,000 |   |
| Interest expense—net                                       |       | (380,000                                                                 | )          | (318,000 | ) |
| Other expense                                                   |       | (59,000                                                                  | )          | — |   |
| Operating income and interest expense—net                  |       | $                                                                        | 2,114,000  |   | $ | 3,180,000 |   |

 

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**3.  Summary of Significant Accounting Policies**

*Interim Statements*

The accompanying condensedconsolidated financial statements for the three months ended March 31, 2007have been prepared in accordance with (i) accounting principles generallyaccepted in the United States of America, or GAAP, and under the liquidationbasis of accounting following our stockholders’ approval of the plan ofliquidation on May 22, 2001, and (ii) the instructions toForm 10-Q and Article 10 of Regulation S-X. These financial statementshave not been audited by a registered independent public accounting firm;however, they include adjustments (consisting of normal recurring adjustments)which are, in the judgment of management, necessary for a fair presentation ofthe net assets, financial condition, results of operations and cash flows forsuch periods. However, these results are not necessarily indicative of resultsfor any other interim period or for the full year. In particular, revenues fromgolf 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. TheCompany’s management believes that the disclosures included in the accompanyinginterim financial statements and footnotes are adequate to make the informationnot misleading, but also believes that these statements should be read inconjunction with the summary of significant accounting policies and notes tofinancial statements included in the Company’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2006.

*Recent Accounting Pronouncements*

In July 2006, the FASB issued FASB InterpretationNo. 48, Accounting for Uncertainty in Income Taxes-an Interpretation ofFASB Statement No. 109 “(FIN 48)”, which clarifies the accounting foruncertainty in income taxes recognized in an enterprise’s financial statements.FIN 48 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 the Company as of January 1, 2007 and requiredapplication of FIN 48 to all existing tax positions upon initial adoption. Theadoption of the standard had no effect on the Company’s financial condition orresults of operations.

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***4.  Commitments andContingencies***

***LandUse Lawsuits***

On March 29,2005, 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 was filed in the Circuit Court of the SixthJudicial Circuit, in and for Pinellas County, Florida, Civil Division and wasgranted by the Circuit Court.  In thisreport, the Company refers to this matter as the “Initial Land Use Lawsuit.”   The plaintiffs in the Initial Land Use Lawsuithave filed a multi-count complaint seeking injunctive and declaratory reliefwith respect to the land use and development rights of a tract of land commonlyknown as Parcel F, a parcel of land located within the Resort and owned byGHR. The Company filed the Motion to Intervene as a defendant in the InitialLand Use Lawsuit in order to protect its property and its land use anddevelopment rights with respect to Parcel F.  On April 26, 2005, Joseph E.Colwell, Marcia G. Colwell, Kirk E. Covert, and Deborah A.Covert and the Autumn Woods Homeowner’s Association, Inc. moved tointervene in the Initial Land Use Lawsuit, which the Court subsequentlyallowed.  On April 8, 2005, aseparate suit was filed by James M. and Mary H. Luckey, and Andrew J.and Aphrodite B. McAdams, against Pinellas County, GHR and BayfairInnisbrook, LLC seeking injunctive and declaratory relief relating to the landuse and development rights of Parcel F. This suit was consolidated with the Initial Land Use Lawsuit.  In this report, the Company refers to thismatter as the “Subsequent Land Use Lawsuit” and to the Initial Land Use Lawsuitand the Subsequent 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 infavor of the defendants on all counts and denied all claims asserted by theplaintiffs in both Land Use Lawsuits. On March 31, 2006, the plaintiffs in theconsolidated cases filed a notice of appeal to the Second District Court ofAppeal.  The Appeal Court affirmed percurium the Circuit Court judgment in favor of the defendants on February 28,2007 and denied the plaintiffs-appellants’ motion for attorney fees.   On March 13, 2007, the plaintiffs filed amotion for the Appeal Court to rehear their claims.   As of May 9, 2007, the Appeal Court has notyet responded to this motion.

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

On July 13, 2006, Wall SpringsConservatory, Inc., or Wall Springs, filed suit against GTA-IB as successor in interest to Golf HostResorts, Inc. in the circuit court of Pinellas County for declaratoryrelief. On July 14, 2006, Wall Springs also filed suit against us in thesmall claims division of the Pinellas County Court in connection with aneasement agreement. We answered both claims, also asserting affirmativedefenses and counterclaims in each action. We then filed a motion to transferthe small claims matter to Circuit Court, which was granted onSeptember 27, 2006. We then moved to consolidate these two cases. Ourmotion to consolidate was granted by the Circuit Court on March 1, 2007.At this time, the Company is unable to assess the likely outcome of thislitigation.

***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., or LOCI, and its assertedassignee of lien and account rights, Everett Holding Company, Inc., in theFall of 1999 against numerous defendants, including Golf Trust of America, L.P.Plaintiffs assert LOCI performed construction services on, or that benefited,the property of various defendants, including Golf Trust of America, L.P.  With respect to Golf Trust of America, L.P.,plaintiffs seek to foreclose a mechanic’s lien upon property formerly owned byGolf Trust of America, L.P. The lien is for the principal amount ofapproximately $1,276,000, plus interest at 10% per annum and attorney fees.Plaintiffs calculate interest to May 20, 1999, just prior to the lienfiling, to be approximately $151,000 and interest thereafter to be $354 perday. The Court entered a written order granting Golf Trust of America, L.P.’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 further proceedings.  As of May 9, 2007, the trial date has not yetbeen set. At this time, the Company is unable to assess the likely outcome ofthis litigation.

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*Environmental Remediation*

The FloridaDepartment of Environmental Protection, or the DEP, conducted a site inspectionat 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 predecessorowner entered into a Consent Order wherein the DEP agreed to a reduced civilpenalty of $22,000, and allowed the predecessor owner to offset 80% of thisreduced civil penalty with credits obtained through the implementation of apollution control project and a process of ongoing self-monitoring andreporting of environmental conditions to the DEP. The DEP determined that anabove ground self-contained storage tank system at the Resort qualifies forthis credit. The Resort installed the system and, on an ongoing basis,continues to monitor the environmental conditions at the Resort and to reportthese 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.  The final formal proposal from URS wasreceived on April 6, 2007 and was subsequently approved by the DEP.  The estimated costs in the proposal for theremediation was approximately $59,000. URS began the remediation work on May 8, 2007.  This amount was accrued as “Other Expense” asof March 31, 2007.  After the excavationis finished, additional testing will be completed. If tests remain favorable,this should conclude the process.

***OrdinaryCourse Litigation***

Ownersand operators of golf courses are subject to a variety of legal proceedingsarising in the ordinary course of operating a golf course, includingproceedings relating to personal injury and property damage. Since the Companyis now either the owner and/or the operator of all of its remaining golfcourses, the Company maintains insurance for these purposes, subject todeductibles and exclusions deemed reasonable by the Company. The Company is notcurrently subject to any material claims of this type.

***Westinand Troon Management Fees***

The July 15, 2004 Management Agreement betweenGTA-IB and Westin provided that Westin would manage the Resort for a fee equalto 2.2% of gross revenue of the Resort. Contemporaneously with the signing ofthis new Management Agreement, Westin and GTA-IB, for the limited purposesdescribed in the Management Agreement, entered into a separate agreement withTroon which provided that Troon would manage the golf facilities of the Resortfor a fee, payable by GTA-IB, equal to 2% of gross golf revenue. Theseagreements also provided for the opportunity for Westin and Troon to earnsupplemental fees based on financial performance metrics. The ManagementAgreement with Westin had a termination date of December 31, 2017;however, by mutual agreement, on September 28, 2006, the Company, Westinand GTA-IB entered a Termination and Release Agreement (the “TerminationAgreement”), pursuant to which the Company, GTA-IB, and Westin agreed toterminate the Management Agreement as of October 31, 2006 (the “TerminationDate”). In addition to the termination of the Management Agreement, theTermination Agreement provides that (i) on or prior to October 3,2006, the Company will deposit $600,000 in the Resort’s operating account(which the Company did)  to be used inpart to pay to Westin certain unpaid fees and charges which have accrued underthe Management Agreement and which are expected to approximate this amount,(ii) on or prior to the earlier of March 31, 2008, or any sale of theResort by the Company, the Company will pay to Westin the termination feeprovided under Section 4.4.2 of the Management Agreement calculated as ofthe Termination Date, or approximately $5,594,000, and (iii) Westin willpermit the Company and GTA-IB to continue to access Westin’s “SAP” accountingsystem (which they did) for the operation of the Resort for a period of threemonths after the Termination Date for a total charge of $6,000. The Company andGTA-IB plan to independently manage the Resort as of the Termination Date.

GTA-IBand Troon agreed to extend the Facilities Management Agreement for ten-dayincremental periods subsequent to November 30, 2006.   On February 22, 2007, GTA-IB sent Troon anotice of termination in regards to the Facilities Management Agreement.  GTA-IB and Troon continue to negotiate thepost-termination rights of the respective parties including the amount, timingand payment of the Supplemental Fee. GTA-IB intends to manage the golf operations internally following thetermination of the Troon Facilities Management Agreement.

***RefundableInitiation Fees***

Certain membership initiation fees at the Country Clubat Wildewood and Woodcreek (collectively known as Stonehenge) are refundablebased on specific conditions. The estimated present value of the potentialrefunds over the thirty-year required membership term, as defined in the ClubMembership Manual, is recorded as an accrued liability on our books at March31, 2007 and is valued at $125,000. Additionally, certain initiation fees may berefundable prior to the expiration of the thirty-year term under specificmembership replacement conditions. There is no liability recorded to considerthe refundability of refunds issued under these conditions due to the fact thatfour new members have to join in the specific membership category for aresigned 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 received are initially recorded as deferredrevenue and amortized over the average life of a membership which, based onhistorical information, is deemed to be nine years.

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**5.  Receivables—net**

Receivables—net consists of approximately $4,776,000in member, trade and other miscellaneous receivables of our managed golfcourses, the Resort and its related entity Golf Host Securities at March 31,2007, as compared to the other miscellaneous receivables at December 31,2006, which include approximately $2,892,000 of member, trade and othermiscellaneous receivables of our managed golf courses, the Resort and itsrelated entity Golf Host Securities.

**6.  Debt**
|                            | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|----------------------------|------------|--------------------|------------|---------------------------------|------------|
| Revolving line  of credit  |       | $                  | 4,100,000  |                            | $          | 4,100,000 |   |
| Capital lease  obligations |       | 1,180,000          |       | 772,000                         |       |
| Total                      |       | $                  | 5,280,000  |                            | $          | 4,872,000 |   |

 

*Revolving Line of Credit*

OnMarch 18, 2004, the Company entered into a loan agreement and relatedmortgage with Textron Financial Corporation, or Textron, for a revolving lineof credit with a maximum permissible outstanding loan amount of $2,100,000. OnAugust 4, 2005, the line was increased to $4,200,000 and the term wasextended to March 18, 2009. This loan is collateralized by a securityinterest in the Company’s golf courses in Stonehenge. The interest rate is theprime rate plus 1.75% per annum paid monthly. This loan requires that theoperations at Stonehenge for the immediately preceding twelve month period besufficient to meet a debt service coverage ratio, as defined in the mortgage ofat least 1.20, as measured monthly. The Company was in compliance with the debtservice coverage ratio covenant at March 31, 2007.

