UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/x/ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1998.

/ / Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________.

- -------------------------------------------------------------------------------

Commission File Number 000-22091

GOLF TRUST OF AMERICA, INC.
(Exact name of registrant as specified in its charter)

Maryland 33-0724736
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)

14 North Adger's Wharf, Charleston, South Carolina 29401
(Address of principal executive offices) (Zip Code)

(843)723-4653
(Registrant's telephone number, including area code)

- -------------------------------------------------------------------------------

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 report(s) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
--- ---

On August 14, 1998 there were 7,637,488 common shares outstanding of the
registrant's only class of common stock.

GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998

INDEX

PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997. . . . . . . . . . 3
Consolidated Statements of Income for the Three Months Ended June 30, 1998 and 1997 4
Consolidated Statements of Income for the Six Months Ended June 30, 1998, the Period
from February 12, 1997 (inception) through June 30, 1997 and the Pro Forma Six Months
Ended June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity for the Period from February 12, 1997
(inception) through December 31, 1997 and for the Six Months Ended June 30, 1998. . . . . 6
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and the
Period from February 12, 1997 (inception) through June 30, 1997. . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . 16

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 23
ITEM 2. CHANGES IN SECURITIES 23
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 23
ITEM 5. OTHER INFORMATION 24
ITEM 6. EXHIBITS INDEX AND REPORT ON FORM 8-K 25
SIGNATURES 27

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)

JUNE 30, DECEMBER 31,
1998 1997
-------------------------
(UNAUDITED)

ASSETS

Property and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . $ 44,043 $ 25,796
Golf course improvements . . . . . . . . . . . . 131,280 58,494
Buildings and improvements . . . . . . . . . . . 64,898 22,199
Furniture, fixtures, and equipment . . . . . . . 37,414 8,556
--------- ---------
Total property and equipment . . . . . . . . . . . 277,635 115,045
Less accumulated depreciation. . . . . . . . . . 18,266 14,001
--------- ---------
Property and equipment, net. . . . . . . . . . . . 259,369 101,044
--------- ---------
Mortgage notes receivable. . . . . . . . . . . . . 68,856 65,129

Cash and cash equivalents. . . . . . . . . . . . . 1,325 14,968
Receivable from affiliates (Note 7). . . . . . . . 1,091 1,004
Other lessee receivables . . . . . . . . . . . . . 1,484 1,196
Other assets . . . . . . . . . . . . . . . . . . . 10,098 2,965
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . $ 342,223 $ 186,306
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY

Notes payable (Note 4) . . . . . . . . . . . . . . $ 142,834 $ 4,325
Accounts payable and other liabilities . . . . . . 11,153 3,029
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . 153,987 7,354
--------- ---------
Minority interest. . . . . . . . . . . . . . . . . 63,982 54,625
--------- ---------
Commitments

Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued . . . . . . . . . . - -
Common stock, $.01 par value, 90,000,000 shares
authorized, 7,637,488 shares issued and outstanding 76 76
Additional paid-in capital . . . . . . . . . . . 128,254 127,488
Retained earnings. . . . . . . . . . . . . . . . 1,236 1,774
Unamortized restricted stock compensation. . . . (2,014) (1,713)
Note receivable from stock sale. . . . . . . . . (3,298) (3,298)
--------- ---------
Stockholders' equity . . . . . . . . . . . . . . . 124,254 124,327
--------- ---------
Total liabilities and stockholders' equity . . . . $ 342,223 $ 186,306
--------- ---------
--------- ---------

See accompanying notes to consolidated financial statements

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)

FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997
-----------------------------

REVENUES:
Rent from affiliates (Note 7). . . . . . . . . . $ 3,152 $ 3,065
Rent . . . . . . . . . . . . . . . . . . . . . . 5,113 752
Mortgage interest. . . . . . . . . . . . . . . . 2,183 181
-------- --------
Total revenues . . . . . . . . . . . . . . . . . . 10,448 3,998
-------- --------

