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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


For Quarter Ended June 30, 2001

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 incorporation or organization)   (I.R.S. Employer 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 21


 

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

BALANCE SHEETS

ASSETS
(Substantially all pledged)

                     
        June 30,   December 31,
        2001   2000
       
 
        (unaudited)        
CURRENT ASSETS:
               
 
Cash
  $ 699,747     $ 565,400  
 
Restricted cash
    1,567,383       1,219,289  
 
Accounts receivable, net
    5,052,477       4,865,607  
 
Other receivables
    72,461       543,651  
 
Inventories and supplies
    1,316,907       1,606,935  
 
Prepaid expenses and other assets
    380,628       197,399  
 
   
     
 
 
    9,089,603       8,998,281  
 
Assets held for sale
          2,435,000  
 
   
     
 
   
Total current assets
    9,089,603       11,433,281  
INTANGIBLES, net
    16,850,139       17,376,706  
PROPERTY AND EQUIPMENT, net
    40,429,951       41,768,369  
OTHER ASSETS
    509,042       483,788  
 
   
     
 
 
  $ 66,878,735     $ 71,062,144  
 
   
     
 

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.)

BALANCE SHEETS

LIABILITIES AND SHAREHOLDER’S DEFICIT

                     
        June 30,   December 31,
        2001   2000
       
 
        (unaudited)        
CURRENT LIABILITIES:
               
 
Accounts payable
  $ 8,342,697     $ 8,614,179  
 
Line of credit
          667,141  
 
Accrued payroll costs
    1,071,310       830,072  
 
Accrued interest
    894,891       817,047  
 
Other payables and accrued expenses
    3,261,072       3,076,854  
 
Deposits and prepaid fees
    1,963,741       3,461,783  
 
Current notes payable
    3,034,453       862,058  
 
Due to related parties
    4,989,477       3,572,690  
 
   
     
 
   
Total current liabilities
    23,557,641       21,901,824  
NOTES PAYABLE
    79,402,165       82,239,239  
OTHER LONG-TERM LIABILITIES
    7,940,914       7,869,858  
DEFERRED INCOME TAXES
    1,770,467       1,770,467  
 
   
     
 
   
Total liabilities
    112,671,187       113,781,388  
 
   
     
 
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
    (13,557,000 )     (13,557,000 )
 
Accumulated deficit
    (36,817,452 )     (33,744,244 )
 
   
     
 
 
Total shareholder’s deficit
    (45,792,452 )     (42,719,244 )
 
   
     
 
 
Total liabilities and shareholder’s deficit
  $ 66,878,735     $ 71,062,144  
 
   
     
 

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.)

STATEMENTS OF INCOME
(unaudited)

                                   
      Quarters ended June 30,   Six months ended June 30,
     
 
      2001   2000   2001   2000
     
 
 
 
REVENUES:
                               
 
Resort facilities
  $ 4,344,924     $ 5,131,088     $ 12,125,179     $ 12,600,061  
 
Food and beverage
    3,729,347       5,767,012       9,063,946       11,111,403  
 
Golf
    3,255,311       3,998,690       9,039,471       9,372,278  
 
Other
    1,388,904       1,663,257       3,315,542       3,302,004  
 
   
     
     
     
 
 
    12,718,486       16,560,047       33,544,138       36,385,746  
 
   
     
     
     
 
COST AND OPERATION EXPENSES:
                               
 
Resort facilities
    3,095,991       3,667,801       7,947,526       8,530,104  
 
Food and beverage
    2,482,346       2,834,018       5,698,239       5,705,804  
 
Golf
    1,687,272       1,987,189       3,657,889       4,040,569  
 
Other
    2,320,834       2,976,038       5,222,906       5,827,321  
 
General and administrative
    1,308,013       1,593,790       2,914,662       3,425,041  
 
Depreciation and amortization
    968,283       995,771       1,936,567       1,951,543  
 
   
     
     
     
 
 
    11,862,739       14,054,607       27,377,789       29,480,382  
 
   
     
     
     
