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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For Quarter Ended March 31, 2001

Commission File no. 2-64309

GOLF HOST RESORTS, INC.
(Exact name of registrant as specified in its charter)

     Indicate by check mark whether the registrant (1) has filed all reports required to Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [  ]

     Issuer has no common stock subject to this report.

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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED BALANCE SHEETS

ASSETS
(Substantially all pledged)

     The accompanying notes are an integral part of these consolidated financial statements.

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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED BALANCE SHEETS

Liabilities and shareholder’s deficit

     The accompanying notes are an integral part of these consolidated financial statements.

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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

     The accompanying notes are an integral part of these consolidated financial statements.

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GOLF HOST RESORTS, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDER’S DEFICIT

     The accompanying notes are an integral part of these consolidated financial statements.

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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,

     The accompanying notes are an integral part of these consolidated financial statements.

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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)		BASIS OF PRESENTATION
		The financial statements for December 31, 2000 were prepared assuming the Company will continue as a going concern. As discussed in the notes to consolidated financial statements on Form 10-K dated December 31, 2000, the Company has suffered recurring losses from operations, has negative working capital and has a shareholder’s deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in the footnotes. Additionally, as described in Note 12 of the notes to consolidated financial statements on Form 10-K, subsequent to December 31, 2000 the Company has defaulted under the terms of its debt agreement and is a defendant to a class action lawsuit. These financial statements do not include any adjustments that might result from the outcome of the uncertainties.
		These financial statements and related notes are presented for interim periods on a going concern basis in accordance with the requirements of Form 10-Q and, consequently, do not include all disclosures normally provided in the Company’s Annual Report on Form 10-K. Accordingly, these financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.
		The accompanying balance sheet for March 31, 2001, and statements of operations and cash flows for the periods ended March 31, 2001 and 2000, are unaudited but reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented on a going concern basis. All such adjustments are of a normal recurring nature.
		The Company’s business is seasonal. Therefore, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal years.
		Certain prior year balances have been reclassified to conform with the current year presentation.
(2)		LONG-TERM OBLIGATIONS
		Long-term obligations consist of the following:

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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3)		CONTINGENCIES
		The Company has been named as a defendant in consolidated class action lawsuit whereby the plaintiffs allege breaches of contract, including breaches in connection with the Rental Pool Master Lease Agreement. The plaintiffs are seeking unspecified damages and declaratory judgement declaring that the plaintiffs are entitled to participate in the rental pool if one exits and a limitation of golf course access to persons who are either condominium owners, members, their accompanied guests, or guests of the resort. Deposition of class members and others, including depositions of prior executives of Golf Host Resorts, have been taken and additional discovery remains. A court date of February 3, 2003 has been set. As this litigation is still in its early stages, the Company is not yet able to determine whether the resolution of this matter will have a material adverse effect on the Company’s financial condition or results of operations although the Company believes it has successful defenses and intends to vigorously defend this action.
(4)		TAMARRON’S RESULTS OF OPERATIONS
		The Company assumes responsibility for the net income (loss) of Tamarron under the terms of the lease agreement between the Company and Golf Host II, Inc. entered into during 2000. The net income (loss) is as follows and is included in loss on assets held for sale and leased asset in the statement of operations:

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GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
NOTES TO FINANCIAL STATEMENTS