EXPENSES:
Depreciation and amortization. . . . . . . . . . 2,452 803
General and administrative . . . . . . . . . . . 1,304 597
-------- --------
Total expenses . . . . . . . . . . . . . . . . . . 3,756 1,400
-------- --------
Operating income . . . . . . . . . . . . . . . . . 6,692 2,598
-------- --------
OTHER INCOME (EXPENSE):
Interest income. . . . . . . . . . . . . . . . . 91 317
Interest expense . . . . . . . . . . . . . . . . (2,006) (250)
Loss on sale of assets . . . . . . . . . . . . . (370) -
-------- --------
Total other income (expense) . . . . . . . . . . . (2,285) 67
-------- --------
Net income before minority interest. . . . . . . . 4,407 2,665
Income applicable to minority interest . . . . . . 1,768 1,373
-------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 2,639 $ 1,292
-------- --------
-------- --------

Basic earnings per share . . . . . . . . . . . . . $ .35 $ .33
-------- --------
-------- --------

Weighted average number of shares - basic. . . . . 7,632 3,924
-------- --------
-------- --------

Diluted earnings per share . . . . . . . . . . . . $ .33 $ .32
-------- --------
-------- --------

Weighted average number of shares - diluted. . . . 7,928 4,007
-------- --------
-------- --------

See accompanying notes to consolidated financial statements

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)

PERIOD FROM
FOR THE SIX FEBRUARY 12 FOR THE SIX
MONTHS ENDED THROUGH MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
1998 1997 1997
--------------------------------------------
(PRO FORMA)

REVENUES:
Rent from affiliates (Note 7). . . . . . . . . . $ 6,307 $ 4,697 $ 6,097
Rent . . . . . . . . . . . . . . . . . . . . . . 8,752 1,162 1,516
Mortgage interest. . . . . . . . . . . . . . . . 4,309 181 181
-------- -------- --------
Total revenues . . . . . . . . . . . . . . . . . . 19,368 6,040 7,794
-------- -------- --------
EXPENSES:
Depreciation and amortization. . . . . . . . . . 4,273 1,149 2,120
General and administrative . . . . . . . . . . . 2,460 910 1,070
-------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . . 6,733 2,059 3,190
-------- -------- --------
Operating income . . . . . . . . . . . . . . . . . 12,635 3,981 4,604
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income. . . . . . . . . . . . . . . . . 163 448 448
Interest expense . . . . . . . . . . . . . . . . (2,922) (290) (290)
Loss on sale of assets . . . . . . . . . . . . . (370) - -
-------- -------- --------
Total other income (expense) . . . . . . . . . . . (3,129) 158 158
-------- -------- --------
Net income before minority interest. . . . . . . . 9,506 4,139 4,762
Income applicable to minority interest . . . . . . 3,786 2,129 2,384
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 5,720 $ 2,010 $ 2,378
-------- -------- --------
-------- -------- --------

Basic earnings per share . . . . . . . . . . . . . $ .75 $ .51 $ .61
-------- -------- --------
-------- -------- --------
Weighted average number of shares - basic. . . . . 7,632 3,924 3,924
-------- -------- --------
-------- -------- --------
Diluted earnings per share . . . . . . . . . . . . $ .73 $ .50 $ .59
-------- -------- --------
-------- -------- --------
Weighted average number of shares - diluted. . . . 7,826 4,007 4,007
-------- -------- --------
-------- -------- --------

See accompanying notes to consolidated financial statements

GOLF TRUST OF AMERICA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

(UNAUDITED)

NOTE
ADDITIONAL RECEIVABLE TOTAL
PAID-IN RETAINED UNEARNED FROM STOCK STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS COMPENSATION SALE EQUITY
------ ------ ---------- -------- ------------ ---------- ------------