 
INCOME BEFORE INCOME/(LOSS) ON ASSET HELD FOR SALE AND LEASED ASSET
    855,747       2,505,440       6,166,349       6,905,364  
INCOME/(LOSS) ON ASSET HELD FOR SALE AND LEASED ASSET
    393,770       (458,615 )     (270,911 )     (1,257,452 )
 
   
     
     
     
 
OPERATING INCOME
    1,249,517       2,046,825       5,895,438       5,647,912  
INTEREST, NET
    2,490,959       2,412,075       4,912,157       4,859,357  
 
   
     
     
     
 
(LOSS)/INCOME BEFORE DIVIDEND REQUIREMENTS ON PREFERRED STOCK
    (1,241,442 )     (365,250 )     983,281       788,555  
DIVIDEND REQUIREMENTS ON PREFERRED STOCK
    64,077       64,077       128,154       128,154  
 
   
     
     
     
 
NET (LOSS)/INCOME AVAILABLE TO COMMON SHAREHOLDER
  $ (1,305,519 )   $ (429,327 )   $ 855,127     $ 660,401  
 
   
     
     
     
 

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

Page 4


 

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

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S DEFICIT

                                                         
    $1 Par Value   5.6% Cumulative                        
    Common Stock   Preferred Stock                   Total
   
 
  Paid-In   Accumulated   Shareholder's
    Shares   Amount   Shares   Amount   Capital   Deficit   Deficit
   
 
 
 
 
 
 
Balance, December 31, 1999
    5,000     $ 5,000       4,577,000     $ 4,577,000     $ (13,557,000 )   $ (12,481,706 )   $ (21,456,706 )
Net loss available to common shareholder
                                  (15,062,942 )     (15,062,942 )
Distribution to shareholder
                                  (6,199,596 )     (6,199,596 )
 
   
     
     
     
     
     
     
 
Balance, December 31, 2000
    5,000       5,000       4,577,000       4,577,000       (13,557,000 )     (33,744,244 )     (42,719,244 )
Net income available to common shareholder
                                  855,127       855,127  
Distribution to shareholder
                                  (3,928,335 )     (3,928,335 )
 
   
     
     
     
     
     
     
 
Balance, June 30, 2001 (unaudited)
    5,000     $ 5,000       4,577,000     $ 4,577,000     $ (13,557,000 )   $ (36,817,452 )   $ (45,792,452 )
 
   
     
     
     
     
     
     
 

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.)

STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(unaudited)

                     
        2001   2000
       
 
CASH FLOWS FROM OPERATING ACTIVITIES:
               
 
Net income before dividend requirements on preferred stock
  $ 983,281     $ 788,555  
 
Adjustments to reconcile net income to net cash provided by operations:
               
   
Depreciation and amortization
    1,936,567       1,951,543  
   
Early extinguishment of debt
          (595,193 )
   
Provision for bad debts
    222,807       68,100  
   
Gain from sale of assets held for sale
    (1,164,911 )      
   
Changes in operating working capital
    (157,373 )     571,446  
 
   
     
 
   
Cash provided by operations
    1,820,371       2,784,451  
 
   
     
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
 
Proceeds from sale of assets held for sale
    3,928,635        
 
Increase in assets held for sale
    (47,624 )      
 
Increase in other assets
    (25,254 )     (20,487 )
 
Purchases of property and equipment
    (352,682 )     (164,031 )
 
   
     
 
   
Cash provided by (used in) investing activities
    3,503,075       (184,518 )
 
   
     
 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
 
Distribution to shareholders
    (3,928,335 )      
 
Repayment of debt
    (664,679 )     (161,972 )
 
Repayment of line of credit
    (667,141 )     (1,331,328 )
 
Increases in other long-term liabilities
    71,056       318,785  
 
   
     
 
   
Cash used in financing activities
    (5,189,099 )     (1,174,515 )
 
   
     
 
NET INCREASE IN CASH
    134,347       1,425,418  
CASH, BEGINNING OF PERIOD
    565,400       131,440  
 
   
     
