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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Commission File Number 01-14115

RESORTQUEST INTERNATIONAL, INC.
(Exact name of registrant in its charter)

8955 Highway 98 West, Suite 203
Destin, Florida 32550
(Address of principal executive offices)(Zip Code)

(850) 278-4000
(Registrant’s telephone number, including area code)

530 Oak Court Drive, Suite 360, Memphis, Tennessee 38117
(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x        No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x        No o

     Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of July 31, 2003.

Common Stock 19,251,749 shares

PART I — FINANCIAL INFORMATION
Company or group of companies for which report is filed:
     RESORTQUEST INTERNATIONAL, INC. AND SUBSIDIARIES

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated balance sheets.

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RESORTQUEST INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share amounts)
(Unaudited)

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

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RESORTQUEST INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
(In thousands, except share amounts)
(Unaudited)

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

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RESORTQUEST INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

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

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RESORTQUEST INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(Unaudited)

     In these footnotes, the words “Company,” “ResortQuest,” “we,” “our” and “us” refer to ResortQuest International, Inc., a Delaware corporation, and its wholly-owned subsidiaries, unless otherwise stated or the context requires otherwise.

NOTE 1 — BASIS OF PRESENTATION

Organization and Principles of Consolidation

     ResortQuest is one of the world’s leading vacation rental property management companies with approximately 20,000 units under management. We are the first company offering vacation condominium and home rentals, sales and management under an international brand name in over 50 premier destination resorts located in the continental United States, Hawaii and Canada. Our condensed consolidated financial statements include the accounts of ResortQuest and its wholly-owned subsidiaries after elimination of all significant intercompany accounts and transactions.

     The condensed consolidated financial statements included herein are unaudited and have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the interim periods are not necessarily indicative of results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2002.

Acquisition and Deferred Costs

     Costs incurred in the course of our evaluation of acquisition candidates and the ultimate consummation of acquisitions consist primarily of attorneys’ fees, accounting fees and other costs incurred by us in identifying and closing transactions. These costs incurred are deferred on the balance sheet until the related transaction is either consummated or terminated. As of December 31, 2002 and June 30, 2003, there are no deferred acquisition costs. A similar treatment is followed in recording costs incurred by us in the course of amending existing debt agreements, generating additional debt or obtaining equity financing. The Company has net deferred financing costs of approximately $900,000 and $1.6 million at December 31, 2002 and June 30, 2003, respectively. Transaction costs and the excess of the purchase price over the fair value of identified net assets acquired represent goodwill. Goodwill is calculated based on a preliminary estimate that is adjusted to its final balance within one year of the close of the acquisition. Additionally, certain of our acquisitions have “earn-up” provisions that require additional consideration to be paid if certain operating results are achieved over periods of up to three years. This additional consideration is recorded as goodwill when the amount is fixed and determinable.

     During the six-month period ended June 30, 2002, we made net cash earn-up payments approximating $1.4 million related to a 2001 acquisition and other purchase accounting adjustments related to certain 2001 acquisitions. No such payments were made during the six-month period ended June 30, 2003.

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NOTE 2 — SUBSEQUENT EVENT, MERGER AGREEMENT AND POTENTIAL LIQUIDITY ISSUES

     As announced on August 5, 2003, the Company has entered into a definitive agreement to merge with Gaylord Entertainment Company (“Gaylord”) in a stock-for-stock acquisition. Under the terms of the definitive agreement, the Company’s stockholders will receive 0.275 shares of Gaylord common stock for each outstanding share of Company common stock. The Company will become a wholly-owned subsidiary of Gaylord and the Company’s stockholders will own approximately 14% of the outstanding shares of capital stock of the combined company. Gaylord is expected to retire the outstanding indebtedness of the Company upon the completion of the merger. The transaction is expected to close in the first quarter of 2004. The transaction is subject to regulatory review, approval by the Company’s lenders, approval by the respective stockholders of Gaylord and the Company and certain other customary conditions.

     As part of this transaction and during the period prior to closing, Gaylord has agreed to provide the Company, subject to the approval of ResortQuest’s lenders and certain other customary conditions, a line of credit of up to $10.0 million. This line of credit, which will bear interest at 10.5% per annum, will be unsecured and subordinated to the Company’s existing debt and will be used for general working capital purposes. Given the Company’s need to fund certain fixed costs during its off season, reduced cash flow resulting from an anticipated seasonal slow down in guest deposits in October and November, shorter reservation lead times, and the recent request by the Company’s credit card processor for a $5.0 million reserve account, the Company may be required to utilize this line of credit to maintain adequate working capital.

     Gaylord’s obligation to make this line of credit available to the Company is conditioned on ResortQuest’s lenders consenting i) to the extension of the line of credit to the Company, ii) to the use of the line of credit for working capital purposes only and not to retire existing debt and iii) to the waiver of all financial covenants of the Company that the Company believes will likely be breached prior to the closing of the acquisition. If lenders’ consents to the working capital line are not received by September 8, 2003, the Company may (on or after September 22, 2003) terminate the merger agreement if Gaylord does not otherwise elect to extend the line of credit. In addition, if such consents are not received by September 8, 2003, Gaylord may terminate the merger agreement so long as it has not made the line of credit available to the Company. Although ResortQuest has initiated discussion with its lenders and believes that it will be able to obtain such consents, there can be no assurance that such consents will be given or upon what terms, and thus, no assurance that Gaylord will make the line of credit available to the Company.

     Our credit facility and senior notes mature during 2004. It is currently expected that the credit facility and the senior notes will be paid by Gaylord at the effective time of the merger. If the merger is not completed, we would seek to refinance or negotiate an extension of the maturity of our credit facility and senior notes. If the merger with Gaylord is not completed and the Company is unable to refinace or extend the maturities of the credit facility or the senior notes, it would have a material adverse effect on the Company.

     The execution of the merger agreement constituted an event of default under the Company’s credit agreement, which default has been waived by the lenders under the credit agreement. The Company is required under the senior note purchase agreement to offer to repurchase the senior notes at par on the effective date of the merger. On August 6, 2003 the Company made such offer to repurchase the senior notes. The proposed purchase date for the senior notes is the later of September 6, 2003 or the closing of the merger with Gaylord.

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NOTE 3 — STOCK-BASED COMPENSATION

     As permitted under the Financial Accounting Standards Board (“FASB”) Statement No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of FASB Statement No. 123,” no compensation cost has been recognized in the condensed consolidated statements of operations for issued options. The Company continues to account for stock-based compensation utilizing the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.

     In accordance with Statement No. 123, “Accounting for Stock-Based Compensation,” ResortQuest has estimated the fair value of each option grant using the Black-Scholes Option-Pricing Model. Had compensation cost for issued options been determined based on the fair value at the grant dates, ResortQuest’s net income (loss) and earnings (loss) per share would have been impacted by the pro forma amounts as indicated in the following table: