FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For Quarter Ended June 30, 2003

Commission File no. 2-64309

GOLF HOST RESORTS, INC.

(Exact name of registrant as specified in its charter)


Colorado		84-0631130

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

36750 US 19 N., Palm Harbor, Florida 34684

(Address of principal executive offices) (Zip Code)

(727) 942-2000

(Registrant’s telephone number, including area code)

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.

Page 1 of 19

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
	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 2. Changes in 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 and Reports on Form 8-K
SIGNATURES
302 CEO Certification
Ex-31.2 302 CFO Certification
Ex-32.1 906 CEO Certification
Ex-32.2 906 CFO Certification

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION		2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
PART II - OTHER INFORMATION		18
Item 1.	Legal Proceedings	18
Item 2.	Changes in Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 5.	Other Information	18
Item 6.	Exhibits and Reports on Form 8-K	18
31.1	Section 302 CEO Certification
31.2	Section 302 Principal Financial Officer Certification
32.1	Section 906 CEO Certification
32.2	Section 906 Principal Financial Officer Certification
SIGNATURES		19

PART I - FINANCIAL INFORMATION

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

ASSETS
(Substantially all pledged)


			June 30,		December 31,
			2003		2002

			(unaudited)
CURRENT ASSETS:
	Cash		$	259,892	$	—
	Restricted cash			2,740,377		2,520,849
	Accounts receivable, net			1,635,328		2,069,962
	Other receivables			64,337		61,554
	Inventories and supplies			1,144,731		1,157,792
	Prepaid expenses and other assets			560,240		514,493

		Total current assets		6,404,905		6,324,650
INTANGIBLES, net				12,033,091		12,463,987
PROPERTY AND EQUIPMENT, net				37,638,597		38,025,063
OTHER ASSETS				5,382,243		5,701,950

			$	61,458,836	$	62,515,650

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

Page 2

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

LIABILITIES AND SHAREHOLDER’S DEFICIT


			June 30,			December 31,
			2003			2002

			(unaudited)
CURRENT LIABILITIES:
	Cash overdrafts		$	—		$	69,846
	Debt due within one year			79,000,592			79,003,552
	Accounts payable			3,278,629			4,973,036
	Accrued payroll costs			975,509			893,224
	Accrued interest			19,130,230			14,538,319
	Other payables and accrued expenses			2,852,623			2,721,823
	Deposits and deferred revenues			1,549,147			2,003,938
	Due to related parties			513,009			198,802

		Total current liabilities		107,299,739			104,402,540
DEBT DUE AFTER ONE YEAR				95,115			—
OTHER LONG-TERM LIABILITIES				10,265,009			10,265,009
LONG TERM REFURBISHMENT				5,623,095			5,548,514
DEFERRED INCOME TAXES				1,255,000			1,255,000

		Total liabilities		124,537,958			121,471,063

SHAREHOLDER’S DEFICIT
	Common stock, $1 par, 5,000 shares authorized, issued, and outstanding			5,000			5,000
	5.6% cumulative preferred stock, $1 par, 4,577,000 shares authorized, issued, and outstanding			4,577,000			4,577,000
	Paid-in capital			(8,487,323	)		(8,487,323	)
	Shareholder receivable			(219,784	)		—
	Accumulated deficit			(58,954,015	)		(55,050,090	)

	Total shareholder’s deficit			(63,079,122	)		(58,955,413	)

	Total liabilities and shareholder’s deficit		$	61,458,836		$	62,515,650

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

Page 3

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


		Quarters Ended June 30,						Six months ended June 30,
		2003			2002			2003			2002

REVENUES:
	Resort facilities	$	2,537,629		$	3,378,897		$	6,613,206		$	8,397,062
	Food and beverage		2,871,574			3,806,922			6,297,775			7,400,352
	Golf		2,869,517			2,915,347			6,630,710			7,472,088
	Other		1,094,184			1,635,313			2,393,916			2,937,805