 
CASH, END OF PERIOD
  $ 699,747     $ 1,556,858  
 
   
     
 
NONCASH FINANCING AND INVESTING ACTIVITIES:
               
The Company satisfied its preferred stock dividend liability to GHI
               
 
through the intercompany account
  $ 128,154     $ 128,154  
 
   
     
 
Transfer from fixed assets to assets held for sale
  $ 281,100     $  
 
   
     
 

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 PREPARATION

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 June 30, 2001, and statements of operations and cash flows for the periods ended June 30, 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) ASSET HELD FOR SALE

On May 4, 2001, the Company sold the remaining land parcel at Innisbrook included in asset 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.

(3) LONG-TERM OBLIGATIONS

Long-term obligations consist of the following:

                 
    June 30,   December 31,
    2001   2000
   
 
Participating mortgage note at varying pay rates maturing in 2027
  $ 69,975,000     $ 69,975,000  
$9,000,000 participation mortgage note credit facility
    9,000,000       9,000,000  
Mortgage note at 6.34%, maturing in 2002
    2,668,000       3,167,921  
Capital leases ranging from 1.89% to 10.76%
    793,618       958,376  
 
   
     
 
 
    82,436,618       83,101,297  
Less current maturities
    (3,034,453 )     (862,058 )
 
   
     
 
 
  $ 79,402,165     $ 82,239,239  
 
   
     
 

Page 7


 

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) LONG-TERM OBLIGATIONS CONT.

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.

(4) 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.

(5) 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 loss is as follows and is included in loss on assets held for sale and leased asset in the statement of operations:

                   
      Six months ended   19 days ended
      June 30,   June 30,
      2001   2000
     
 
Revenue:
               
 
Hotel
  $ 1,212,509     $ 123,355  
 
Food and beverage
    953,377       120,212  
 
Golf
    646,998       69,539  
 
Other
    914,606       83,568  
 
   
     
 
 
    3,727,490       396,674  
 
   
     
 
Costs & operating expense:
               
 
Hotel
    534,570       67,127  
 
Food and beverage
    699,003       87,936  
 
Golf
    361,703       42,580  
 
Other
    1,275,205       122,196  
 
General and administrative
    2,235,375       201,199  
 
Interest expense
    57,456        
 
   
     
 
 
    5,163,312       521,038  
 
   
     
 
Net loss
  $ (1,435,822 )   $ (124,364 )
 
   
     
 

Page 8


 

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) SUBSEQUENT EVENTS

The Company was informed by GTA on November 29, 2001 that the Company is in default on the $78,975,000 participating mortgage 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 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 to negotiate 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 Master Lease Agreement (“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 4), 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.

Page 9


 

GOLF HOST RESORTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Quarter Ended June 30, 2001

During the second quarter of 2001, the Company has continued to experience a downturn in resort business as a result of an overall decline in the hotel golf resort industry. Occupancy percentages declined 10.8% (3,905 room nights) from the same period last year. Revenue per room night also fell short of the prior year results by $63.66. Average guest spending went from $458.09 in 2000, down to $394.43 per room night, or about 14%. The downturn of group business and the related planned functions caused a net reduction in gross revenue of $3,841,561 for the second quarter comparative numbers. Operating expenses declined by $2,191,868, or 15.6%; however, operating income for the quarter of $855,747 was $1,649,693 less than the same period last year.

Interest expense was approximately $79,000 greater in the current quarter over last year. Approximately $108,000 of this increase relates to the Golf Trust of America’s annual contractual escalator of 5%. Offsetting this contractual increase was a reduction of interest expense of approximately $29,000 due to a reduced utilization of the Accounts Receivable revolving credit line.

Year to Date June 30, 2001

During the six months ended June 30, gross revenues decreased $2,841,608, or 7.8%, from the same period in 2000. Room nights for the six months ended were down 5,325 as compared to the 2000 period. Total rooms sold were 70,466 and 75,791 for the six months ended June 2001 and 2000, respectively. While overall revenue was less than last year due to the reduced room nights, the average daily room rate and golf revenue per round achieved gains of 3.5% and 9.2%, respectively.