BALANCE, February 12, 1997 . . . . - $ - $ - $ - $ - $ - $ -
Proceeds from Initial Public
Offering . . . . . . . . . . . . . 3,910 39 82,071 - - - 82,110
Payment of underwriters
discount and initial offering
costs. . . . . . . . . . . . . . . - - (9,055) - - - (9,055)
Adjustment for minority
interest in operating
partnership. . . . . . . . . . . . - - (33,882) - - - (33,882)
Issuance of shares in exchange
for note . . . . . . . . . . . . . 159 2 3,296 - - (3,298) -
Issuance of shares for
acquisition. . . . . . . . . . . . 22 - 600 - - - 600
Issuance of restricted stock . . . 70 1 1,827 - (1,828) - -
Proceeds from follow-on
offering . . . . . . . . . . . . . 3,450 34 88,372 - - - 88,406
Payment of underwriters
discount and costs . . . . . . . . - - (5,741) - - - (5,741)
Amortization of restricted
stock Compensation . . . . . . . . - - - - 115 - 115
Dividends. . . . . . . . . . . . . - - - (4,195) - - (4,195)
Net income . . . . . . . . . . . . - - - 5,969 - - 5,969
------ ----- --------- -------- --------- --------- ---------
BALANCE, December 31, 1997 . . . . 7,611 $ 76 $ 127,488 $ 1,774 $ (1,713) $ (3,298) $ 124,327
------ ----- --------- -------- --------- --------- ---------

Issuance of restricted stock . . . 21 - 607 - (607) - -
Issuance of shares for option
exercise and employee stock
purchase plans . . . . . . . . . . 5 - 159 - - - 159
Amortization of restricted
stock compensation . . . . . . . . - - - - 306 - 306
Dividends. . . . . . . . . . . . . - - - (6,258) - - (6,258)
Net income . . . . . . . . . . . . - - - 5,720 - - 5,720
------ ----- --------- -------- --------- --------- ---------
BALANCE, June 30, 1998 . . . . . . 7,637 $ 76 $ 128,254 $ 1,236 $ (2,014) $ (3,298) $ 124,254
------ ----- --------- -------- --------- --------- ---------
------ ----- --------- -------- --------- --------- ---------

See accompanying notes to consolidated financial statements

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

PERIOD FROM
SIX MONTHS FEBRUARY 12
ENDED THROUGH
JUNE 30, JUNE 30,
1998 1997
------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 5,720 $ 2,010
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . 4,265 1,149
Loan cost amortization . . . . . . . . . . . . . . . 280 -
Straight-line interest . . . . . . . . . . . . . . . (664) -
Amortization of restricted stock compensation. . . . 306 -
Income applicable to minority interest . . . . . . . 3,786 2,492
Increase in receivables. . . . . . . . . . . . . . . (375) (1,451)
Increase in other assets . . . . . . . . . . . . . . (4,938) (1,495)
Increase in accounts payable and other liabilities . 2,522 873
-------- -------
Net cash provided by operating activities. . . . . . . . 10,902 3,578
-------- -------

CASH FLOWS USED IN INVESTING ACTIVITIES:
Golf course acquisitions and improvements. . . . . . . (136,236) (54,898)
Increase in mortgage notes receivable. . . . . . . . . (3,063) (61,599)
-------- -------
Net cash used in investing activities. . . . . . . . . . (139,299) (116,497)
-------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit . . . . . . . . . . . 120,675 43,825
Payments on notes. . . . . . . . . . . . . . . . . . . (92) -
Bridge loan proceeds . . . . . . . . . . . . . . . . . 5,000 -
Financing costs. . . . . . . . . . . . . . . . . . . . (765) -
Net proceeds from issuance of common stock . . . . . . 159 73,055
Distributions to partners. . . . . . . . . . . . . . . (3,965) (869)
Dividends paid . . . . . . . . . . . . . . . . . . . . (6,258) (821)
-------- -------
Net cash provided by financing activities. . . . . . . . 114,754 115,190
-------- -------
Net increase in cash . . . . . . . . . . . . . . . . . . (13,643) 2,271
Cash and cash equivalents, beginning of period . . . . . 14,968 -
-------- -------
Cash and cash equivalents, end of period . . . . . . . . $ 1,325 $ 2,271
-------- -------
-------- -------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period . . . . . . . . . . . . $ 2,834 $ -