			9,372,904			11,736,479			21,935,607			26,207,307

COST AND OPERATION EXPENSES:
	Resort facilities		2,146,932			2,785,709			5,243,711			6,126,672
	Food and beverage		2,041,635			2,374,933			4,301,900			4,767,309
	Golf		1,747,929			1,673,007			3,453,462			3,258,607
	Other		2,238,575			2,277,235			4,579,995			4,701,374
	General and administrative		970,086			1,108,359			2,069,621			2,325,537
	Depreciation and amortization		747,198			860,448			1,494,396			1,733,277

			9,892,355			11,079,691			21,143,085			22,912,776

OPERATING (LOSS)/INCOME			(519,451	)		656,788			792,522			3,294,531
INTEREST, NET			2,338,834			2,236,275			4,568,293			4,606,710

LOSS BEFORE PREFERRED STOCK DIVIDEND			(2,858,285	)		(1,579,487	)		(3,775,771	)		(1,312,179	)
DIVIDEND REQUIREMENTS ON PREFERRED STOCK			64,077			64,077			128,154			128,154

LOSS AVAILABLE TO COMMON SHAREHOLDER		$	(2,922,362	)	$	(1,643,564	)	$	(3,903,925	)	$	(1,440,333	)

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

Page 4

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


	$1 Par Value				5.6% Cumulative										Total
	Common Stock				Preferred Stock				Paid-In			Retained			Shareholder’s
	Shares		Amount		Shares		Amount		Capital			Deficit			Deficit

Balance, December 31, 2002		5,000	$	5,000		4,577,000	$	4,577,000	$	(8,487,323	)	$	(55,050,090	)	$	(58,955,413	)

Shareholder receivable		—		—		—		—		—			(219,784	)		(219,784	)
Loss available to common shareholder		—		—		—		—		—			(3,903,925	)		(3,903,925	)

Balance, June 30, 2003 (unaudited)		5,000	$	5,000		4,577,000	$	4,577,000	$	(8,487,323	)	$	(59,173,799	)	$	(63,079,122	)

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

Page 5

GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(unaudited)


			2003			2002

CASH FLOWS FROM OPERATING ACTIVITIES:
	(Loss)/income before dividend requirements on preferred stock		$	(3,775,771	)	$	(1,312,179	)
	Adjustments to reconcile net income to net cash provided by operations:
		Depreciation and amortization		1,494,396			1,733,277
		Provision for bad debts		(75,520	)		181,869
		Gain on disposal of capital lease		(27,739	)		(294,822	)
		Rental pool expense		390,919			203,508
		Changes in operating working capital		2,807,375			4,118,337

		Cash provided by operations		813,660			4,629,990

CASH FLOWS FROM INVESTING ACTIVITIES:
	Increase in other assets			3,369			(21,794	)
	Purchases of property and equipment			(627,492	)		(200,904	)

		Cash used in investing activities		(624,123	)		(222,698	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Contribution from owners			—			21,239
	Repayment of existing debt			(62,245	)		(91,970	)
	Additional borrowings on existing debt			132,600			—
	Decreases in other long-term liabilities			—			(3,190,194	)

		Cash used in financing activities		70,355			(3,260,925	)

NET INCREASE IN CASH				259,892			1,146,367
CASH, BEGINNING OF PERIOD				—			665,402

CASH, END OF PERIOD			$	259,892		$	1,811,769

NONCASH FINANCING AND INVESTING ACTIVITIES:
The Company satisfied its preferred stock dividend liability to GHI through the intercompany account			$	128,154		$	128,154

Master lease agreement refurbishment program			$	5,877,702		$	3,256,120

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

Page 6

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, 2002 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, 2002, the Company has suffered recurring losses from operations, has negative working capital and has a shareholder’s deficit. These issues raise substantial doubt about the Company’s 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 6 of the notes to consolidated financial statements on Form 10-K, the Company has defaulted under the terms of its debt agreement and Golf Host, Inc. (the Company’s parent company) 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 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, 2002.

		The accompanying consolidated balance sheet for June 30, 2003, and consolidated statements of operations and cash flows for the periods ended June 30, 2003 and 2002, 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. 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.