Operating expenses for the six months were reduced 7.1% from the prior year. The expenses decreased from $29,480,382 in 2000, to $27,377,789 in 2001. With the reduction in revenue partially offset by a reduction in expenses, the Company had a reduction of $739,015 in operating income, or 10.7% for the six-month comparative period.

Interest expense for 2001 exceeded the 2000 amount by $52,800. This is due to the contractual increase in the Golf Trust of America’s obligation in the aggregate of $216,000, offset by reductions in the utilization of the Accounts Receivable credit line.

During the six months ended June 30, 2001, the Company set aside capital reserves in the amount of $1,186,968. Of this amount, the Company invested $485,951 in the property, plant and equipment. These funds were used to finalize the Highlands Clubhouse renovation, repair the Island Clubhouse roof and water heater, replace the Innisbrook property water softener, fund the property’s golf cart lease and certain golf course equipment and upgrade and maintain the computer systems and software.

Page 10


 

Financial Condition and Liquidity

The Company’s working capital position (exclusive of Assets Held for Sale) has dropped to a deficit of $14,468,038. This reduction from the December 31, 2000 deficit of $12,903,543 is primarily the result of the reclassification of the long-term note payable of $2,668,000, due to the prior shareholders from long term to short term. That note is due to be retired in June 2002. The Company ultimately retired the obligation with the proceeds from the sale of the Tamarron property in November 2001.

The Company continues to experience seasonal fluctuations in its net working capital position. These fluctuations are managed 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 have 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.

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.

Page 11


 

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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.

Item 2. Changes in Securities

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 this 10-Q filing are unaudited financial statements of the Innisbrook Rental Pool Lease Operation and the Tamarron Rental Pool Lease Operation for the quarter ended June 30, 2001 and 2000.

Page 12


 

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 six months ended June 30, 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 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).

Page 13


 

INNISBROOK RENTAL POOL LEASE OPERATION

BALANCE SHEETS

                         
            June 30,   December 31,
            2001   2000
           
 
            (unaudited)        
DISTRIBUTION FUND
 
ASSETS
 
RECEIVABLE FROM GOLF HOST RESORTS, INC FOR DISTRIBUTION
  $ 1,542,890     $ 1,579,097  
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND
    25,144       45,643  
 
   
     
 
 
  $ 1,568,034     $ 1,624,740  
 
   
     
 
LIABILITIES AND PARTICIPANTS’ FUND BALANCES
 
DUE TO PARTICIPANTS FOR DISTRIBUTION
  $ 1,197,210     $ 1,285,558  
DUE TO MAINTENANCE ESCROW FUND
    370,824       339,182  
 
   
     
 
 
  $ 1,568,034     $ 1,624,740  
 
   
     
 
MAINTENANCE ESCROW FUND
 
ASSETS
 
CASH AND CASH EQUIVALENTS
  $ 2,258,627     $ 2,517,396  
RECEIVABLE FROM DISTRIBUTION FUND
    370,824       339,182  
CONSTRUCTION WORK IN PROGRESS
          11,484  
INTEREST RECEIVABLE
    22,724       27,301  
 
   
     
 
 
  $ 2,652,175     $ 2,895,363  
 
   
     
 
LIABILITIES AND PARTICIPANTS’ FUND BALANCES
 
ACCOUNTS PAYABLE
  $ 2,017     $ 760,544  
CONSTRUCTION RETAINAGE
    48,033       154,419  
INTEREST PAYABLE TO DISTRIBUTION FUND
    25,144       45,643  
CARPET CARE RESERVE
    24,263       4,856  
PARTICIPANTS’ FUND BALANCES
    2,552,718       1,929,901  
 
   
     
 
 
  $ 2,652,175     $ 2,895,363  
 
   
     
 

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.