NON-CASH INVESTING AND FINANCING TRANSACTIONS
Net assets of Legends Golf transferred to the Company. . $ - $ 981
Property and equipment in accruals or deferred purchase. $ 3,992 $ -
OP Units issued in golf course acquisitions. . . . . . . $ 9,716 $ -
Debt acquired with acquisition (Note 4). . . . . . . . . $ 12,927 $ -

See accompanying notes to consolidated financial statements

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

Golf Trust of America, Inc. (the "Company") was incorporated in Maryland
on November 8, 1996. The Company is a self-administered real estate
investment trust ("REIT") formed to capitalize upon consolidation
opportunities in the ownership of upscale golf courses in the United States.
The principal business strategy of the Company is to acquire upscale golf
courses and to lease the golf courses pursuant to long-term triple net leases
to qualified third party operators, including affiliates of the sellers.
Title to the acquired courses is held by Golf Trust of America, L.P., a
Delaware limited partnership (the "Operating Partnership") and Sandpiper-Golf
Trust LLC. a wholly-owned subsidiary of the Operating Partnership. Golf Trust
of America, Inc., through its wholly owned subsidiaries GTA GP, Inc. ("GTA
GP") and GTA LP, Inc. ("GTA LP"), holds a 59.7 percent interest in the
Operating Partnership. GTA GP is the sole general partner of the Operating
Partnership and owns a 0.2 percent interest therein. GTA LP is a limited
partner in the Operating Partnership and owns a 59.5 percent interest
therein. Larry D. Young, a director of the Company, along with his
affiliates, owns 29.2 percent of the Operating Partnership and is a
significant lessee. The remaining interest in the Operating Partnership is
held by operators of the golf courses, their affiliates and officers of the
Company.

The accompanying unaudited financial statements have been prepared by
the management of Golf Trust of America, Inc. in accordance with generally
accepted accounting principles for interim financial statements and in
conformity with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring adjustments) considered necessary for a
fair presentation have been included. The results of operations for the
three months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the full year. These financial statements
should be read in conjunction with the Company's December 31, 1997 audited
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K.

The unaudited Pro Forma Consolidated Statement of Income for the six
months ended June 30, 1997 is presented as if the Formation Transactions (i.e.,
the events occurring or resulting from the Company's initial public offering
on February 11, 1997) had occurred January 1, 1997 and includes the pro forma
period from January 1, 1997 to February 11, 1997 and actual results for the
period from February 12 to June 30, 1997. In management's opinion, all
adjustments necessary to reflect the effects of the Formation Transaction
have been made.

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
This pronouncement specifies the computation, presentation and disclosure
requirements for earnings per share. The new standard had no material impact
on the Company's financial statements as "diluted" earnings per share
disclosure required by the pronouncement were the same as earnings per share
previously reported. The only difference in "basic" and "diluted" weighted
average shares is the dilutive effect of the Company's stock options
outstanding (approximately 296,000 and 83,000 shares added to weighted shares
outstanding for the three months ended June 30, 1998 and 1997, respectively).

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2. ACQUISITION OF GOLF COURSES

During the three months ended March 31, 1998, the Company purchased 6
golf courses for an aggregate initial investment of approximately $79.6
million in cash and repayment of indebtedness, the assumption of a property
subject to a lien of $12.9 million and $7.6 million in OP Units
(approximately 280,000 units).

During the three months ended June 30, 1998, the Company purchased an
additional 5.5 eighteen hole equivalent golf courses for an aggregate initial
investment of approximately $55.3 million of which $53.2 million was paid in
cash and $2.0 million in OP Units (approximately 62,000 units). The
aforementioned golf courses are leased to third party operators pursuant to
long-term triple net leases.