2)		INTANGIBLE ASSETS

		The Company recorded at closing in 1997, a resort intangible asset of approximately $30,400,000. This intangible related to the purchase of the Innisbrook Resort, which contained an existing rental pool agreement and a recently executed management agreement with Westin Hotels. The intangible is being amortized over twenty years on a straight-line basis. Amortization expense for all intangible assets was approximately $431,000 and $383,000 for the six months ended June 30, 2003 and June 30, 2002, respectively.

Page 7

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

2)		INTANGIBLE ASSETS

		During 2002 and as of June 30, 2003, the Company reviewed the carrying value of the intangible asset and determined that further impairment had not occurred. Advance booking and rental pool participation have stabilized from a historical perspective, and pro-forma cash flows, based upon advance bookings indicate that no further deterioration in the carrying value needs to be recognized.

(3)		DEBT

		Debt consists of the following:


	June 30,			December 31,
	2003			2002

Participating mortgage note at varying pay rates maturing in 2027 (in default)	$	69,975,000		$	69,975,000
$9,000,000 participating mortgage note credit facility maturing in 2007 (in default)		9,000,000			9,000,000
Capital leases ranging from 1.89% to 17.37%		120,707			28,552

		79,095,707			79,003,552
Less current maturities		(79,000,592	)		(79,003,552	)

	$	95,115		$	—

(4)		CONTINGENCIES

		Golf Hosts, Inc., the Company’s parent, was named as a defendant in a consolidated class action lawsuit whereby the plaintiffs allege breaches of contract, including breaches in connection with the Rental Pool Master Lease Agreement. By order dated April 3, 2003, the Company was substituted in place of Golf Hosts, Inc. as the defendant in the lawsuit. The plaintiffs are seeking unspecified damages and declaratory judgment stating that the plaintiffs are entitled to participate in the rental pool if one exists, a restriction of golf course access to persons who are either condominium owners, members, their accompanied guests, or guests of the resort and a restriction of the total number of club memberships. Deposition of class members and others, including depositions of prior executives of Golf Host Resorts, have been taken and additional discovery remains. The previously scheduled trial date of February 3, 2003 has been postponed by the Court; a new trial

Page 8

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

(4)		CONTINGENCIES (continued)

		date has not yet been set. In July 2003, the lawsuit class was de-certified leaving approximately 80 plaintiffs in the lawsuit. Plaintiffs have filed a notice of appeal regarding the de-certification decision. As this litigation is still in progress, 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. The Company believes Golf Hosts, Inc. has successful defenses based upon consultations with legal counsel and intends to vigorously defend this action.

		The Company has recorded a liability and related asset in the approximate amount of $5,623,000, in recognition of the Master Lease Agreement refurbishment reimbursement program. The liability will be settled in accordance with the terms of the agreement and the asset will be amortized on a straight line basis beginning in 2002 and ending December 31, 2009. Amortization expense for the asset was approximately $391,000 and $204,000 for the periods ended June 30, 2003 and June 30, 2002, respectively.

		As noted in the Company's 10-K filed as of December 31, 2002, the Company has defaulted on its primary mortgage with Golf Trust of America ("GTA"). The Company is engaged in negotiations with "GTA" and is seeking a resolution to its current default status. As of the time of this publication, no definite or final agreement has been reached.

Page 9

RENTAL POOL LEASE OPERATION

The following unaudited financial statements of the Innisbrook Rental Pool Lease Operation (the Rental Pool) are for the quarters ended June 30, 2003 and 2002.

The operation of the Rental Pool is tied closely to that of Golf Host Resorts, Inc. (the Company), and provides 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 Operation is party to lease agreements with an affiliated entity, whose ability to continue as a going concern is in substantial doubt.

The operation of the Rental Pool is more fully discussed in Form 10-K, for the fiscal year ended December 31, 2002 (file No. 2-64309).