Incertain instances, the loan may be assumed by a buyer of Stonehengepursuant to assumption provisions in the loan amendment. The interest ratecontinues to be the prime rate (8.25% per annum at March 31, 2007) plus 1.75%per annum, paid monthly. The Company paid a one-time commitment fee to Textronof $42,000 to obtain the increase in this credit line.  In addition, the Company will pay to Textrona fee of 0.25% per annum of the unused balance of this line of credit.

Inconnection with the execution of the Textron loan amendment, the Company,through its subsidiaries Stonehenge LLC and Golf Trust of America, L.P.,collectively the Borrower, entered into a Notice of Future Advance, Note,Mortgage and Loan Modification Agreement with Textron, or the Amended Mortgage,modifying the March 2004 Mortgage, Security Agreement and Fixture Filing(as modified by the Amended Mortgage, the “Security Agreement”). The SecurityAgreement contains events of default provisions that include, among others,non-payment of principal, interest or fees, violation of covenants, inaccuracyof representations and warranties, cross defaults, bankruptcy and insolvencyproceedings, termination, dissolution or liquidation of Stonehenge LLC of GolfTrust of America, L.P., failure to cure the loss of certain licenses, permitsor contracts, curtailment of utilities or services at Stonehenge, and materialjudgments. In the event of the occurrence of an event of default, Textron isentitled to, among other things, accelerate all obligations of the Borrowerunder the aforesaid loan documents and sell certain of the Borrower’s assets,namely the Wildewood and Woodcreek golf courses and related assets, to satisfythe Borrower’s obligations.

SeeNote 10, *Subsequent Events*, for furtherdiscussion regarding debt.

*Capital Lease Obligations*

AtMarch 31, 2007, the Company had capital lease agreements for certain golfcourse and other equipment at the Resort. These lease agreements expire atvarious dates through 2012.
|                                              | ** ** | **Capital** | ** ** |
|----------------------------------------------|------------|-------------|------------|
| April 1  through December 31, 2007 |       | $           | 393,000    |   |
| 2008                                         |       | 465,000     |       |
| 2009                                         |       | 238,000     |       |
| 2010                                         |       | 126,000     |       |
| Thereafter                                   |       | 155,000     |       |
| Total                                        |       | 1,377,000   |       |
| Less amount  representing interest           |       | (197,000    | )          |
| Total                                        |       | 1,180,000   |       |
| Less current  portion                        |       | 435,000     |       |
| Long-term portion                            |       | $           | 745,000    |   |

 

**7.  Accounts payable and other liabilities**

Accountspayable and other liabilities consist of the following:
|                                | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Accounts payable               |       | $                            | 6,909,000  |                            | $          | 5,904,000 |   |
| Accrued payroll                |       | 1,157,000                    |       | 1,250,000                       |       |
| Accrued expenses               |       | 2,757,000                    |       | 2,151,000                       |       |
| Deferred revenue  and deposits |       | 4,069,000                    |       | 4,103,000                       |       |
| Total                          |       | $                            | 14,892,000 |                            | $          | 13,408,000 |   |

 

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**8.  Investment in Resort and related obligations**

Certaincondensed balance sheet information regarding the Resort, adjusted for theliquidation basis of accounting, is provided below:
| ** **                                                                                           | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Assets                                                                                               |       |                         |       |                            |       |
| Current assets                                                                                       |       | $                            | 8,252,000  |                            | $          | 5,296,000 |   |
| Real estate and Resort assets                                                                        |       | 51,819,000                   |       | 51,212,000                      |       |
| Other assets                                                                                         |       | 3,413,000                    |       | 3,302,000                       |       |
| Total assets                                                                                         |       | 63,484,000                   |       | 59,810,000                      |       |
| Liabilities                                                                                          |       |                         |       |                            |       |
| Accounts payable and accrued expenses                                                                |       | 9,870,000                    |       | 8,961,000                       |       |
| Long term refurbishment                                                                              |       | 4,056,000                    |       | 4,254,000                       |       |
| Capital lease obligations                                                                            |       | 1,180,000                    |       | 772,000                         |       |
| Westin Termination Fee                                                                               |       | 5,594,000                    |       | 5,594,000                       |       |
| Troon Supplemental Fee                                                                               |       | 800,000                      |       | 800,000                         |       |
| Reserve/adjustment for projected operating results  through the contemplated holding period (Note 2) |       | 1,700,000                    |       | (900,000                        | )          |
| Total  liabilities                                                                                   |       | 23,200,000                   |       | 19,481,000                      |       |
| Net investment  in subsidiary                                                                        |       | 40,284,000                   |       | 40,329,000                      |       |
| Write-down to  estimated value                                                                       |       | (2,421,000                   | )          | (2,421,000                      | )          |
| Net investment in  subsidiary adjusted for write-down                                                |       | $                            | 37,863,000 |                            | $          | 37,908,000 |   |

 

Thefirst quarter of the year is typically the most profitable quarter of theResort’s fiscal year, so typically the reserve created by the performance inthe first quarter is absorbed by the end of the third quarter.  As more fully described in Note 2, at March31, 2007, the Company has recorded a reserve to reflect the estimated operatingresults during the remaining contemplated holding period (until July 31, 2007).

*Master LeaseRefurbishment Obligation*

In connection with the SettlementAgreement, the Company assumed control and operation of the Rental Pool LeaseOperations at the Resort (the “Rental Pool”). The Rental Pool was operated and controlled by GHR prior to that time.On a year-to-year basis, approximately 500 of the 938 condominium units at theResort are leased by the Company from the condominium owners and used as hotelaccommodations for the Resort pursuant to rental pool lease arrangements. TheCompany is the lessee under these rental pool lease operation agreements.  Those agreements provide that the Companywill distribute a percentage of room revenues to participating condominiumowners who permit the Company to lease their units as hotel accommodations.

Inconnection with the Company taking control of the Resort from its unaffiliatedborrower effective July 16, 2004, the Company recorded a liability torecognize its obligations under the Master Lease Agreement, or MLA,refurbishment program.  This programentitles condominium owners who participate in the Rental Pool to 50%reimbursement of the refurbishment costs of their unit subject to the terms andconditions of the MLA. Interest on this liability is accrued at a rate of 5%and is paid quarterly. Principal payments began in the first quarter of 2005and 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. The Company refers to this program as Phase 5. Interest on thePhase 5 liability is accrued at a rate of 2.5% per annum and paid quarterly.Principal payments for Phase 5 begin in the first quarter of 2008 and will be paidquarterly through the fourth quarter of 2012.  As of March 31, 2007, the Company estimates the settlement value of thisliability upon sale of the Resort to be $4,056,000.

Minimum principal payments on the refurbishmentprogram at the Resort are as follows:
| Year                                         | ** ** | **Amount** | ** ** |
|----------------------------------------------|------------|------------|------------|
| ** **                                   | ** ** | ** ** | ** ** |
| April 1  through December 31, 2007 |       | $          | 1,065,000  |   |
| 2008                                         |       | 1,786,000  |       |
| 2009                                         |       | 2,147,000  |       |
| 2010                                         |       | 22,000     |       |
| Thereafter                                   |       | 60,000     |       |
| Total  undiscounted principal payments       |       | 5,080,000  |       |
| Less: net  present value discount            |       | (1,024,000 | )          |
| Total                                        |       | $          | 4,056,000  |   |

 

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*Westin TerminationFee*

The Management Agreement that the Company executedwith Westin on July 15, 2004 provides that the Company shall pay toWestin, subject to the terms and conditions set forth in that agreement, atermination fee of not less than $5,500,000. The estimated settlement value ofthis liability upon sale of the Resort is approximately $5,594,000 as ofMarch 31, 2007. The termination fee is due the earlier of a sale of theResort or March 31, 2008. See Note 4 regarding the termination of theManagement Agreement.

*Troon SupplementalFee*

The Facility Management Agreement that Westin executedwith Troon was effective as of July 15, 2004. That agreement provides thatthe Company shall pay to Troon, subject to the terms and conditions set forthin that agreement, a supplemental fee of $800,000 for outstanding managementfees originally payable to Troon prior to July 15, 2004. See Note 4 forfurther discussion regarding the Facility Management Agreement.

**9.  Preferred Stock**

*Series A CumulativeConvertible Redeemable Preferred Stock*

On April 2, 1999, the Company completed aregistered offering of 800,000 shares of 9.25% Series A CumulativeConvertible Preferred Stock, par value $0.01 per share, or series Apreferred stock, at a price of $25.00 per share. All shares of this series Apreferred stock were sold to AEW Targeted Securities Fund, L.P., or AEW. Theseries A preferred stock is convertible, in whole or in part, at theoption of the holder at any time into the Company’s common stock at an implicitconversion price of $26.25 per share of common stock, subject to adjustment incertain circumstances. The Company contributed the net proceeds to the Company’soperating partnership in exchange for 800,000 series A preferred OP unitswith analogous terms.

Aggregate series A preferred stock dividendsaccrued until 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). As of March 31, 2007, the Company had notpaid 22 quarters of series A preferred stock dividends (including thedividend otherwise payable in respect of the quarter ended March 31, 2007).Under the Company’s series A preferred stock charter document, because theCompany has at least six quarters of unpaid series A preferred stockdividends, the holder of the series A preferred stock, AEW or itstransferee, has the right to elect two additional directors to the Company’sboard of directors whose terms as directors would continue until the Companyfully pays all accrued but unpaid series A preferred stock dividends. Thisright went into effect at the Company’s annual meeting that was held onNovember 17, 2003 and although AEW has not exercised this right, itmay do so in the future in accordance with the terms of the Company’sseries A preferred stock charter and the voting agreement described below.

On February 22, 2001, the Company entered into avoting agreement with AEW, which continues to hold all shares of theseries A preferred stock. That agreement required AEW to vote in favor ofthe plan of liquidation and required the Company to redeem all of the shares ofseries A preferred stock (for $25 per share plus dividends accrued andunpaid thereon through the date of the final redemption payment) promptly afterthe Company determines in good faith that it has received sufficient netproceeds from the disposition of the Company’s assets and/or operations toredeem all of the series A preferred stock without violating any legal orcontractual obligations.

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Moreover, under the Company’s voting agreement withAEW, since the Company did not fully redeem the series A preferred stockby May 22, 2003, AEW or its transferee had the right to require theCompany to redeem the series A preferred stock in full within 60 daysthereafter, which right AEW exercised. Since the Company defaulted on thatobligation, from July 21, 2003 until the series A preferred stock isredeemed, the stated dividend rate of the series A preferred stockincreased from 9.25% to 12.50% per annum (equivalent to a quarterly dividend of$625,000). Although the Company is permitted to continue to accrue suchdividends without paying the same on a current basis, the dividends must bepaid in full prior to any distribution to the Company’s common stockholders(but after payment of all obligations to the Company’s creditors), which willreduce the Company’s cash available for liquidating distributions to commonstockholders.