The following is a summary of the acquisitions for 1998:

INITIAL
ACQUISITION INVESTMENT
DATE COURSE NAME LOCATION (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------

1/2/98 Bonaventure - East and West Courses Fort Lauderdale, FL $23,700
1/16/98 Mystic Creek Golf Club & Banquet Center Dearborn, MI 10,000
2/1/98 Emerald Dunes Golf Course West Palm Beach, FL 22,400
3/6/98 Sandpiper Golf Course Santa Barbara, CA 36,500
3/9/98 Persimmon Ridge Country Club Louisville, KY 7,500
5/22/98 Eagle Ridge Inn & Resort Galena, IL 47,000
5/29/98 Tierra Del Sol Albuquerque, NM 3,600
6/17/98 Silverthorn Country Club Brooksville, FL 4,700
---------
$155,400
---------
---------

The Emerald Dunes Golf Course was acquired subject to a lien which is
explained in Note 4. In conjunction with the purchase of the Emerald Dunes
Golf Course, Raymon Finch, Sr. and Ray Finch, Jr. (collectively the Finches)
were granted 50,000 options each, of which 25,000 in the aggregate will vest
when in any calendar year, the Company acquires $25 million in courses as
identified by the Finches. After year five, all options immediately vest if
the stock price is $10.00 over the strike price at which the options were
issued ($28) and if the Finches have otherwise undertaken to promote and
market the Company.

Concurrent with the acquisition of the Sandpiper Golf Course, the
Company formed Sandpiper-Golf Trust LLC, of which the Operating Partnership
is the sole member, to hold title to the golf course. In, addition, the
Operating Partnership owns approximately 95% of the economic interest in a
taxable subsidiary formed to hold title to a 14 acre development site
adjacent to the Sandpiper Golf Course with the balance owned by Mr. Blair,
President and Mr. Young, a director of the Company.

On May 22, 1998, the Company acquired Eagle Ridge Inn and Resort,
located in Galena, Illinois for $47.0 million. The facility, comprised of
three 18-hole golf courses, a 9-hole executive course, the 80-room Eagle
Ridge Hotel, conference center facilities and other resort related amenities,
is leased by the Company to an affiliate of Starwood Capital and Troon Golf.
Troon Golf also manages the Westin Innisbrook Resort Courses which is owned
by an affiliate of Starwood Capital and Troon Golf, as is the Lost Oaks of
Innisbrook course. This transaction was funded by approximately $45.8 million
from the line of credit and $1.2 million of OP Units.

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2. ACQUISITION OF GOLF COURSES (CONT'D)

On May 29, 1998, the Company acquired Tierra Del Sol, an 18-hole upscale
golf facility located near Albuquerque, New Mexico for $3.6 million. The
course is leased to an affiliate of the prior owner, Golf Classic Resorts.
This transaction was funded by $2.7 million in cash from the Bridge Loan and
$.9 million in OP Units.

On June 22, 1998, the Company acquired Silverthorn Country Club, an
18-hole private championship golf facility located in Brooksville, Florida,
north of Tampa, for $4.7 million. The Company leases the golf course to
Granite Golf Group, Inc. Granite Golf Group now operates five courses which
are owned by the Company.

3. COMMITMENTS

LEASES

The Company, typically, leases its golf courses to affiliates of the
prior owners and other qualified operators under non-cancelable lease
agreements for an initial period of ten years with options to extend the term
of each lease up to six consecutive times for a period of 5 years. From the
minimum lease payments, the Company is generally required to make available a
reserve of 2 to 5 percent of the annual gross golf revenue of each course for
capital expenditure reimbursement to the lessee subject to approval by the
Company. At June 30, 1998, the amount reserved was $696,000 compared to
$248,000 for June 30, 1997.

The non-cancelable leases provide for the Company to receive the greater
of the Base Rent Escalation or an amount equal to Participating Rent plus the
Base Rent Escalation payable under each non-cancelable lease. Participating
rent will generally be paid to the Company each quarter in the amount, if
any, by which the Gross Golf Revenue exceeds the Gross Golf Revenue for the
Golf Course for the base year times 33 1/3%. Participating rent was $155,000
and $74,000 for the three months ended June 30, 1998 and 1997, respectively.
The base rent will generally be increased each year by the lesser of (i) 3%
or (ii) 200% of the annual percentage increase in the Consumer Price Index
("CPI"). Annual increases in lease payments, including Base Rent Escalation
and Participating Rents, are generally limited to 5% to 7% for a given period.