Page 14


 

INNISBROOK RENTAL POOL LEASE OPERATION

STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(unaudited)

DISTRIBUTION FUND

                                     
        Current Quarter   Year-to-Date
       
 
        2001   2000   2001   2000
       
 
 
 
GROSS REVENUES
  $ 3,958,629     $ 5,012,349     $ 11,226,479     $ 12,387,505  
 
   
     
     
     
 
DEDUCTIONS:
                               
   
Agents’ commissions
    155,741       255,530       454,383       620,918  
   
Credit Card fees
    30,528       40,071       81,793       88,434  
   
Audit fees
    3,625       3,251       7,250       6,501  
 
   
     
     
     
 
 
    189,894       298,852       543,426       715,853  
 
   
     
     
     
 
ADJUSTED GROSS REVENUES
    3,768,735       4,713,497       10,683,053       11,671,652  
MANAGEMENT FEE
    (1,878,220 )     (2,348,432 )     (5,324,427 )     (5,816,593 )
 
   
     
     
     
 
GROSS INCOME DISTRIBUTION
    1,890,515       2,365,065       5,358,626       5,855,059  
ADJUSTMENTS TO GROSS INCOME
                               
 
DISTRIBUTION:
                               
   
Management fee
    (205,978 )     (259,799 )     (584,766 )     (644,365 )
   
Marketing fee
    (112,352 )     (141,709 )     (318,964 )     (351,472 )
   
Miscellaneous pooled expense
    (18,670 )     (20,786 )     (40,800 )     (43,580 )
   
Corporate complimentary occupancy fees
    10,450       13,444       21,246       23,855  
   
Westin Associate room fees
    27,881       21,301       51,940       39,675  
   
Occupancy fees
    (415,730 )     (460,399 )     (900,093 )     (958,410 )
   
Advisory Committee expenses
    (51,623 )     (8,146 )     (88,249 )     (16,186 )
 
   
     
     
     
 
NET INCOME DISTRIBUTION
    1,124,493       1,508,971       3,498,940       3,904,576  
ADJUSTMENTS TO NET INCOME DISTRIBUTION:
                               
   
Occupancy fees
    415,730       460,399       900,093       958,410  
   
Hospitality suite fees
          135             135  
   
Greens fees
    1,977       2,322       5,851       5,700  
   
Additional participation credit
    690       720       1,410       1,470  
 
   
     
     
     
 
AMOUNT AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS
  $ 1,542,890     $ 1,972,547     $ 4,406,294     $ 4,870,291  
 
   
     
     
     
 
Average daily distribution
  $ 25.64     $ 32.50     $ 37.43     $ 40.95  
Average room rate
  $ 122.77     $ 138.65     $ 159.32     $ 163.44  
Occupied room nights
    32,245       36,150       70,466       75,791  
Available room nights
    60,171       60,701       117,720       118,929  
Occupancy percentage
    53.6 %     59.6 %     59.9 %     63.7 %
Average number of available units
    661       667       650       653  

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.

Page 15


 

INNISBROOK RENTAL POOL LEASE OPERATION

STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(unaudited)

                                       
          Current Quarter   Year-to-date
         
 
          2001   2000   2001   2000
         
 
 
 
DISTRIBUTION FUND
 
BALANCE, beginning of period
  $     $     $     $  
ADDITIONS:
                               
 
Amount available for distribution
    1,542,890       1,972,547       4,406,294       4,870,291  
 
Interest received or receivable from Maintenance Escrow Fund
    25,144       56,707       49,316       112,692  
REDUCTIONS:
                               
 
Amounts withheld for Maintenance Escrow Fund
    (370,824 )     (410,031 )     (802,898 )     (854,302 )
 
Amounts accrued or paid to participants
    (1,197,210 )     (1,619,223 )     (3,652,712 )     (4,128,681 )
 
   
     
     
     
 
BALANCE, end of period
  $     $     $     $  
 
   
     
     
     
 
 
MAINTENANCE ESCROW FUND
 
BALANCE, beginning of period
  $ 2,738,506     $ 7,018,143     $ 1,929,901     $ 7,021,346  
ADDITIONS:
                               
 
Amounts withheld from occupancy fees
    370,824       410,031       802,898       854,302  
 