On May 6, 2005, the Company executed an optionagreement with AEW which granted the Company the right to repurchase all800,000 shares of the Company’s series A preferred stock held by AEW at afixed price.  AEW and the Companysubsequently entered into a series of agreements granting the Company the rightto repurchase AEW’s series A preferred stock, each of which has expired by itsterms. In particular, on April 12, 2006, the Company entered into a newoption agreement with AEW. In this option agreement (now expired), AEW grantedthe Company the option, exercisable by the Company in its sole discretion, topurchase, on or before June 30, 2006, all 800,000 shares of the Company’sseries A preferred stock held by AEW, including, without limitation, allof AEW’s rights to Liquidation Preferences (as defined in the Company’sArticles Supplementary, including, without limitation, Liquidation Preferencesin respect of any accrued and unpaid dividends) payable in respect of suchshares as of the date of the Company’s exercise of the option for a price of$20,000,000. The option to repurchase AEW’s series A preferred stock was onlyexercisable in the event that the business of the Resort is purchased for cashconsideration of no more than $35,000,000. This option agreement expired onJune 30, 2006 pursuant to its terms.

The conclusion of the Company’s subsequentnegotiations with AEW which will allow the Company to repurchase all of AEW’sseries A preferred stock plus accrued dividends for a price of $20,000,000 orless is pending evidence or confirmation that the Company has secured adequatefinancing to demonstrate its ability to close on the transaction to repurchaseall of the series A preferred stock.

As a result of the Company’s assumption that thesenegotiations will lead to an executed agreement, the Company has not recordedin its net assets for the three months ended March 31, 2007 either (i) aliability of $13,147,000 for the accrual of quarterly preferred dividends forthe period July 1, 2001 to December 31, 2006 or (ii) additionaldividend accruals of $625,000 for each subsequent quarter through the date thatthe exit transaction is ultimately consummated and liquidation payments aremade to AEW.  Further, the carryingamount of the preferred shares remains at $20,000,000 on the accompanyingstatement of net assets; however, absent either an agreement by a third partyto assume all or a portion of the Company’s accrued preferred dividendobligation or an agreement by AEW to forgive all or a portion of the Company’spreferred dividend obligations, (neither of which have occurred), the Companywill be required to accrue, and ultimately pay in liquidatingdistributions to AEW, these preferred dividends. Any preferred dividends whichthe Company is required to pay to AEW ultimately would reduce the net assetsavailable to stockholders in liquidation and correspondingly the estimatedliquidation distribution per common share. If the Company were required to payto AEW dividends accrued through March 31, 2007, the Company’s liquidatingdistributions would be reduced by $1.82 per common share or OP unit of theOperating Partnership outstanding on that date.

At the present time, the Company has not executed abinding agreement with AEW. There can be no assurances that the Company willsuccessfully execute such an agreement with AEW, or that the terms of anyagreement that the Company may execute with AEW will not be more onerous to theCompany than management currently anticipates. Further, even if the Company isable to execute an agreement with AEW which permits the Company to repurchasethe series A preferred stock at $20,000,000 or less, the Company may be unableto negotiate a financing arrangement through its existing lender relationshipsor otherwise to procure sufficient funding to permit it to exercise thatrepurchase right and close the repurchase prior to its expiration. In the eventthat the Company executes an agreement with AEW and it is unable to repurchaseAEW’s series A preferred stock in accordance with the terms of that agreement,in addition to the requirement that the Company pay accrued dividends to AEW,the Company expects that the agreement also would subject the Company topenalties or grant AEW additional rights with respect to the Company and itsremaining assets which will be prejudicial to the Company and its assets.

**10.  Subsequent Events**

On April 10, 2007, GTA-IB and certain of its affiliates entered into a Business LoanAgreement (the “Loan Agreement”) with Patriot Bank, a community bank, toborrow, on a non-revolving basis,  up toa principal amount of  $1,200,000 (the “Loan”).  The Loan is secured by a first prioritymortgage on three wholly-owned condominium units located at the

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Resort.  On theClosing Date, the Company borrowed, pursuant to the Loan Agreement,approximately $20,000 to pay the closing costs related to the Loan. Subject to compliance with the Loan Agreement, the Company has the right todraw 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 bears interest at thefloating Wall Street Journal Prime rate (currently 8.25%) and provides forinterest only payments through December 31, 2007.  Beginning with themonthly payment due on January 31, 2008, the Loan Agreement requires principaland interest payments based on a twenty year amortization schedule.  Thereis no prepayment penalty for early repayment.  Any balance of the Loanwhich remains unpaid on April 10, 2010 must be repaid in full on that date. Ifan event of default occurs, then the obligation may be accelerated and theprincipal and any interest on the Loan shall be due and payable in full. The lender shall also have additional remedies in law and equity upon an eventof default. An event of default is defined in the Loan Agreement to generallyinclude, among other events, (i) a payment default, (ii) a failure by theCompany to comply with the terms of the loan agreement, (iii) any falsestatement or misrepresentation in any loan-related document by the Company,(iv) dissolution of the Company, (v) any defect in collateralization orforeclosure proceedings involving the Company, (vi) a material adverse changein the Company’s financial condition, or (vii) if the lender believes that theprospect of repayment of the loan is impaired or otherwise in good faithbelieves itself insecure.

Among other terms, the Loan Agreement contains 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 May 9, 2007, the only draw against this Loan wasfor the loan closing costs of approximately $20,000.

16

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**GOLF TRUST OFAMERICA, INC.Form 10-Q Quarterly ReportFor the Three Months Ended March 31, 2006**

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

Wewere incorporated in Maryland on November 8, 1996. We are currentlyengaged in a liquidation of our assets pursuant to a plan of liquidationapproved by our stockholders. We were originally formed to be a real estateinvestment trust, or REIT; however, as of fiscal year 2002 we no longer haveour REIT status as a result of our repossession and operation of certain golfcourses following the default of their original third-party lessees. As of May9, 2007, we own two properties, held by us in fee simple.  These two properties represent six golfcourses. Two of the six golf courses are managed by us and four (namely, thegolf courses at the Resort) were managed by Westin pursuant to our ManagementAgreement with Westin, or the Management Agreement, from the inception of ourownership, July 15, 2004, until the termination of the Management Agreement onOctober 31, 2006.  See further discussionin Note 4 to the Condensed Consolidated Financial Statements referred to inItem 1 of this Quarterly Report.  Four ofour golf courses are located in Florida and two are located in South Carolina.Golf Trust of America, L.P., a Delaware limited partnership, holds title to thegolf courses which are located in South Carolina. Title to the Resort is heldby GTA-IB, LLC, a wholly-owned subsidiary of GTA-IB Golf Resort, LLC. GTA-IBGolf Resort, LLC is 100% owned by our operating partnership, Golf Trust ofAmerica, L.P. In this Quarterly Report, we refer to Golf Trust of America, L.P.as “our operating partnership” or “OP,” and we refer to the operatingpartnership and ourselves (together with all subsidiaries) collectively as “we,”“us” or “our Company”. Through our wholly owned subsidiaries, GTA GP, Inc.and GTA LP, Inc., we held 100 percent of the interests in ouroperating partnership as of May 9, 2007. GTA GP is the sole general partner ofour operating partnership and owns a 0.2 percent interest therein. GTA LPis the sole limited partner in the operating partnership and owns a99.8 percent interest therein.

**Significant Events since thefiling of our Annual Report on Form 10-K on April 2, 2007**

Significant events occurring since April 2, 2007 (thefiling date of our Annual Report on Form 10-K) include:

·                                          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 a principal amount of  $1,200,000 (the “Loan”).  The Loan is secured by a first prioritymortgage on three wholly-owned condominium units located at the Resort.  On theClosing Date, the Company borrowed, pursuant to the Loan Agreement,approximately $20,000 to pay the closing costs related to the Loan. Subject to compliance with the Loan Agreement, the Company has the right todraw 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. See further discussion in Note 10 to theCondensed Consolidated Financial Statements referred to in Item 1 of thisQuarterly Report.

·                                          Theconclusion of our negotiations with AEW which will allow us to repurchase allof AEW’s series A preferred stock plus accrued dividends for a price of $20million or less is pending evidence or confirmation that we have securedadequate financing to demonstrate our ability to close on the transaction torepurchase all of the series A preferred stock. As a result of our assumptionthat these negotiations will lead to an executed agreement, we have notrecorded in our net assets a liability for the accrual of preferred dividendspayable for the quarter beginning July 1, 2001 or for subsequent quarters.  In the event that either we are unable toreach an agreement with AEW, or we are unable to exercise any repurchase rightand close the repurchase under any agreement we may reach with AEW, we may berequired to pay AEW all or a portion of the preferred dividends for which we havenot recorded a liability, reducing our liquidating distributions to holders ofour common stock.  See further discussionin Note 9 to the Condensed Consolidated Financial Statements referred to inItem 1 of this Quarterly Report and in Part II, Item 1A “Risk Factors” in ourAnnual Report on Form 10-K for the fiscal year ended December 31, 2006 filed onApril 2, 2007.

 

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**Assetsheld for sale**

Thefollowing chart identifies each of our unsold properties as of May 9, 2007:
| **Property**                                | ** ** | **Location**     | ** ** | **Number of  Golf Courses** | ** ** |
|---------------------------------------------|------------|------------------|------------|---------------------------------------|------------|
| The Resort                                  |       | Palm  Harbor, FL |       | 4                                     |       |
| Stonehenge  (Wildewood and Woodcreek Farms) |       | Columbia,  SC    |       | 2                                     |       |
| Total                                       |       |             |       | 6                                     |       |

 

As ofMay 9, 2007, we have not entered into any binding agreements with prospectivepurchasers of the foregoing assets.

***Current Strategic Choices and the Status of the Sale of the Resort***

On January 21, 2005, in the interest of seekingto accelerate the completion of our liquidation, we engaged Houlihan LokeyHoward and Zukin Capital, Inc., or Houlihan Lokey, as our then exclusivefinancial advisor to provide financial advisory services to us in furtheranceof our stockholder-approved plan of liquidation. Our liquidation may occurthrough the sale of our assets, a merger or otherwise in order to allow us tomaximize value to our stockholders. In addition,  we may pursue financing or equityinvestment in furtherance of the plan of liquidation. In this Quarterly Report,we refer to the type of transaction discussed in the prior two sentences as anexit transaction. The initial term of Houlihan Lokey’s engagement was ninemonths, which was subsequently extended on a month-to-month basis . Since anexit transaction had not occurred, we terminated our month-to-month engagementwith Houlihan Lokey on June 29, 2006. The period during which Houlihan Lokeymight have still been owed a transaction fee if a closing of an exittransaction were to occur under certain circumstances expired onFebruary 28, 2007.

The terms of our series A preferred stock and ouragreements with AEW prohibit us from making any further distributions to commonstockholders until the series A preferred stock is redeemed in full. Afterour series A preferred stock has been redeemed in full, we anticipatemaking one or more liquidating distributions to the holders of our commonstock. However, we can provide no assurance that the net proceeds of our assetdispositions will be sufficient to redeem our series A preferred stockwhether or not we sell the Resort.