Page 10

INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS

DISTRIBUTION FUND


			June 30,
			2003		December 31,
			(unaudited)		2002

	ASSETS
LIFE SAFETY RECEIVABLE FROM PARTICIPANTS			$	66,407	$	—
RECEIVABLE FROM GOLF HOST RESORTS, INC. FOR DISTRIBUTION				846,233		1,790,798
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND				14,068		15,856

			$	926,708	$	1,806,654

	LIABILITIES AND PARTICIPANTS’ FUND BALANCES
DUE TO PARTICIPANTS FOR DISTRIBUTION			$	622,555	$	1,480,977
DUE TO MAINTENANCE ESCROW FUND				237,746		325,677
LIFE SAFETY SETTLEMENT LIABILITY				66,407		—

			$	926,708	$	1,806,654


MAINTENANCE ESCROW FUND

	ASSETS
CASH AND CASH EQUIVALENTS			$	3,486,445	$	4,991,956
RECEIVABLE FROM DISTRIBUTION FUND				237,746		325,677
CONSTRUCTION WORK IN PROGRESS				—		7,284
CARPET CARE RECEIVABLE				12,110		23,576
INTEREST RECEIVABLE				16,944		9,012

			$	3,753,245	$	5,357,505

		LIABILITIES AND PARTICIPANTS’ FUND BALANCES
ACCOUNTS PAYABLE			$	659,190	$	2,820
INTEREST PAYABLE TO DISTRIBUTION FUND				14,068		15,856
PARTICIPANTS’ FUND BALANCES - ESCROW A				1,634,853		1,366,611
PARTICIPANTS’ FUND BALANCES - ESCROW B				1,445,134		3,972,218

			$	3,753,245	$	5,357,505

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

Page 11

STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 30, 2003 AND 2002

DISTRIBUTION FUND
(Unaudited)


		Current quarter						Year-to-Date

		2003			2002			2003			2002


GROSS REVENUES		$	2,485,774		$	3,325,678		$	6,498,035		$	8,253,420

DEDUCTIONS:
	Agents’ commissions		82,033			178,326			260,468			373,116
	Credit card fees		58,723			79,187			153,920			195,506
	Audit fees		5,387			3,813			10,774			8,375
	Uncollectable room rents		—			8,239			2,119			24,371
	Linen replacements		21,290			66,107			74,197			109,028
	Rental pool complimentary fees		654			1,025			1,629			1,820

			168,087			336,697			503,107			712,216

ADJUSTED GROSS REVENUES			2,317,687			2,988,981			5,994,928			7,541,204
MANAGEMENT FEE			(1,390,231	)		(1,791,923	)		(3,595,979	)		(4,520,854	)

GROSS INCOME DISTRIBUTION			927,456			1,197,058			2,398,949			3,020,350
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION:
	Management fee		(223	)		(876	)		(575	)		(2,288	)
	Marketing fee		(121	)		(478	)		(313	)		(1,248	)
	General pooled expense		—			(12,355	)		—			(12,355	)
	Miscellaneous pooled expense		(21	)		(77	)		(45	)		(169	)
	Corporate complimentary occupancy fees		5,040			4,899			7,802			8,717
	Interest (Paragraph 3.1 (3))		(3,183	)		(3,183	)		(6,366	)		(6,366	)
	Gtd MLA guaranteed payment		—			—			1,592			—
	Occupancy fees		(264,162	)		(329,087	)		(571,531	)		(690,951	)
	Advisory Committee expenses		(54,143	)		(48,314	)		(101,537	)		(103,765	)
	Life-safety reimbursement		(46,284	)		—			(134,827	)		—

NET INCOME DISTRIBUTION			564,359			807,587			1,593,149			2,211,925
ADJUSTMENTS TO NET INCOME DISTRIBUTION:
	Occupancy fees		264,162			329,087			571,531			690,951
	Hospitality suite fees		2,424			1,157			3,864			3,019
	Westin Associate room fees		15,288			16,709			39,444			39,445
	Interest		—			—			2,890			—

AMOUNT AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS		$	846,233		$	1,154,540		$	2,210,878		$	2,945,340