Interest earned
    25,144       56,707       49,316       112,692  
 
Receivable from Innisbrook
                397,412        
 
Charges to participants to establish or restore escrow balances
    23,449       117,043       245,617       165,221  
REDUCTIONS:
                               
 
Maintenance charges
    (109,868 )     (125,068 )     (270,892 )     (226,786 )
 
Carpet care reserve deposit
    (20,787 )     (21,577 )     (45,006 )     (41,480 )
 
Interest accrued or paid to Distribution Fund
    (25,144 )     (56,707 )     (49,316 )     (112,692 )
 
Refunds to participants as prescribed by the master lease agreements
    (449,406 )     (148,810 )     (507,212 )     (522,841 )
 
   
     
     
     
 
BALANCE, end of period
  $ 2,552,718     $ 7,249,762     $ 2,552,718     $ 7,249,762  
 
   
     
     
     
 

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.

Page 16


 

TAMARRON RENTAL POOL LEASE OPERATION

BALANCE SHEETS

                         
            June 30,   December 31,
            2001   2000
           
 
            (unaudited)        
DISTRIBUTION FUND
 
ASSETS
 
CASH
  $ 1,000     $ 1,000  
RECEIVABLE FROM GOLF HOST RESORTS, INC. FOR DISTRIBUTION
    193,431       181,539  
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND
    922       1,549  
 
   
     
 
 
  $ 195,353     $ 184,088  
 
   
     
 
 
LIABILITIES AND PARTICIPANTS’ FUND BALANCES                
 
DUE TO PARTICIPANTS FOR DISTRIBUTION
  $ 137,122     $ 152,957  
DUE TO MAINTENANCE ESCROW FUND
    58,231       31,131  
 
   
     
 
 
  $ 195,353     $ 184,088  
 
   
     
 
 
MAINTENANCE ESCROW FUND
 
ASSETS
 
CASH AND CASH EQUIVALENTS
  $ 97,330     $ 129,635  
DUE FROM DISTRIBUTION FUND
    58,231       31,131  
INVENTORY:
               
 
Linen
    40,131       16,496  
 
Materials and supplies
    13,715       7,306  
DEPOSITS
    4,729       6,292  
 
   
     
 
 
  $ 214,136     $ 190,860  
 
   
     
 
 
LIABILITIES AND PARTICIPANTS’ FUND BALANCES
 
ACCOUNTS PAYABLE
  $ 2,954     $ 14,597  
INTEREST PAYABLE TO DISTRIBUTION FUND
    922       1,549  
PARTICIPANTS’ FUND BALANCES
    210,260       174,714  
 
   
     
 
 
  $ 214,136     $ 190,860  
 
   
     
 

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.

Page 17


 

TAMARRON RENTAL POOL LEASE OPERATION

STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(unaudited)

DISTRIBUTION FUND

                                       
          Current Quarter   Year-to-date
         
 
          2001   2000   2001   2000
         
 
 
 
GROSS REVENUES
  $ 517,459     $ 709,134     $ 1,125,285     $ 1,139,021  
 
   
     
     
     
 
DEDUCTIONS:
                               
 
Agents’ commissions
    19,722       12,279       46,806       40,498  
 
Sales and marketing expenses
    38,809       53,185       84,396       85,427  
 
Audit fees
    3,255       3,255       6,510       6,510  
 
   
     
     
     
 
 
    61,786       68,719       137,712       132,435  
 
   
     
     
     
 
ADJUSTED GROSS REVENUES
    455,673       640,415       987,573       1,006,586  
MANAGEMENT FEE
    (257,836 )     (355,791 )     (523,786 )     (538,876 )
 
   
     
     
     
 
GROSS INCOME DISTRIBUTION
    197,837       284,624       463,787       467,710  
ADJUSTMENTS TO GROSS INCOME
                               
   
DISTRIBUTION:
                               
     
Corporate complimentary occupancy fees
    875       590       1,644       1,123  
     
Occupancy fees
    (73,083 )     (70,835 )     (171,115 )     (132,992 )
     