For a period of time during the early stages of theHoulihan Lokey engagement, our board of directors also formed a SpecialCommittee comprised of all three of its then three independent directors toconsider certain matters relating to the liquidation and financial advisorservices in evaluating an exit transaction. We continue to negotiate withprospective buyers of the Resort and believe we are currently faced with thestrategic choices outlined below. As of May 9, 2007, we have not entered into adefinitive agreement for the sale of the Resort and can provide no assurancewhen or if we will.

Since we adopted the plan of liquidation inMay 2001, we believe we have made significant progress in liquidating ourassets. We have successfully closed on the sale of 32 of the 34 properties thatwe owned, leaving the Innisbrook Resort and Golf Club and the Country Clubs ofWildewood and Woodcreek still remaining in our portfolio. Over the years, wehave had numerous parties approach us either directly or through our thenfinancial advisors, Bank of America and Houlihan Lokey, expressing an interestin purchasing the Resort. However, after substantial efforts to sell the Resort(including engaging with third parties in negotiating various types of purchaseand sale agreements, property tours, due diligence and negotiations with AEW,among other efforts), only a single transaction led to an executed purchase andsale agreement. That purchase and sale agreement was executed on or aboutOctober 25, 2005 and was subsequently terminated. In our view, otherprospective buyers declined to proceed because of the complexity of the assetor our preferred price; and we declined to proceed with a number of prospectivebuyers because of their unwillingness to meet our pricing expectations orbecause of our concerns regarding their financeability or credibility issues,among other problems.

Moreover, since we adopted the Plan of Liquidation, anumber of events have occurred, including the following: we took title to theResort from our borrower in July 2004; the Westin Management Agreement wasterminated on October 31, 2006; we are currently negotiating terms toterminate the Troon Facilities Management Agreement; and we have sought toreposition the Resort as an independently owned and operated resort and golfclub based upon the foregoing.

 

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We are currently negotiating various letters of intentand purchase and sale agreements with various parties with the goal ofexecuting a purchase and sale agreement and closing a transaction by July 31,2007, however, we can provide no assurance that our objectives will be met inthis regard or at all. Moreover, we can provide no assurance that if we enter apurchase and sale agreement with respect to the Resort that it will be at aprice equal to our estimate of fair value.

We believe it has been difficult to sell the Resortfor a variety of reasons, including among others, the instability of the formerowner and the market’s perception of such instability on the Resort as aviable, well-run operating business. However, absent the constraints of aManagement Agreement, we believe the Resort is slowly re-establishing theInnisbrook brand that was very successful prior to the first managementagreement with Hilton in 1993. The Resort hosted in March 2007 the PGAPODS Championship and, when coupled with the national telecast of the event forfour days, was, we believe, generally perceived as a great success for theResort’s reputation. We believe the Resort is currently positioned to gain backmarketshare that it has lost over the years. Golf package revenue growthcontinues to be strong with group meeting revenue growth a longer and slowerprocess. However, in order to achieve faster growth from group meeting revenue,we believe a spa must be constructed at the Resort. We believe this investment,along with other more minor capital improvement and deferred maintenanceprojects, would help to return the Resort and the Innisbrook brand to itshistorical  national recognition andsuccess. These projects require capital which, because of the Resort’s troubledpast and our prolonged plan of liquidation, is not available internally.

If we are unable to execute a satisfactory purchaseand sale agreement for the Resort and to achieve a transaction structure thatallows us to meet our obligations to AEW, our Board may consider modificationsor alternatives to the Plan of Liquidation. The modifications or alternativesmay include, among others, a recapitalization of the Company (for example, theissuance of debt, equity or derivative securities), a strategic partnership ora joint venture of the Resort. The goal of any such transaction would be tofirst redeem AEW at an acceptable discounted amount and, secondly, to allowadditional time to realize recovery of some of the historical Resort value overa reasonable period of time. Any such transaction could, but would notnecessarily, include funds to make capital investments at the Resort in orderto enhance its sale value.

Our board is currently considering the advantages anddisadvantages of establishing a finite timeline to execute a purchase and saleagreement with a qualified buyer and requiring a non-refundable deposit by anear-term specified date or, if that is not achieved, the Resort will be takenoff the market while an alternative to the plan of liquidation, such as one ormore of those discussed above, is executed. We do not believe that we cancontinue to entertain indications of interest from buyers if we elect to pursuea recapitalization or other transaction because we will need to focus ourefforts on the success of the return on investment for the parties to such atransaction and not be diverted by indications of interest that may likely notresult in an executed purchase and sale agreement. If a firm timeline isestablished, this will also inform the current interested parties that we mustall move expeditiously to an end result instead of continued prolongednegotiations that tax our limited resources.

Our board hascurrently taken this matter under advisement and is studying the advantages anddisadvantages of various strategies. There can be no assurance that any new strategy will be implemented or,if implemented, that it will be successful. In the meantime, we will continue to seek to sell the Resort but onlyfor a price we deem in the best interest of our stockholders.  See further discussion and in Part II, Item1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2006 filed on April 2, 2007.

***Potential use of a Liquidating Trust***

As wecontemplate the sale of our remaining assets and the wind-up of our Company, ascontemplated by our plan of liquidation, we may elect to contribute ourremaining assets and liabilities to a liquidating trust. For a more completedescription of our potential use of a liquidating trust, please refer to “Potentialuse of a Liquidating Trust; Related Income Tax Risks to our Stockholders” inPart 1, Item 1 of our Form 10-K for the year ended December 31,2006 filed on April 2, 2007.

 

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***Rental Pool***

In addition to thecurrent Rental Pool agreement dated January 1, 2002, GHR agreed with thecondominium owners association that GHR would reimburse 50% of therefurbishment costs invested in the condominium units by the condominium ownersplus interest on those costs accrued at 5% per annum. We assumed this obligationwhen we took control of the Resort. This amount will be reimbursed toparticipating condominium owners, or transferees who receive a condominium unitfrom a participating owner, over the five-year period beginning in 2005 asreflected in the table below. The full reimbursement attributable to each unitis contingent on the unit remaining in the Rental Pool from the date of therefurbishment of such unit through 2009. If the unit does not remain in thepool during the reimbursement period of 2005 through 2009, the owner orsuccessor owner forfeits any unpaid installments at the time the unit isremoved from the pool. In the event that the number of units in the Rental Pooldeclines below 575, our obligation to reimburse refurbishment expenses for the unitswill abate until such time as the number of units in the Rental Pool is again575 or more. The refurbishment of 617 Rental Pool units was completed as ofSeptember 30, 2003.  In addition,GTA IB agreed to provide refurbishment reimbursement for units placed into therental pool during 2005 at a level of 25% of the applicable condominium owner’sinvestment in the refurbishment. We refer to this program as Phase 5. Intereston the Phase 5 liability is accrued at a rate of 2.5% per annum and paidquarterly. Principal payments for Phase 5 begin in the first quarter of 2008and will be paid quarterly through the fourth quarter of 2012. As of May 9,2007, 612 units were participating in the Rental Pool. Minimum undiscountedprincipal and interest payments on the refurbishment program are as follows:
|                                         | ** ** | **Principal** | ** ** | **Interest** | ** ** |
|-----------------------------------------|------------|---------------|------------|--------------|------------|
| ** **                              | ** ** | ** **    | ** ** | ** **   | ** ** |
| April 1, 2007 –  December 31, 2007 |       | $             | 1,065,000  |         | $          | 169,000 |   |
| 2008                                    |       | 1,786,000     |       | 154,000      |       |
| 2009                                    |       | 2,147,000     |       | 55,000       |       |
| 2010                                    |       | 22,000        |       | 1,000        |       |
| Thereafter                              |       | 60,000        |       | 1,000        |       |
| Total  undiscounted principal payments  |       | $             | 5,080,000  |         | $          | 380,000 |   |
| Less: net  present value discount       |       | (1,024,000    | )          |         |       |
| Total                                   |       | $             | 4,056,000  |         |       |   |

 

**Applicationof Critical Accounting Policies**

Uponapproval by our stockholders of the plan of liquidation on May 22, 2001,we adopted the liquidation basis of accounting for periods beginning afterMay 22, 2001. The changes in Net Assets in Liquidation for Golf Trust ofAmerica, Inc., excluding the Resort and Golf Host Securities, arediscussed below. This discussion of changes in net assets, instead of adiscussion of operating results, is consistent with the presentation of theliquidation basis financial statements in Item 1 of this Quarterly Report onForm 10-Q. The results of operations for the Resort are discussed separatelybelow under the caption “Resort results of operations for the three monthsended March 31, 2007 and 2006.” Please refer to “Management’s Discussion andAnalysis of Financial Condition and Results of Operations—Application ofCritical Accounting Policies” in our Form 10-K for the year endedDecember 31, 2006, filed on April 2, 2007, for a complete descriptionof our critical accounting policies.

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

Thechange in our reserve for estimated liquidation costs for the three monthsended March 31, 2007 is summarized in Note 2 to our Condensed ConsolidatedFinancial Statements contained in Item 1 above.

 

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**Changes in Net Assets inLiquidation**

***January 1, 2007 toMarch 31, 2007***

For the three months ended March 31, 2007, net assetsin liquidation decreased by approximately $505,000.  This decrease resulted from (a) a decrease ofapproximately $500,000 in the forecast of the Company’s cumulative netoperating results which includes its remaining golf course assets, the Resortcondominium sales operations, and the overhead and interest expense of theCompany’s corporate operations and (b) an increase of $5,000 in the accrual forcapital expenditures at Stonehenge.

Thenet assets of approximately $13,360,000 at March 31, 2007 would result in aliquidation distribution per share of approximately $1.85. This $1.85 estimatefor liquidation distribution per share includes projections of costs andexpenses expected to be incurred during the period required to complete theplan of liquidation, that is, until the Company sells its remaining two assets,including the Resort. The actual per share distributions that we make to theholders of the Company’s common stock could be materially lower than thecurrent estimate of $1.85 due to factors such as (i) the timing of any sale ofthe properties and the corresponding transaction costs, (ii) the performance ofthe underlying assets, and (iii) a change in the underlying assumptions of thecash flow amount projected. The $1.85 estimate is derived by dividing the netassets in liquidation by the number of shares of common stock and commonoperating partnership units outstanding (7,317,000 less 85,000) afterconsideration of those shares that will be canceled prior to the distributionof the net assets.  The 85,000 shares ofcommon stock were pledged to the Company as security for the payment andperformance of the obligations and liabilities of the pledgor under a commonstock redemption agreement executed concurrently with a 2001 asset sale.Because this redemption agreement provides in part that these shares willbe tendered to us if and when the total amount of liquidating distributionspaid to its holders of common stock pursuant to the plan of liquidation is lessthan $10.74 per share, we expect these shares to be tendered to us andcanceled.