Average daily distribution		$	15.85		$	21.76		$	21.00		$	28.38
Average room rate		$	119.74		$	125.61		$	143.32		$	148.33
Occupied room nights			20,760			26,476			45,339			55,642
Available room nights			53,379			53,068			105,286			103,775
Occupancy percentage			38.9	%		49.9	%		43.1	%		53.6	%
Average number of available units			587			583			582			573

Page 12

INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES
FOR THE QUARTERS ENDED JUNE 30, 2003 AND 2002

DISTRIBUTION FUND
(Unaudited)


		Current Quarter						Year-to-date
		2003			2002			2003			2002


BALANCE, beginning of period		$	—		$	—		$	—		$	—
ADDITIONS:
	Amount available for distribution		846,233			1,154,542			2,210,878			2,945,340
	Interest received or receivable from Maintenance Escrow Fund		14,068			21,862			25,040			37,718
REDUCTIONS:
	Amounts withheld for Maintenance Escrow Fund		(237,746	)		(296,179	)		(514,698	)		(621,856	)
	Amounts accrued or paid to participants		(622,555	)		(880,225	)		(1,721,220	)		(2,361,202	)

BALANCE, end of period		$	—		$	—			—		$	—


MAINTENANCE ESCROW FUND

BALANCE, beginning of period		$	4,568,662		$	5,338,829		$	3,444,280		$	2,726,458
ADDITIONS:
	Amounts withheld from occupancy fees		237,746			296,179			514,698			621,856
	Interest earned		14,068			21,862			25,040			37,718
	Charges to participants to establish or restore escrow balances		249,203			314,934			1,788,251			4,491,168
REDUCTIONS:
	Maintenance charges		(188,829	)		(115,573	)		(438,815	)		(288,311	)
	Refurbishment Phase II		(1,611,768	)		(818,942	)		(2,012,025	)		(1,971,409	)
	Carpet care reserve deposit		(13,208	)		(16,455	)		(28,576	)		(30,930	)
	Interest accrued or paid to Distribution Fund		(14,068	)		(21,862	)		(25,040	)		(37,718	)
	Refunds to participants as prescribed by the master lease agreements		(161,819	)		(55,136	)		(188,096	)		(604,996	)

BALANCE, end of period		$	3,079,987		$	4,943,836		$	3,079,717		$	4,943,836

Page 13

GOLF HOST RESORTS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Quarter ended June 30, 2003

During the second quarter of 2003, The Company’s results of operations continued to reflect the downward trend in the hospitality industry and the destination golf resort segment of that industry. Occupancy percentages at the Innisbrook resort were 21.6% less than the same three-month period for the prior year. Total room nights were down 5,716 for the period ended June 30, 2003 and compared to the three months ended June 30, 2002. Group room nights were down 6,064 while transient rooms increased by 348 room nights, as compared to the same period last year. Total revenue per room night increased by 12.1% or $67.07 over the prior year. Gross revenue per room night for the three months ended June 30, 2003 was $623.20 as compared to $556.13 for the three months ended June 30, 2002. These net reductions in room nights coupled with the increase in room night spending levels produced a net decrease in gross revenue of approximately $2,364,000 or 20.1%.

All expenses have been managed to respond to the reduced demand in the market place, excluding the day-to-day maintenance costs of the four golf courses. Operating expenses, exclusive of depreciation and amortization, decreased approximately $1,074,000 or 11%. Depreciation and amortization also decreased by approximately $113,000 or 13.2%.

The decrease in revenue combined with the decreases in operating expenses and depreciation and amortization noted above, produced a net reduction in the comparative three month operating income of approximately $1,176,000. Operating income, before interest expense and preferred dividend requirements, was a loss of approximately $519,000 versus income of approximately $657,000 for the three months ended June 30, 2003 and June 30, 2002, respectively.

Interest expense, net of interest income, reflects the continued accrual of the Company’s GTA interest obligations. Total interest expense increased by approximately $103,000 or 4.6%. This increase was the result of effective interest rate changes.