COMMITMENTS

Under certain circumstances, the Company agrees to fund significant
capital improvements, to expand the existing golf facilities and in limited
circumstances to provide working capital to existing lessees. When
significant capital improvements are funded, the underlying Base Rent will be
increased. Working capital lines are evidenced by promissory notes or set
forth in the lease agreement. The Company has agreed to fund the
construction of an additional nine holes at Northgate Country Club ($3.0
million), fund the construction at Lost Oaks of Innisbrook for renovations of
the clubhouse and golf course ($1.25 million), fund a working capital line at
Tiburon ($150,000), fund the renovations to the conference facilities and
construction of additional nine holes at the Westin Innisbrook Resort ($9.0
million), fund a working capital line at Bonaventure Golf Course ($750,000)
and pay for renovations at that course ($3.2 million) and pay for renovations
at the Sandpiper Golf Course ($6.0 million) and to fund a working capital
line ($5.0 million) at that course. The Company has currently funded $10.6
million and is obligated to fund an additional $17.6 million over the next
two years.

The Company is in various stages of negotiation and due diligence review
for several acquisitions. Completion of these transactions is subject to
negotiation and execution of definitive documentation and certain other
customary closing conditions. No assurances can be given that the Company
will continue to pursue or complete the acquisition of any of these golf
course acquisitions.

4. NOTES PAYABLE

On June 20, 1997, the Company entered into a Credit Facility with a
consortium of banks led by NationsBank N.A., as agent, to be used primarily
for the acquisition of golf courses, but a portion of which may also be used
for acquisition of expansion facilities, for capital expenditures or for
general working capital purposes. Prior to amendment, the Company had a $100
million secured revolving Credit Facility with a floating interest rate of
LIBOR plus 1.75%. On February 27, 1998, the Company amended and restated the
Credit Facility to increase the amount available to $125 million on an
unsecured basis. The Credit Facility has only interest due currently, with
the principal balance due February 2000 (the third anniversary of the closing
date). The Credit Facility availability is limited to the unencumbered pool
calculation (as defined in the Credit Facility) and up to 20% of the Facility
may be used for working capital needs. Financial covenants include net
worth, liquidity and cash flow covenants. Non-financial covenants include
restrictions on loans outstanding, construction in progress, loans to
officers and changes to the Board of Directors. At the present time, these
covenants have been met.

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

4. NOTES PAYABLE (CONT'D)

On May 6, 1998, the Company negotiated an amendment to the Credit
Facility whereby the Company now has a grid pricing arrangement which
provides incentives for the Company to maintain a low ratio of total debt to
total assets. The Company expanded the definition of eligible properties for
qualification into the unencumbered pool in a manner consistent with the
Company's own underwriting methods. The Company also negotiated to reduce
the coverage ratio for the unencumbered pool calculation to offer greater
flexibility for future capital needs.

On May 22, 1998, Eagle Ridge was purchased for approximately $45.5
million in cash and $1.2 million in OP units. This increased the amount
borrowed under the Credit Facility to its limit of $125.0 million. Also on
May 22, 1998, a $5.0 million temporary (30 day) bridge loan was obtained from
NationsBank N.A. for the purchase of the Silverthorn and Tierra Del Sol
courses. This temporary loan was rolled over into the $100.0 million Bridge
Loan on July 9, 1998 with NationsBank N.A. and Bank of America National Trust
and Savings Association.

The $100.0 million Bridge Loan has the same interest rates and covenant
requirements as the $125.0 million Credit Facility. The Bridge Loan has an
original term of 90 days with 3 options to extend for an additional 30 days.
The Company has an obligation to pay off this Bridge Loan at the end of its
term. As a result, the Company is currently considering several equity and
debt financing options. The total unsecured loans as of June 30, 1998 were
$125.0 under the Credit Facility and $5.0 million under the Bridge Loan.