Since we are presenting liquidation basis financialstatements that only reflect the changes in net assets in liquidation, theoperating results of our company are summarized and reflected in the tablebelow.
| ** **                                                      | ** ** | **For the three months ended   March 31,** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2007**                                                                 | ** ** | **2006** | ** ** |
| Revenues                                                        | ** ** | ** **                                                               | ** ** | ** ** | ** ** |
| Revenue from  Resort and managed golf course operations         |       | $                                                                        | 15,278,000 |   | $ | 18,006,000 |   |
| Expenses                                                        |       |                                                                     |       |   |   |
| General and  administrative                                     |       | 296,000                                                                  |       | 251,000 |   |
| Direct expenses  from Resort and managed golf course operations |       | 12,429,000                                                               |       | 14,257,000 |   |
| Total operating  expenses                                       |       | 12,725,000                                                               |       | 14,508,000 |   |
| Operating income                                                |       | 2,553,000                                                                |       | 3,498,000 |   |
| Interest  expense—net                                      |       | (380,000                                                                 | )          | (318,000 | ) |
| Other expense                                                   |       | (59,000                                                                  | )          | — |   |
| Operating income and  interest expense—net                 |       | $                                                                        | 2,114,000  |   | $ | 3,180,000 |   |

 

**Resort results of operations forthe three months ended March 31, 2007 and 2006**

***Results of Operations***

Because the Resort is adestination golf resort, we believe it appeals to a different market than themarket to which stand-alone hotels located in downtown metropolitan areaswould appeal. The Resort provides recreation, condominium accommodations andfood and beverage dining and catering options to business meeting or grouptravelers, transient guests who play golf, guests who purchase golf packagesand guests who bring their families to the Resort. As a destination golfresort, the Resort’s performance is sensitive to weather conditions andseasonality.

The Resort had lower realizedrevenue and fewer room nights during the three months ended March 31, 2007 thanduring the corresponding period in 2006. The decrease in realized revenue isdirectly attributable to the reduction in aggregate room nights, describedbelow, for both the group and transient market sectors.  The decrease in aggregate room nights in thegroup sector was primarily due to 3,000 room nights that booked in the firstquarter of 2006 that the Resort chose to decline for the first quarter of 2007because it was not profitable business for the Resort.  The balance of the variance was due to groupsthat are on a regional rotation for their respective meetings.  The Resort was not able to replace these roomnights with other group

 

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bookings.  Underthe Westin Management Agreement which terminated on October 31, 2006, theResort had access to the Westin Global Sales Office, or GSO, which providedgroup booking leads to the Resort.  Sincethe group booking window is typically six to eighteen months out, the Resortwas negatively impacted by the loss of the leads historically provided by theGSO which were not able to be replicated by other lead sources in the shortwindow of time between the termination of the Westin Management Agreement onOctober 31, 2006 and the peak season of 2007, January through April. Since thetermination of the Westin Management Agreement, the Resort management teamshave made efforts to replicate the GSO lead source with other independent leadsources but the impact of these efforts will not necessarily be realized in theshort-term.

Transient room nights were alsodown due to the loss of the Westin central reservations unit and othertransient booking sources and the benefit of an international marketingcampaign that was available when the Resort was under the Westin internationalhotel chain flag.  As we continue toestablish Innisbrook as an independent brand and gain exposure in the internetbooking arena, we believe we will realize less of a variance in the room nightsin the transient sector.  The Resort didrealize an increase in the average daily room rate of approximately $13.20 fromtargeting a more profitable type of guest, which helped mitigate some of therevenue lost due to the reduction in room nights and golf rounds.

During the three months endedMarch 31, 2007, each of these market segments at the Resort produced a greateraggregate spending level per room night as compared to the three months endedMarch 31, 2006.  While overall roomnights and golf rounds decreased 26.6% and 7.5%, respectively, during the firstthree months of 2007 as compared to the same period in 2006, overall grossrevenue per room night increased by $80.25 to $615.62 from $535.37 while grossgolf revenue per round played increased by $9.72 to $150.00 from $140.28.  The fluctuation in gross revenue is discussedin further detail below.

The following table showsutilization of the Resort facilities broken down by department, results ofoperations and selected Rental Pool statistical data during the three monthperiods ended March 31, 2007 and March 31, 2006.  This information is shown in thousands,except for statistical data such as the utilization data in the table below:
|                                        | ** ** | **Three Months Ended March 31,** | ** ** |
|----------------------------------------|------------|------------------------------------------------------|------------|
| ** **                             | ** ** | **2007**                                             | ** ** | **2006** | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** |
| **Utilization  of Resort facilities:** | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available room  nights                 |       | 51,107                                               |       | 51,067 |   | 40 |   | 0.1 | % |
| Actual room  nights                    |       |                                                 |       |   |   |   |   |   |   |
| Group                                  |       | 16,284                                               |       | 23,093 |   | (6,809 | ) | (29.5 | )% |
| Transient                              |       | 7,052                                                |       | 8,683 |   | (1,631 | ) | (18.8 | )% |
| Total room nights                      |       | 23,336                                               |       | 31,776 |   | (8,440 | ) | (26.6 | )% |
| Food and  beverage meals               |       | 105,333                                              |       | 158,709 |   | (53,376 | ) | (33.6 | )% |
| Golf rounds                            |       |                                                 |       |   |   |   |   |   |   |
| Resort guests                          |       | 20,840                                               |       | 23,421 |   | (2,581 | ) | (11.0 | )% |
| Member/guests                          |       | 12,721                                               |       | 12,858 |   | (137 | ) | (1.1 | )% |
| Total golf rounds                      |       | 33,561                                               |       | 36,279 |   | (2,718 | ) | (7.5 | )% |
| Gross revenue per room  night          |       | $                                                    | 615.62     |   | $ | 535.37 |   | $ | 80.25 |   | 15.0 | % |
|                                        |            |                                                      |            |  |  |  |  |  |  |  |  |  |

 

 

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|                                             | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                  | ** ** | **2007**                                             | ** ** | **2006** | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** |
| **Results  of operations (in thousands):**  | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues                                    |       |                                                 |       |   |   |   |   |   |   |
| Hotel                                       |       | $                                                    | 4,601      |   | $ | 5,845 |   | $ | (1,244 | ) | (21.3 | )% |
| Food and beverage                           |       | 3,987                                                |       | 5,132 |   | (1,145 | ) | (22.3 | )% |
| Golf                                        |       | 5,034                                                |       | 5,089 |   | (55 | ) | (1.1 | )% |
| Other                                       |       | 744                                                  |       | 946 |   | (202 | ) | (21.4 | )% |
| Total revenues                              |       | 14,366                                               |       | 17,012 |   | (2,646 | ) | (15.6 | )% |
| Expenses                                    |       |                                                 |       |   |   |   |   |   |   |
| Hotel                                       |       | 3,363                                                |       | 4,107 |   | (744 | ) | (18.1 | )% |
| Food and beverage                           |       | 2,632                                                |       | 3,133 |   | (501 | ) | (16.0 | )% |
| Golf                                        |       | 2,013                                                |       | 1,856 |   | 157 |   | 8.5 | % |
| Other                                       |       | 2,632                                                |       | 2,895 |   | (263 | ) | (9.1 | )% |
| General and administrative                  |       | 1,120                                                |       | 1,682 |   | (562 | ) | (33.4 | )% |
| Depreciation and amortization               |       | 536                                                  |       | 491 |   | 45 |   | 9.2 | % |
| Total expenses                              |       | 12,296                                               |       | 14,164 |   | (1,868 | ) | (13.2 | )% |
| Operating income                            |       | 2,070                                                |       | 2,848 |   | (778 | ) | (27.3 | )% |
| Other expense                               |       | 59                                                   |       | — |   | 59 |   | 100 | % |
| Interest  expense, net                      |       | 260                                                  |       | 373 |   | (113 | ) | (30.3 | )% |
| Net income                                  |       | $                                                    | 1,751      |   | $ | 2,475 |   | $ | (724 | ) | (29.3 | )% |
| ** **                                  | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Selected  Rental Pool statistical data:** | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Average daily  distribution                 |       | $                                                    | 32.04      |   | $ | 40.03 |   | $ | (7.99 | ) | (20.0 | )% |
| Average room  rate                          |       | $                                                    | 197.15     |   | $ | 183.95 |   | $ | 13.20 |   | 7.2 | % |
| Occupancy  percentage                       |       | 45.7                                                 | %          | 62.2 | % | (16.5 | ) | (26.6 | )% |
| Average number of  available units          |       | 568                                                  |       | 567 |   | 1 |   | (0.0 | )% |

 

 

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***Three months ended March 31, 2007 and 2006.***

During the three months endedMarch 31, 2007, there were 8,440, or 26.6%, fewer occupied room nights ascompared to the three months ended March 31, 2006.  There were 1,631 fewer transient room nightsand 6,809 less group room nights during the three months ended March 31, 2007as compared to the three months ended March 31, 2006.  Group room nights consist of conference roomnights, or room nights which are booked and correlate to a meeting orconvention at the Resort, and transient room nights are room nights which arebooked and do not correlate to a meeting or convention at the Resort.  Transient room nights are often booked within30 days or less from the date of the visit, while group room nights aretypically booked no less than 120 days in advance of the date of avisit.  Larger groups typically book 16to 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 attributed to the change in lead andreservation channels from the Westin central reservation unit and theirinternational marketing campaign and other sources available through Westin toindependent lead and reservation channels. This type of change takes time to establish the Innisbrook name as anindependent brand and gain appropriate exposure in the Internet and Mediamarket separate from the Westin identity. Also, the Resort staff has to learn how to maximize the reservationchannels available to it as an independent property.

Total revenue for the Resort was$2,646 less during the three months ended March 31, 2007 than in the sameperiod of 2006. An overall increase in spending by the Resort’s guests, bothfor rooms (improved average room rates) and by package guests for food andbeverages, helped to mitigate the reduction in gross revenue that resulted fromthe lower number of room nights and decreases in banquet and catering sales inthree months ended March 31, 2007 as compared to same period of 2006.  During the same periods, the average roomrate increased from $183.95 in 2006 to $197.15 in 2007.  Gross revenue per room night during the threemonths ended March 31, 2007 was $615.62, as compared to $535.37 for the sameperiod in 2006.

The most significant decrease inrevenues at the Resort during the three months ended March 31, 2007 occurred inthe Hotel department. Revenues attributable to that category for the three monthsended March 31, 2007 decreased by approximately $1,244,000, or 21.3%, ascompared to the same period in 2006. Hotel revenue decreased primarily becauseof the decrease in aggregate room nights noted above.  Food and Beverage revenues decreased by approximately$1,145,000, or 22.3%, as a result of 53,376, or 33.6%, fewer meals being served, also referred to as covers,as compared to the three months ended March 31, 2006.   This aggregate decrease in covers served wasprimarily attributable to the Resort’s banquets, catering and room service,with a combined decrease of approximately 46,870 covers. Covers attributed tothe Resort’s casual restaurants and pool service decreased by approximately6,506. While the aggregate number of covers decreased, revenue per coverincreased from $32.34 to $37.85.  Thecombination of decreased number of covers and increased revenue per coverproduced the $1,145,000 negative variance for the three months ended  March 31, 2007 as compared to the threemonths ended March 31, 2006.