Capital expenditure reserves in the amount of approximately $603,000 were set-aside during the quarter ended June 30, 2003. Of this amount, approximately $101,000 was used to fund capital lease payments on operating assets such as golf carts, golf grounds equipment and computer equipment while $73,000 was used to replace and repair the conference center and clubhouse HVAC, roofing systems and miscellaneous deferred maintenance projects. The balance is being held in reserve to fund the new telephone switch and golf course equipment, both of which will be installed and or delivered before the end of the year 2003.

Six months ended June 30, 2003

During the six months ended June 30, 2003, The Company’s results of operations continued to reflect the downward trend in the hospitality industry and the destination golf resort segment of that industry as noted above. Occupancy percentages at the Innisbrook resort were 18.5% less than the same six-month period for the prior year. Total room nights were down 10,303 for the period ended June 30, 2003 as compared to the six months ended June 30, 2002. Group and transient room nights were down 8,911 and 1,392 room nights respectively, as compared to the same period last year. Total revenue per room night increased by $37.97 or 6.1% over the prior year. Gross revenue per room night for the six months ended June 30, 2003 was $659.14 as compared to $621.17 for the six months ended June 30, 2002. These reductions in room nights coupled with the increase in room night spending levels produced a net decrease in gross revenue of approximately $4,272,000 or 16.3%.

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GOLF HOST RESORTS, INC.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Due to managements reducing operating expenses in response to reduced demand, operating expenses, exclusive of depreciation and amortization, decreased approximately $1,531,000 or 7.2%. Depreciation and amortization also declined by approximately $239,000 or 13.8%.

The decrease in revenue combined with the decreases in operating expenses and depreciation and amortization noted above, produced a net reduction in the comparative six month operating income of approximately $2,502,000. Operating income, before interest expense and preferred dividend requirements, was approximately $793,000 versus income of approximately $3,295,000 for the six months ended June 30, 2003 and June 30, 2002, respectively.

Interest expense, net of interest income, reflects change in the effective interest rates related to the GTA interest obligations. Total interest expense decreased by approximately $38,000 or 0.8%.

Capital expenditure reserves in the amount of approximately $1,212,000 were set-aside during the six months ended June 30, 2003. Of this amount, approximately $479,000 was used to fund capital lease payments on operating assets such as golf carts, golf grounds equipment and computer equipment while $200,000 was used to replace and repair the conference center and clubhouse HVAC, roofing systems and miscellaneous deferred maintenance projects. The balance is being held in reserve to fund the new telephone switch and golf course equipment, both of which will be installed and or delivered before the end of the year 2003.

The following information may contain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Such statements may be identified by the inclusion of terms such as “believe,” “expect,” “hope” or “may.” Although the Company believes that such forward-looking statements are based upon sound and reasonable assumptions, given the circumstances in which the statements are made, the actual results could differ significantly from those described in the forward-looking statements.

Certain factors that might cause such a difference include the following: changes in general economic conditions that may influence group conferences and guests’ vacations plans; changes in travel patterns; changes in consumer tastes in destinations or accommodations for group conferences and vacations; changes in rental pool participation by the current condominium owners; reaching a settlement agreement with the Company’s primary lender; settlement of the Class Action Lawsuit; the ability of the Company to continue to operate the Innisbrook property under its management contracts; and the resale of condominiums to owners who elect neither to participate in the rental pool nor to become Club members. Given these uncertainties, readers are cautioned not to put undue reliance on such statements.

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GOLF HOST RESORTS, INC.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity and Capital Resources

The Company’s working capital position has decreased to a deficit of approximately $107,300,000. This is a reduction of approximately $9,222,000 in working capital from the December 31, 2002 deficit of approximately $98,078,000.

The Company continues to experience seasonal fluctuations in its net working capital position. These fluctuations have been managed in the past through the utilization of an accounts receivable revolving credit line. Effective May 23, 2002, the revolving credit line with Wells Fargo Business Credit was terminated by Wells Fargo as a result of the Company’s default on the participating mortgage with Golf Trust of America (GTA).