Designated items
    (20,689 )     (20,239 )     (31,734 )     (30,540 )
     
Advisory Committee expenses
    (5,281 )     (2,477 )     (7,455 )     (2,640 )
 
   
     
     
     
 
POOLED INCOME
    99,659       191,663       255,127       302,661  
ADJUSTMENTS TO POOLED INCOME:
                               
     
Occupancy fees
    73,083       70,835       171,115       132,992  
 
   
     
     
     
 
NET INCOME DISTRIBUTION
  $ 172,742     $ 262,498     $ 426,242     $ 435,653  
 
   
     
     
     
 
 
Average daily distribution
  $ 7.89     $ 10.94     $ 9.95     $ 9.14  
 
Average room rate
  $ 94.65     $ 99.12     $ 87.87     $ 84.32  
 
Room nights
    5,467       7,154       12,805       13,508  
 
Available Rooms
    21,900       24,015       42,756       47,617  
 
Occupancy percentage
    24.9 %     29.8 %     29.8 %     28.4 %
 
Average number of available units
    240       267       236       262  

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.

Page 18


 

TAMARRON RENTAL POOL LEASE OPERATION

STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(unaudited)

                                       
          Current Quarter   Year-to-date
         
 
          2001   2000   2001   2000
         
 
 
 
DISTRIBUTION FUND
BALANCE, beginning of period
  $     $     $     $  
ADDITIONS:
                               
 
Amounts available for distribution
    172,742       262,498       425,677       435,653  
 
Interest received or receivable from Maintenance Escrow Fund
    922       1,231       2,045       1,374  
REDUCTIONS:
                               
 
Amounts withheld for Maintenance Escrow Fund
    (36,542 )     (35,419 )     (85,558 )     (66,499 )
 
Amounts accrued or paid to participants
    (137,122 )     (228,310 )     (342,164 )     (370,528 )
 
   
     
     
     
 
BALANCE, end of period
  $     $     $     $  
 
   
     
     
     
 
 
MAINTENANCE ESCROW FUND
 
BALANCE, beginning of period
  $ 215,971     $ 189,482     $ 174,714     $ 188,338  
ADDITIONS:
                               
 
Amounts withheld from occupancy fees
    36,542       35,419       85,558       66,499  
 
Interest earned
    922       1,231       2,045       1,374  
 
Reimbursement of designated items
    20,689       20,239       31,734       30,540  
 
Charges to participants to establish or restore escrow balances
    13,837       94,378       41,609       101,858  
REDUCTIONS:
                               
 
Maintenance and inventory charges
    (53,503 )     (94,867 )     (86,508 )     (124,049 )
 
Refurbishing charges
                       
 
Interest accrued or paid to Distribution Fund
    (922 )     (1,231 )     (2,045 )     (1,374 )
 
Designated items
    (20,689 )     (20,239 )     (31,734 )     (30,540 )
 
Refunds to participants as prescribed by Master Lease Agreement
    (2,587 )     (8,796 )     (5,113 )     (17,030 )
 
   
     
     
     
 
BALANCE, end of period
  $ 210,260     $ 215,616     $ 210,260     $ 215,616  
 
   
     
     
     
 

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.

Page 19


 

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

       None

     (b)  Reports on Form 8-K

       None

Page 20


 

SECTION 906 CERTIFICATION

The following statement is provided by the undersigned to accompanying Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and shall not be deemed filed pursuant to any provision of the Exchange Act of 1934 or any other securities law.

Each of the undersigned certifies that the foregoing Report on Form 10-Q fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operation of Golf Host Resorts, Inc.

     
/s/ Merrick Kleeman

Merrick Kleeman
President
Golf Host Resorts, Inc.
  /s/ R. Keith Wilt

R. Keith Wilt
Vice President and Treasurer
Golf Host Resorts, Inc.

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.
For the quarter ended June 30, 2001

         
Date: September 20, 2002

  By:   /s/ Merrick Kleeman

Merrick Kleeman
President
 
         
 
Date: September 20, 2002

  By:   /s/ R. Keith Wilt

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

Page 21