Golf revenue decreased byapproximately $55,000, primarily as a result of 2,718 fewer rounds of golfplayed during the three months ended March 31, 2007 as compared to the sameperiod in 2006.  Management believes thatapproximately 1,200 of that reduction in rounds for the quarter resulted fromthe fact that the PGA tournament was moved from October, during which it has been held annually since 2001, to Marchbeginning in 2007.  As a consequence ofthe Copperhead course being used by the PGA for the tournament, the Resort wasunable to sell its golf packages during the week of the March tournament.  Gross golf revenue for the quarter endedMarch 31, 2007 averaged $150.00 per round, as compared to $140.28 per round forthe same period in 2006.  The netdecrease in aggregate rounds played was attributed to 2,581 fewer rounds playedby the Resort’s transient guests, including packages, coupled with an aggregatedecrease of 137 rounds played by Resort members.  The number of total golf rounds played in thethree months ended March 31, 2007 was 33,561, compared to 36,279 rounds playedin 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 to occupied room nights.

Consistent with past periods, we continued to monitortotal operating expenses in an attempt to ensure that we control expenses andthat the expenses bear a direct correlation to the room nights, food andbeverage covers and golf round demand. Aggregate total operating expenses donot generally increase or decrease on a one-to-one basis with total operatingrevenue because the Resort must carry a minimum fixed operating staff and othersupport expenses at all times. In those operating departments where thevariable costs can best be managed, we manage these costs consistent with room,food and beverage and

 

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golf demand. Total Resortoperating expenses, before depreciation and amortization and excluding theRental Pool amortization in hotel operations, decreased by approximately$1,913,000, or 14.0%, for the three months ended March 31, 2007 as compared tothe same period in 2006.  This decreaseis primarily attributable to the decrease in room nights and food and beveragecovers discussed above.

Depreciation and amortization expense, excluding theRental Pool amortization included in hotel expenses, was approximately $536,000and $491,000 for the three months ended March 31, 2007 and 2006, respectively.

Interest expense, net of interestincome, was approximately $260,000 and $373,000 for the three months endedMarch 31, 2007 and 2006, respectively, and reflects amortization of thediscount of our Rental Pool refurbishment liability in the amount of $161,000and the interest portion of lease payments amounting to approximately$21,000.  The defaulted participatingmortgage loan that was assumed by us from GHR, our unaffiliated borrower, hasan outstanding balance at March 31, 2007 of $39,240,000 and became non-interestbearing upon our assumption on July 15, 2004.

Other expense of $59,000 in thethree months ended March 31, 2007 represents the accrual of the environmentalremediation costs as more fully discussed in Note 4 to the CondensedCombined Financial Statements referred to in Item 1 of this Quarterly Report onForm 10-Q.

The net income for the threemonths ended March 31, 2007 was approximately $1,751,000, compared to a netincome for the three months ended March 31, 2006 of approximately $2,475,000.

During the three months endedMarch 31, 2007, approximately $358,000 was disbursed for capital projects. Ofthose disbursed funds, $222,000 was used to pay lease payments on existing andadditional equipment consisting of bellman vehicles, golf cart leases, golfcourse equipment leases, telephone equipment leases and cable leases and thebalance was for various capital improvement projects and replacementsthroughout the Resort.

**Liquidity and Capital Resources**

Our only source of cash flow is a distribution of netoperating income from the one remaining golf property that we own and manageand cash flow from the operations of the Resort, if any. We discuss the Resort’scash position below. As a result of our need for liquidity, on March 18,2004 we entered into a loan agreement and related mortgage with TextronFinancial Corporation, or Textron, for a revolving line of credit. OnAugust 4, 2005, we executed loan documents with Textron to amend the termsof the existing revolving loan. Pursuant to this amendment, the maximumpermissible outstanding loan amount was increased from $2,100,000 to$4,200,000. The interest rate pursuant to the amended Textron loan documentscontinues to be the prime rate plus 1.75% per annum, paid monthly. Theamendment extended the term of the loan from March 18, 2006 toMarch 18, 2009. This loan is collateralized by a security interest in ourgolf courses collectively known as Stonehenge. The loan requires that theoperations at Stonehenge for the immediately preceding twelve month period mustbe sufficient to meet a monthly debt service coverage ratio, as defined in themortgage, of at least 1.20.  At March 31,2007, we were in compliance with the debt service coverage ratio covenant andwe currently expect to be in compliance going forward.

Subject to certain conditions, a buyer of Stonehengemay assume this loan pursuant to the loan assumption provisions in theamendment. We paid a one-time commitment fee to Textron of $42,000, whichrepresents 2% of the new funds approved to obtain the increase in this creditline. In addition, we will pay to Textron a fee of 0.25% per annum of theunused balance of the available line. As of the date of this report, we havedrawn down a total of $4,100,000 on the line of credit. Subject to oursatisfaction of the applicable terms, conditions and covenants of this loan,there is $100,000 available that could be drawn under this loan.

As of March 31, 2007, the Resort has a working capitaldeficit of approximately $8,535,000. This working capital deficit resultedprimarily from the reclassification of the Westin termination fee and the Troonsupplemental fee from long term to short term obligations. The reclassifiedtermination and supplemental fees are approximately $5,594,000 and $800,000,respectively, as of  March 31, 2007.  See further discussion in Note 4 to theCondensed Consolidated Financial Statements referred to in Item 1 of thisQuarterly Report on Form 10-Q. Before this reclassification, theResort had a working deficit of approximately $2,141,000. The Resort’s memberdeficit at March 31, 2007 is $11,600,000. The Resort reported net

 

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incomeof approximately $1,751,000 for the three months ended March 31, 2007. TheResort continues to experience seasonal fluctuations in its net working capitalposition due to the seasonality of the golf industry in Florida. Thisseasonality impacts our liquidity. In particular, there is generally moreavailable cash during the winter months, specifically in the first quarter.Cash generally becomes very limited in the late summer months. Revenuesgenerally decline at the Resort during the summer months because the hotFlorida weather makes the Resort less appealing for group golf outings andvacation destination golfers. Additionally, unusual weather patterns, such asthe hurricanes experienced in Florida in 2004 and those that affected thesoutheast coast in 2005, negatively impacted revenues for the Resort in thelate summer-early fall season of 2005 and 2006 as groups and guests werehesitant to book reservations on the southeast coast during the hurricaneseason. Weather-related concerns may continue to negatively impactreservations in comparable periods (July through September) of this andsubsequent years. The Resort uses seasonal pricing (peak, shoulder andoff-peak) to maximize revenues.

Generally, the Resort’s only source of cash is fromits operations.  Further, now that theWestin Management Agreement is terminated, we are currently involved in thecapital improvement project of upgrading the technological infrastructure ofthe Resort and replacing certain components which were proprietary to Westin.Our projections indicate that the replacement of these components could requireus to make an investment in the range of $1,500,000 to $2,000,000.  The Company’s management continues to workdiligently with the Resort’s management team to identify opportunities toimprove the cash flow situation at the Resort. Although we are currentlyseeking a buyer for the Resort pursuant to the stockholder-approved plan ofliquidation, no binding contract for the sale of the Resort has yet beenexecuted. We made intercompany advances to the Resort to support workingcapital needs in the amounts of $2,000,000, $400,000, $650,000 , $600,000 and$120,000 in July 2004, September 2005, November 2005, October2006, and February 2007, respectively. Further,we funded approximately $203,000 and $33,000 for the beginning phase of thetechnological infrastructure capital investment in October 2006 and November2006, respectively, and entered into a related lease for an investmentof approximately $468,000 in January 2007.  The proceeds of these advances have beenfully expended to support the Resort’s operational expense and existingobligations. The Resort repaid the $120,000 and the $33,000 advancesfrom Resort operational cashflow in March 2007. While current Resort cash flow projections for 2007 indicate wemay be in a breakeven cash situation as of year-end December 31, 2007, ashortfall is anticipated by late summer to early fall 2007.  This shortfall is expected primarily due tocertain obligations that the Resort must pay in August 2007 and November 2007,including obligations of approximately $1,060,000 and $728,000, respectively,for the quarterly rental pool distributions and $412,000 in both August andNovember 2007 for the rental pool refurbishment payments.   Therefore, a cash infusion of up toapproximately $1,000,000 may be necessary to fund the short-fall.

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 theprincipal amount of  $1,200,000.  The Loan is secured by a first prioritymortgage on three wholly-owned condominium units located at the Resort.  On theClosing Date, we borrowed, pursuant to the Loan Agreement, approximately$20,000 to pay the closing costs related to the Loan.  Subject to compliancewith the Loan Agreement, the GTA-IB has the right to draw down the remainder ofthe principal amount available under the Loan Agreement over time to financerenovations of the Resort’s restaurants, upgrades of the Resort’s informationtechnology infrastructure, and other Resort improvements or short-term workingcapital shortfalls.  See furtherdiscussion in Note 10 to the Condensed Combined Financial Statements referredto in Part I, Item 1 of this Quarterly Report on Form 10-Q.  Further, theCompany continues to seek additional funding sources to manage the Resort’sseasonal cash flow needs.   If weare unable to either continue to improve our operating cash flows or otherwiseobtain more long-term liquidity, then we may be unable to continue as agoing concern.

In the event that we must advance additional capitalto fund operations at the Resort or our other operations, we may experiencesevere liquidity problems.

In the event that we are unable to sell our remainingassets as contemplated, we may be unable to pay our obligations as they becomedue. In addition, our ability to pay our obligations as they become due wouldbe compromised if our chief executive officer requires payment of outstandingperformance milestone payments owed by us to him before we are able to realizenet cash proceeds from asset sales sufficient to repay him. As of March 31,2007, we owed our two most senior executive officers a total of approximately$1,755,000 in milestone payments and accrued interest on such milestone payments.We also owed approximately $3,162,000 in legal fees which are included in ourestimate of the costs to be incurred prior to our liquidation. We expect toincur additional fees and costs in connection with closing the sales of our tworemaining assets. Our ability to pay our obligations as they become due willdepend on cash flow from the Resort, and

 

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forbearance by our seniorexecutive officers and our counsel with respect to sums that we owe to them. Inthe event that we experience lower revenues, or higher costs, with respect tothe Resort, we may need to seek alternative funding in order to pay ourobligations. Further, should our senior executive officers or our counselrequire payment of funds owed to them, we may need to find alternative fundingin order to pay our obligations. This funding, if available, may not be offeredon reasonable terms.

We could realize liquidity through our interest in theproceeds from the sale of Parcel F. The anticipated timeline to realize theproceeds from our interest in the sale proceeds of Parcel F is currentlydependent on the decision of the Second District Court of Appeals as to whetheror not the Court will rehear the plaintiffs’ claims in the Land Use Lawsuitsand the Parcel F purchaser’s commitment to close. (See detailed discussion ofthe Land Use Lawsuits in Part II, Item 1 of this Quarterly Report onForm 10-Q.)  If the Courtrejects the plaintiffs’ request to rehear their claims, then the buyer ofParcel F must close on the purchase of Parcel F within sixty days or GHR willseek a new buyer. In that event, the fair value of our interest in Parcel Fcould potentially be adjusted based on any increase or decrease in the Parcel Fsales price in any subsequent agreement with a new buyer for the purchase ofParcel F.  We do not currently believethat the sales price to a new buyer would be lower than the sales price in thesale agreement with the current contracted buyer.