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

As of August 2003, 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 Innisbrook resort property, three condominium units located at the resort, the Company’s ownership interests in GTA stock, and all rights, title and interests of the Company under existing contracts and agreements. In addition, the Company would provide 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 are under any obligation to execute the Settlement Agreement and GTA could initiate foreclosure proceedings or pursue any other legal remedies available to it at any time.

As described in Note 4 of the notes to consolidated financial statements on the Company’s Form 10-K for December 31, 2002, management had determined that due to declining demand in the hotel golf resort business and related rental pool participation, which led to declines in operating results, impairment of the intangible asset had occurred. At December 31, 2000, an impairment charge of $7,441,000 was recorded. As a result of the continued decline in destination golf resort business during 2001 and the events of September 11, 2001, the Company had determined that further impairment had occurred and consequently recorded an additional $3,000,000 impairment charge during the quarter ended September 30, 2001. No further impairment has been recognized subsequent to the period ended September 30, 2001.

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GOLF HOST RESORTS, INC.

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

		The Registrant does not have significant market risk with respect to foreign currency exchanges or other market rates. The Registrant’s debt has a fixed contractual interest rate through the year 2027 and, accordingly, fluctuations in interest rates are not expected to affect financial results.

Item 4.		Controls and Procedures

		Within the 90 days prior to the date of this report, the Registrant’s management, including the Chief Executive Officer, the Principal Financial Officer and the Registrant’s agent (Westin North American Management Company), carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the evaluation, the Registrant’s Chief Executive Officer and the Principal Financial Officer concluded that the Registrant’s disclosure controls and procedures are effective in timely alerting them to material information to be included in the Registrant’s periodic SEC filings.

		There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Chief Executive Officer and the Principal Financial Officer carried out this evaluation.

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PART II - OTHER INFORMATION

Item 1.		Legal Proceedings

		Golf Hosts, Inc., the Company’s parent, was named as a defendant in a consolidated class action lawsuit whereby the plaintiffs allege breaches of contract, including breaches in connection with the Rental Pool Lease Agreement. By order dated April 3, 2003, the Company was substituted in place of Golf Hosts, Inc. as the defendant in the lawsuit. The plaintiffs are seeking unspecified damages and declaratory judgment stating that the plaintiffs are entitled to participate in the rental pool if one exists, a limitation of golf course access to persons who are either condominium owners, members, their accompanied guest, or guests of the resort and a limitation of the total number of Club memberships. Deposition of class members and others, including depositions of prior executives of Golf Host Resorts, have been taken and additional discovery remains. The previously scheduled trial date of February 3, 2003 has been postponed by the Court; a new trial date has not yet been set. In July 2003, the lawsuit was de-certified leaving approximately 80 plaintiffs in the lawsuit. Plaintiffs have filed a notice of appeal regarding the de-certification decision. As this litigation is still in progress, 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 Golf Hosts, Inc. has successful defenses based upon consultations with legal counsel and intends to vigorously defend this action.

Item 2.		Changes in Securities and Use of Proceeds

		Not applicable.

Item 3.		Defaults Upon Senior Securities

		Not applicable

Item 4.		Submission of Matters to a Vote of Security Holders

		Not applicable

Item 5.		Other Information

		Pursuant to an agreement with the SEC staff, included in the 10-Q filing are unaudited financial statements of the Innisbrook Rental Pool Lease Operation for the quarters ended March 31, 2003 and 2002.

Item 6.		Exhibits and Reports on Form 8-K

		(a) The following exhibits are included in this Form 10-Q:

		31.1 President Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

		31.2 Principal Financial Officer Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

		32.1 President Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

		32.2 Principal Financial Officer Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

		(b) The Registrant did not file Form 8-K during the three months ended March 31, 2003.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GOLF HOST RESORTS, INC.


Date: August 14, 2003		By: /s/ Merrick Kleeman

		Merrick Kleeman
		President

Date: August 14, 2003		By: /s/ R. Keith Wilt

		R. Keith Wilt
		Vice President and Treasurer
		(Principal Financial Officer)

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GOLF HOST RESORTS INC 10-Q