(5)		SUBSEQUENT EVENTS
		On May 4, 2001, the Company sold the remaining land parcel at Innisbrook included in assets held for sale as of December 31, 2000 for $4,578,000. Net proceeds of $3,929,000 were distributed by the Company to its shareholder.
		On May 22, 2001, Golf Trust of America, Inc. (“GTA”), the lender on the $78,975,000 participating mortgage, announced that its shareholders approved a plan for its liquidation. The impact of GTA’s plan of its liquidation on the Company, if any, is uncertain. Additionally, the Company was informed by GTA on November 29, 2001 that the Company is in default on the $78,975,000 participating mortgages with GTA arising from the Company’s failure to pay the October 2001 interest payment. GTA has asserted its right to accelerate payment of the total outstanding principal amounts.
		As a result of the default, Wells Fargo Business Credit, Inc. has elected to terminate their credit line with the Company effective May 23, 2002. The Company expects to develop a replacement facility upon reaching a resolution with GTA.
		As of July 2002, the Company is seeking to negotiate a Settlement Agreement with GTA. In connection with the proposed Settlement Agreement, The Company would transfer to GTA the resort property, three condominium properties located at the Innisbrook Resort, the Company’s GTA stock interests, and all rights, title, and interests of the Company under existing contracts and agreements. In addition, the Company would provide a limited indemnity to defend and hold harmless GTA (and its affiliates) from and against any and all costs, liabilities, claims, losses, judgements or damages arising out of or in connection with the Class Action Lawsuit, as well as liabilities accruing on or before the closing date relating to employee benefits and and liabilities for contracts or agreements not disclosed by the Company to GTA. In return, it is anticipated that GTA would deliver to the Company a duly executed release. No Settlement Agreement has yet been signed and no terms are definite. Neither GTA nor any of its affiliates is under any obligation to continue negotiating with the Company or to execute the Settlement Agreement and could initiate foreclosure proceedings and pursue its other remedies at any time.
		On November 19, 2001, GH II, an affiliated company and lessor of Tamarron, sold Tamarron for $9,500,000. A portion of the proceeds were contributed to the Company as a capital contribution and were used to settle the remaining balance due under the $5 million mortgage note from the previous owners.
		A revised Master Lease Agreement (“Revised MLA”) has been presented to the rental pool participants, effective January 1, 2002, resulting from the expiration of the existing MLA (“MLA”) between the Company and rental pool participants under the existing Master Lease Agreement on December 31, 2001. On an annual basis, beginning in 2002 each condominium owner will elect to participate in either the Revised MLA or the Guaranteed Master Lease Agreement (“GMLA”). As of December 26, 2001, 605 rental units had elected participation in the Revised MLA and 13 in the GMLA. The Revised MLA provides for Adjusted Gross Revenues, as defined, to be divided 40% to the Innisbrook rental pool participants and 60% to the Company. In addition, the Company has agreed as part of the Revised MLA, to reimburse participants in the Revised MLA for up to 50% of actual unit refurbishment costs. If the Company proves unsuccessful in its defenses in the class-action lawsuit (Note 3), any rental pool participant who elects, subject to the Revised MLA, will forego reimbursement by the Company for renovations or offset against future quarterly distributions equal to their pro-rata amount of the class-action settlement proceeds.
		On October 3, 2001, the FASB issued FASB Statement No. 144 (“FAS 144”), ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. FAS 144 excludes goodwill from its scope and, therefore, eliminates the requirement to allocate goodwill to long-lived assets to be tested for impairment. The provisions of FAS 144 will be effective for fiscal years beginning after December 15, 2001. The Company has not completed the process of evaluating the impact that will result from adopting FAS 144.

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GOLF HOST RESORTS, INC.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations

Results of Operations

During the first quarter of 2001, business continued to soften with respect to actual guest occupancy as compared to 2000 as a result of the declining hotel golf resort industry. Guest occupancy for 2001 declined to 38,221 room nights or 3.6% below the same period last year. This reduction in occupancy was partially offset by an improvement in average guest revenue. Average revenues increased $44.74 per guest from the prior year average of $500.13 or 8.9%. The result of these two items, occupancy and spending, produced net gains of $999,953 in gross revenue or 5%. Costs and operating expenses increased less than 1% or $89,275. The net results of the increased revenue of $999,953 and increase in operating expenses of $89,275 was an increase in operating income of $910,678 or 20.7% over the prior year.

Interest expense was reduced for the period by $26,084 as compared to the prior year. This reduction is primarily the result of reduced utilization of the Accounts Receivable credit line during the period and the increase in interest payments and accruals on the Golf Trust of America (“GTA”) loan. The GTA loan payments increased by the contractual factor of 5% or $107,481 for the quarter.

During the quarter, the Company set aside $640,605 in reserve accounts for capital improvements. $331,052 of this reserve were expended to finalize the Highlands Clubhouse renovation, repair the Island Clubhouse roof, replace the Innisbrook property-wide water softener, lease golf carts and golf course equipment and upgrade computer systems and software.

Financial Condition and Liquidity

The Company’s working capital position (exclusive of Assets Held for Sale) as of March 31, 2001 remains a deficit of $9,642,582. The Company traditionally experiences seasonal fluctuations in its net working capital position. Management of these fluctuations is accomplished through the utilization of an Accounts Receivable revolving credit line of $3,000,000 and advances from Westin Hotel Corporation under the annual guarantee agreement. Management believes that the Company will need to restructure the GTA loan for the economic viability of the Resort.

The Company was informed by GTA on November 29, 2001 that the Company is in default on the $78,975,000 participating mortgages with GTA arising from the Company’s failure to pay the October 2001 interest payment. GTA has asserted its right to accelerate payment of the total outstanding principal amounts.

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As of July 2002, the Company is seeking to negotiate a Settlement Agreement with GTA. In connection with the proposed Settlement Agreement, the Company would transfer to GTA the resort property, three condominium properties located at the Innisbrook Resort, the Company’s GTA stock interests, and all rights, title and interests of the Company under existing contracts and agreements. In addition, the Company would provide a limited indemnity to defend and hold harmless GTA (and its affiliates) from and against any and all costs, liabilities, claims, losses, judgments or damages arising out of or in connection with the Class Action Lawsuit, as well as liabilities accruing on or before the closing date relating to employee benefits and liabilities for contracts or agreements not disclosed by the Company to GTA. In return, it is anticipated that GTA would deliver to the Company a duly executed release. No Settlement Agreement has yet been signed and no terms are definite. Neither GTA nor any of its affiliates is under any obligation to continue negotiating with the Company or to execute the Settlement Agreement and could initiate foreclosure proceedings and pursue its other remedies at any time.

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PART II — OTHER INFORMATION

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RENTAL POOL LEASE OPERATIONS

The following unaudited financial statements of the Innisbrook Rental Pool Lease Operation and the Tamarron Rental Pool Lease Operation (the Rental Pools) are for the quarters and three months ended March 31, 2001 and 2000.

The operations of the Rental Pools are tied closely to that of Golf Host Resorts, Inc. (the Company) and provide for distribution of a percentage of the Company’s room revenues, as defined in the Rental Pool Master Lease Agreements, to participating condominium owners (Participants).

The Innisbrook Rental Pool Lease Operation is a party to lease agreements with an affiliated entity, whose ability to continue as a going concern is in substantial doubt.

The operations of the Rental Pools are more fully discussed in Form 10-K for the fiscal year ended December 31, 2000 (file No. 2-64309).

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INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS

DISTRIBUTION FUND

These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of management, include all adjustments which are necessary for a fair presentation.

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INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 2001 AND 2000
(unaudited)

DISTRIBUTION FUND

These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of management, include all adjustments which are necessary for a fair presentation.

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INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES
FOR THE QUARTERS ENDED MARCH 31, 2001 AND 2000
(Unaudited)

DISTRIBUTION FUND

These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of management, include all adjustments which are necessary for a fair presentation.

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TAMARRON RENTAL POOL LEASE OPERATION
BALANCE SHEETS

DISTRIBUTION FUND

     These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of management, include all adjustments which are necessary for a fair presentation.

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TAMARRON RENTAL POOL LEASE OPERATION
STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 2001 AND 2000
(Unaudited)

DISTRIBUTION FUND