*Seediscussion of our obligations to the holder of our preferred stock inNote 9 to the Condensed Consolidated Financial Statements.*

*Three months ended March31, 2007 and 2006*

Cash provided by operating activities for the threemonths ended March 31, 2007 was $1,354,000, compared to cash flow used providedby operating activities for the three months ended March 31, 2006 of$2,844,000. The primary components of the cash fluctuations in operatingactivities were liquidation liability payments and adjustments and workingcapital changes.  Liquidation liabilitypayments decreased for the three months ended March 31, 2007 as compared to thethree months ended March 31, 2006, primarily due to a decrease in legal feesincurred in connection with negotiations with potential purchasers of theResort, among other matters.

We made $136,000 in capital expenditures at the Resortand $34,000 at Stonehenge during the three months ended March 31, 2007, ascompared to $20,000 at the Resort and $26,000 at Stonehenge and Tierra del Solduring the three months  ended March 31,2006.

During the three months ended March 31, 2007, theResort paid approximately $90,000 to satisfy its capital lease obligations and approximately $358,000against its refurbishment obligation to certain Rental Pool participants. During the three months ended March 31, 2006, theResort paid approximately $72,000 to satisfy its capital lease obligations andapproximately $232,000 against its refurbishment obligation to certain rentalpool participants.

**TaxConsideration**

We donot currently 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.

**OffBalance Sheet Arrangements**

As of March 31, 2007, we have no off balance sheet arrangementsthat have or are reasonably likely to have a current or future material effecton our financial condition, revenues, expenses, results of operations,liquidity, capital expenditures or capital resources.

 

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**ContractualObligations, Contingent Liabilities and Commitments**

The followingtable summarizes our contractual obligations at March 31, 2007, and the effectsuch obligations are expected to have on our liquidity and cash flow (or uponour successors in interest under the applicable contracts, if the contracts arenot terminated) in future periods: 
| ** **                                                                                                                           | ** ** | **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                                                                            |       | $                                                                  | 2,217      |   | $ | 1,786 |   | $ | 431 |   | $ | — |   | $ | — |   |
| Series A Preferred  Stock and accrued dividends(1)                                                                              |       | 20,000                                                             |       | 20,000 |   | — |   | — |   | — |   |
| Textron revolving line  of credit                                                                                                    |       | 4,920                                                              |       | 410 |   | 4,510 |   | — |   | — |   |
| Operating lease  agreements at the managed golf courses                                                                         |       | 255                                                                |       | 148 |   | 90 |   | 17 |   | — |   |
| Advertising, service,  equipment maintenance and other contracts and software license and support  agreements at the managed courses |       | 49                                                                 |       | 49 |   | — |   | — |   |   |   |
| Lease agreements for  GTA corporate office                                                                                           |       | 9                                                                  |       | 5 |   | 4 |   | — |   | — |   |
| Subtotal of our obligations  excluding those of the Resort                                                                           |       | $                                                                  | 27,450     |   | $ | 22,398 |   | $ | 5,035 |   | $ | 17 |   | $ | — |   |
| Master lease agreement  (with the condominium owners)                                                                           |       | $                                                                  | 5,080      |   | $ | 1,065 |   | $ | 3,934 |   | $ | 49 |   | $ | 32 |   |
| Troon management fee                                                                                                                 |       | 233                                                                |       | 233 |   |   |   |   |   |   |   |
| Westin termination fee                                                                                                               |       | 5,594                                                              |       | 5,594 |   | — |   | — |   | — |   |
| Troon supplemental fee                                                                                                               |       | 800                                                                |       | 800 |   | — |   | — |   | — |   |
| Operating and capital  leases                                                                                                        |       | 1,631                                                              |       | 607 |   | 898 |   | 126 |   | — |   |
| Service agreements and  other                                                                                                        |       | 4,733                                                              |       | 1,293 |   | 2,439 |   | 1,001 |   | — |   |
| Subtotal of the  Resort’s obligations                                                                                           |       | $                                                                  | 18,071     |   | $ | 9,592 |   | $ | 7,271 |   | $ | 1,176 |   | $ | 32 |   |
| Total of our consolidated obligations                                                                                                |       | $                                                                  | 45,521     |   | $ | 31,990 |   | $ | 12,306 |   | $ | 1,193 |   | $ | 32 |   |

 

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(1)             The series Apreferred stock is reflected in the “Less than 1 year” column of this tableabove due to the fact that this obligation is expected to be paid upon the saleof the Resort. See further discussion below under the caption “Series APreferred Stock.”

(2)             Pursuant to the termsof the Termination Agreement, the Westin termination fee of approximately$5,594,000 is due at the earlier of the date of a sale of the Resort or March31, 2008.   This amount is included in the “Lessthan 1 year” column due to the fact that we are currently seeking a buyer forthe Resort and although as of May 9, 2007,no binding contract for the sale ofthe Resort has been executed.

Interestis reflected, as applicable, in the commitments and obligations listed above.The above table does not give effect to the anticipated sale of the Resort.

Pleaserefer to “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Contractual Obligations, Contingent Liabilities andCommitments” in our Form 10-K for the year ended December 31, 2006filed on April 2, 2007 for a description of our contractual obligations.

**Commitments**

***Series APreferred Stock.***See discussion of our obligations to ourholder of the series A preferred stock in Item 1, note 9 above to ourCondensed Consolidated Financial Statements herein and in Part II, Item 1A “RiskFactors” in our Annual Report on Form 10-K for the fiscal year ended December31, 2006 filed on April 2, 2007.

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**Inflation**

Webelieve that inflation does not pose a material risk to us. Our main source ofcash flow is golf course dispositions which are not particularly vulnerable toinflation because we can adjust our asking prices if supply/demand factorssupport an interest in the particular golf course. Although some of ourobligations (such as the salary of our chief executive officer) automaticallyadjust for inflation, some of 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**

The golf industry is seasonal in nature. Revenuesgenerally decline at the Resort during the summer months because the hotFlorida weather makes the Resort less appealing for group golf outings andvacation destination golfers. Additionally, we believe that unusual weatherpatterns, such as the tropical storm weather and hurricanes experienced inFlorida in 2004 and 2005,  reduced revenues for the Resort in the periodfrom late summer through early fall in 2006 and could possibly do so in futureyears by negatively impacting reservations in comparable periods.

The Resort hosted in October 2003,October 2004, October 2005 and October 2006, a nationallytelevised PGA event, the Chrysler Championship, that brought some of thehighest profile golfers to the Resort for several days for the tournament, aswell as high profile golf industry sponsors and vendors. We do not expect tohost the Chrysler Championship after 2006. On April 25, 2006, we enteredinto an agreement with Suncoast Charities, Inc., or Suncoast, which providesthat Suncoast will lease the Copperhead golf course at the Resort for seven andone half days during the month of March for a PGA TOUR event known as thePODS Championship. Our agreement with Suncoast provides that the tournamentwill occur each year in March beginning in March 2007 and ending inMarch 2012. The agreement also provides, among other things, that we willreceive a base fee and that we may receive a participation fee in the event theaggregate ticket sales during any tournament year exceed 115% of the greater ofthe 2005 tournament ticket sales or the 2006 tournament ticket sales. We do notyet have the final numbers for the March 2007 tournament but our estimatesindicate that the ticket sales did exceed the referenced threshold.

Historically, revenues increase in the fourth quarter;however, revenues are generally the greatest during the first quarter as guestsarrive from the northeast and other regions to enjoy the warm weather at theResort. The Resort uses seasonal pricing (peak, shoulder and off-peak) tomaximize revenues. The effects of seasonality at our golf courses can bepartially offset at daily-fee golf courses by varying greens fees based onchanges in demand.

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

We have not entered into any transactions usingderivative financial instruments. We are subject to market risk associated withchanges in interest rates applicable to the revolving line of credit that weobtained on March 18, 2004, and amended on August 4, 2005. At May 9,2007, the outstanding debt under this line of credit subject to interest rateexposure is $4,100,000. As of March 31, 2007, a 25 basis point movement wouldhave resulted in a $12,000 annualized increase or decrease in interest expense andcash flows.

Weare also 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; however,  as of May 9, 2007, we currently only have $20,000outstanding under the Loan Agreement with Patriot Bank.

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.

Referenceis made to Note 6 to the Condensed Consolidated Financial Statements in Item 1for additional 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, our Chief FinancialOfficer (until his resignation effective February 7, 2007) and our PrincipalAccounting

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Officer, asappropriate, to allow timely decisions regarding required disclosure. Ourmanagement assesses the costs and benefits of such controls and proceduresbased upon the prevailing facts and circumstances, including management’sreasonable judgment of such facts. As we neither controlled nor managed theResort prior to July 15, 2004, our disclosure controls and procedures withrespect to the manager and the Resort were necessarily more limited than thosewe maintained with respect to our own corporate operations. At the close ofbusiness on July 15, 2004, we took title to the Resort; however, despitethe fact that our Management Agreement with Westin provides us with heightenedcontrol and access to information, prior to the termination of the ManagementAgreement on October 31, 2006, we did not directly assemble the financialinformation for the Resort although we have taken steps that we deem to bereasonable under the circumstances to seek to verify such financialinformation. Consequently, until the termination of the Management Agreement onOctober 31, 2006, our disclosure controls and procedures with respect to theResort, while strengthened as a relative matter, remained necessarily morelimited than those we maintained with respect to our own corporate operations.Since taking title to the Resort and most recently, assuming the management ofthe Resort, we have focused upon integrating operations at the Resort into ourdisclosure controls and procedures and internal control procedures. Inparticular, those controls and procedures have been updated to account for thechallenges presented by the increased size and scope of our operations now thatwe own the Resort.  Effective January 1,2007, we implemented a new general ledger accounting software package, or GLsoftware, at the Resort to replace the former GL software of which the majorityof the financial reports were proprietary to Westin.  Our new GL software, known as Aptech, wasused at the Resort prior to July 15, 2004 when Westin required that the Resortadopt their GL software so the accounting staff is familiar with the processand procedures in operating the new GL software.  We do not currently believe that the changein the GL software will materially change our controls over financial reportingor our disclosure controls and procedures.

Theintegration of a business much larger in size and scope of operations increasesthe risk that conditions may have been introduced that we did notanticipate in our design of our systems of control. Any pre-existingdeficiencies in the predecessor owner’s financial systems, processes andrelated internal controls increase the risk that the historical unauditedfinancial statements of the Resort’s operations and cash flows, which thepredecessor owner has provided to us, may not be accurate. We have out ofnecessity placed a certain amount reliance on the historical financialinformation and reports of the Resort’s predecessor owner for the periods priorto July 16, 2004 and continued to rely on the information provided byWestin as manager of the Resort until October 31, 2006.

As ofMarch 31, 2007, we carried out an evaluation, under the supervision and withthe participation of our management, including our Chief Executive Officer andour Principal Accounting Officer, of the effectiveness of the design andoperation of our disclosure controls and procedures (as defined in Exchange ActRule 13a-15(e)). Subject to the limitations mentioned above, our ChiefExecutive Officer and our Principal Accounting Officer concluded that as ofMarch 31, 2007, our disclosure controls and procedures are effective intimely alerting them to material information relating to us (including ourconsolidated subsidiaries) required to be included in our Exchange 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.

**PART II. OTHER INFORMATION**

**ITEM 1:Legal Proceedings.**

We arecurrently involved 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).

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The complaintalleges that the BDO Defendants engaged in professional malpractice, misrepresentation,breach of fiduciary duty and fraud by counseling plaintiffs to participate in atype of tax shelter transaction allegedly held illegal by the Internal RevenueService, and that we conspired with the BDO Defendants to convince Mr. Youngthat he would realize a large projected tax gain in order to induceMr. Young (and the other plaintiffs) to enter into the failed tax sheltertransaction. The plaintiffs are seeking damages of at least $3.7 million,together with legal expenses and other costs. On November 4, 2004, we filed an answer and counterclaims. OnFebruary 14, 2005, the court granted the motion to compel arbitration of theBDO Defendants as to claims against them, and it appears that the Plaintiffsand the BDO Defendants have resolved their differences. On October 18, 2006,the Plaintiffs filed a notice of dismissal of their claims against the BDODefendants.  On March 1, 2007, theU.S. District Court granted the GTA Defendants’ Motion for Summary Judgment. Asof March 26, 2007, the plaintiffs have no remaining claims against any ofthe GTA Defendants.  All of GTADefendants’ counterclaims against the plaintiffs remain. The trial date for theGTA Defendants’ counterclaims against the plaintiffs has been set for August 6,2007.  At this time, the Company isunable to assess the likely outcome of this litigation.

***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 Richland County.We asserted causes of action against the defendant for breach of contract,fraud and unfair trade practices. We were seeking damages of approximately$172,000, which represents prepaid dues that were not disclosed by thedefendants. A counterclaim for payment under a consulting agreement, along withclaims for payment of operating/maintenance and insurance expenses was filed bythe defendant against us on June 20, 2002. The Court dismissed the case onMay 28, 2003. On March 15, 2005, we took action to restore the case.The Court of Common Pleas for Richland County has ordered the case restored tothe roster.  As of May 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 toIntervene in the suit titled *Innisbrook CondominiumAssociation, Inc., C. Frank Wreath, Meredith P. Sauer, and Mark Banning,Plaintiffs vs. Pinellas County, Florida, Golf Host Resorts, Inc. andInnisbrook F LLC, Defendants*, Case No. 043388CI-15. This motionwas filed 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 a tract of land commonly known as Parcel F,a parcel of land located within the Resort and owned by GHR. The Company filedthe Motion to Intervene as a defendant in the Initial Land Use Lawsuit in orderto protect its property and its land use and development rights with respect toParcel F.  On April 26, 2005,Joseph E. Colwell, Marcia G. Colwell, Kirk E. Covert, andDeborah A. Covert and the Autumn Woods Homeowner’s Association, Inc.moved to intervene in the Initial Land Use Lawsuit, which the Courtsubsequently allowed.  On April 8,2005, a separate suit was filed by James M. and Mary H. Luckey, andAndrew J. and Aphrodite B. McAdams, against Pinellas County, GHR andBayfair Innisbrook, LLC seeking injunctive and declaratory relief relating tothe land use and development rights of Parcel F.  This suit was consolidated with the InitialLand Use Lawsuit.  In this report, theCompany refers to this matter as the “Subsequent Land Use Lawsuit” and to theInitial Land Use Lawsuit and the Subsequent Land Use Lawsuit as the “Land UseLawsuits.”

FromDecember 19 through December 23, 2005, the Court tried theseconsolidated cases in a non-jury trial. On March 8, 2006, the Court ruled infavor of the defendants on all counts and denied all claims asserted by theplaintiffs in both Land Use Lawsuits. On March 31, 2006, the plaintiffs in theconsolidated cases filed a notice of appeal to the Second District Court ofAppeal.  The Appeal Court affirmed percurium the Circuit Court judgment in favor of the defendants on February 28,2007 and denied the plaintiffs-appellants’ motion for attorney fees.   On March 13, 2007, the plaintiffs filed amotion for the Appeal Court to rehear their claims.   As of May 9, 2007, the Appeal Court has notyet responded to this motion.

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***Wall Springs Conservatory, Inc. Complaint***

On July 13, 2006, Wall SpringsConservatory, Inc., or Wall Springs, filed suit against GTA-IB assuccessor in interest to Golf Host Resorts, Inc. in the circuit court ofPinellas County for declaratory relief. On July 14, 2006, Wall Springsalso filed suit against us in the small claims division of the Pinellas CountyCourt in connection with an easement agreement. We answered both claims, alsoasserting affirmative defenses and counterclaims in each action. We then fileda motion to transfer the small claims matter to Circuit Court, which wasgranted on September 27, 2006. We then moved to consolidate these twocases. Our motion to consolidate was granted by the Circuit Court onMarch 1, 2007. At this time, the Company is unable to assess the likelyoutcome of this litigation.

***Property Tax Lawsuit***

On December 10, 2004, GTA-IB filed a lawsuitagainst the property appraiser of Pinellas County Florida, or Pinellas County,to challenge the 2004 and 2005 real estate assessment of the Resort property.Pinellas County filed a motion to dismiss the Company’s complaint for the 2004tax year case, which was denied by the court. On December 11, 2006, wefiled a complaint challenging the 2006 real estate tax assessments. As ofMarch 26, 2007, no trial date has been set for any of the three cases. IfPinellas County were to prevail, there would be no material adverse effect uponour financial statements, as the assessment is fully accrued and accounted forin our books and records.

***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 a contractor,Lake Ozark Construction Industries, Inc., or LOCI, and its assertedassignee of lien and account rights, Everett Holding Company, Inc., in theFall of 1999 against numerous defendants, including Golf Trust of America, L.P.Plaintiffs assert LOCI performed construction services on, or that benefited,the property of various defendants, including Golf Trust of America, L.P.  With respect to Golf Trust of America, L.P.,plaintiffs seek to foreclose a mechanic’s lien upon property formerly owned byGolf Trust of America, L.P. The lien is for the principal amount ofapproximately $1,276,000, plus interest at 10% per annum and attorney fees.Plaintiffs calculate interest to May 20, 1999, just prior to the lien filing,to be approximately $151,000 and interest thereafter to be $354 per day. TheCourt entered a written order granting Golf Trust of America, L.P.’s Motion forSummary Judgment in April 2002 and a final judgment in November 2003.  Plaintiffs appealed the ruling to theMissouri Court of Appeals.  The Court ofAppeals on April 5, 2005 reversed the Circuit Court judgment in favor ofus 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 May 9, 2007, thetrial date has not yet been set. At this time, the Company is unable to assessthe likely outcome of this litigation.

**Routine Litigation**

In addition to litigation between a lessor (such asour operating partnership) and our former lessees (and their affiliates),owners and operators of golf courses are subject to a variety of legalproceedings arising in the ordinary course of operating a golf course,including proceedings relating to personal injury and property damage. We havein the past been, and expect to continue in the future to be, subject toproceedings relating to personal injury and property damage. Such proceedingsare generally brought against the operator of a golf course, but may alsobe brought against the owner of the golf course. Since we are now either theoperator or owner of our remaining golf courses, we maintain insurance to defendagainst certain of these actions.

**ITEM 1A.RISK FACTORS**

There have been nomaterial changes in the risk factors disclosed in Part II, Item 1A “RiskFactors” in our Annual Report on Form 10-K for the fiscal year ended December31, 2006 filed on April 2, 2007.

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

None.

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**ITEM 3.DEFAULTS UPON SENIOR SECURITIES**

Aspreviously reported, on July 21, 2003 we defaulted on our obligation underour voting agreement with the holder of our series A preferred stock, AEW,to redeem the series A preferred stock within 60 days of the holder’sMay 23, 2003 demand. As a result, the aggregate series A preferredstock dividend rate increased from $462,500 per quarter to $625,000 per quarterand the series A preferred stock holder has a right to appoint two directors toour board of directors. The series A preferred stock holder has that same rightunder our charter document relating to the series A preferred stock because wehave not paid a series A preferred stock dividend since the third quarter of2001 and such right arises when the series A preferred stock dividends are inarrears for six or more quarters. The holder of our series A preferred stockhas informed us that it does not currently intend to exercise that right.However, it remains free to do so at any time (pursuant to the proceduresspecified in our charter and the voting agreement).

OnApril 12, 2006, we entered into a new option agreement with AEW (nowexpired) in which AEW grants us the option, exercisable by us in our solediscretion, to purchase on or before June 30, 2006, all 800,000 shares ofthe series A preferred stock held by AEW, including, without limitation,all of AEW’s rights to Liquidation Preferences (as defined in the series A preferredstock charter document, including, without limitation, Liquidation Preferencesin respect of any accrued and unpaid dividends) payable in respect of theseries A preferred stock as of our exercise of the option for a price of $20million. The option to repurchase AEW’s preferred stock is only exercisable inthe event that the business of the Resort is purchased for cash considerationof no more than $35 million. This option agreement expired pursuant to itsterms on June 30, 2006.  The conclusionof our current negotiations with AEW which will allow us to repurchase all ofAEW’s series A preferred stock plus accrued dividends for a price of $20million or less is pending evidence or confirmation that we have securedadequate financing to demonstrate our ability to close on the transaction torepurchase all of the series A preferred stock. At the present time, we have not executed a binding agreement with AEW.

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

Nomatters were submitted to a vote of security holders during the three monthsended March 31, 2007.

**ITEM 5.OTHER INFORMATION**

Notapplicable.

**ITEM 6.EXHIBITS**

***Exhibits***

Theexhibits listed on the Exhibit Index, which appears after the signaturepage, are included or incorporated by reference in this Quarterly Report.

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.
|                    | ** ** | **GOLF TRUST OF AMERICA, INC., registrant**        |
|--------------------|------------|---------------------------------------------------------|
| Date: May 15, 2007 | By:        | /s/ W. BRADLEY BLAIR, II                           |
|               |       | W. Bradley Blair, II                               |
| * *           | * *   | *President and Chief Executive Officer*                 |
| * *           | * *   | * *                                                |
| Date: May 15, 2007 | By:        | /s/ TRACY S. CLIFFORD                              |
|               |       | Tracy S. Clifford                                       |
| * *           | * *   | *Secretary and Principal Accounting Financial  Officer* |

 

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**EXHIBIT INDEX**

Thefollowing exhibits are filed with this Quarterly Report on Form 10-Q (andare numbered in accordance with Item 601 of Regulation S-K). 
| No.    | ** ** | **Description**                                                                                                 |
|--------|------------|-----------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                            |
| 31.1   |       | Certification of W. Bradley Blair II  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                            |
| 31.2   |       | Certification of Tracy S. Clifford pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.             |
|   |       |                                                                                                            |
| 32.1   |       | Certifications under Section 906 of the  Sarbanes-Oxley Act of 2002.                                       |

 

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