Effective February 1, 1998, the Company purchased the Emerald Dunes
property subject to an existing lien whose principal balance was
approximately $12.9 million at the time of the purchase. This loan has fixed
monthly payments of approximately $117,000 (including interest of 8.75%) due
on the first of each month with the term expiring in November 2016. The
balance at June 30, 1998 was approximately $12.8 million.

The Company has agreed to maintain minimum loan balances of
approximately $17.2 million for up to ten years to accommodate certain prior
owners' efforts to seek to minimize certain adverse tax consequences from
their contribution of their courses to the Company.

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

5. STOCK OPTIONS AND AWARDS

In May 1997, the Company adopted the 1997 Stock-Based Incentive Plan
(the "New 1997 Plan"). Under the New 1997 Plan, the Compensation Committee of
the Board of Directors is authorized to grant awards relating in the
aggregate up to 600,000 shares of the Company's common stock. Option grants
generally vest ratably over a period of three years from the date of grant
and expire ten years from the date of grant. Restricted stock grants vest
twenty five percent per year from the date of grant. On June 3, 1998, 25,000
options were granted to a new employee.

Transactions involving the plans are summarized as follows:

WEIGHTED
AVERAGE
OPTION SHARES SHARES EXERCISE PRICE
------------- ------ --------------

Outstanding at February 12, 1997. . . . - $ -
Granted . . . . . . . . . . . . . . . . 940,000 23.88
Exercised . . . . . . . . . . . . . . . - -
Expired and/or canceled . . . . . . . . - -
--------- --------
Outstanding at December 31, 1997. . . . 940,000 $ 23.88
--------- --------
--------- --------
Granted . . . . . . . . . . . . . . . . 70,000 29.82
Exercised . . . . . . . . . . . . . . . (4,666) (25.75)
Expired and/or canceled . . . . . . . . - -
--------- --------
Outstanding at June 30, 1998. . . . . . 1,030,334 $ 24.42
--------- --------
--------- --------

- ------------------------------------------------------------ -----------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------ -----------------------
RANGE OF REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE
PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE
- --------- -------- ----------- -------- -------- ------

$21 335,000 8.6 $21.00 125,000 $21.00
$24 - $26 600,334 8.8 $25.48 - -
$29 - $32 70,000 9.6 $29.00 20,000 $29.00
$32 - $35 25,000 9.9 $32.13 - -

EMPLOYEE STOCK PURCHASE PLAN

Effective March 1, 1998, the Company adopted an Employee Stock Purchase
Plan to provide substantially all employees an opportunity to purchase shares of
its common stock through payroll deduction, up to 10% of eligible compensation
with a $25,000 maximum deferral. Semi-annually, participant account balances
will be used to purchase shares of stock at the lesser of 85 percent of the fair
market value of shares on grant date or exercise date. The Employee Stock
Purchase Plan expires on February 28, 2008. A total of 250,000 shares will be
available for purchase under this plan. As of June 30, 1998 1,128 shares have
been issued.

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

6. PRO FORMA FINANCIAL INFORMATION

The pro forma financial information set forth below is presented as if
the second quarter 1998 acquisitions (Note 3) had been consummated as of
January 1, 1997. The pro forma financial information is not necessarily
indicative of what actual results of operations of the Company would have
been assuming the acquisitions had been consummated as of January 1, 1997 nor
does it purport to represent the results of operations for future periods (in
thousands, except per share amounts).

For the Six For the Pro forma Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
-------------------------------------------------------------------------

Revenues $25,373 $15,840
Net income $ 5,668 $ 1,235
Basic earnings per share $ .74 $ .31
Diluted earnings per share $ .71 $ .31

The pro forma financial information includes the following adjustments:
(i) an increase in depreciation and amortization expense; (ii) an increase in
general and administrative expenses to reflect a whole year of operations for
1997 only; (iii) a increase in interest expense; and (iv) an increase in
income applicable to minority interest.

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

7. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE

Legends Golf is a significant lessee of the golf courses in the
Company's portfolio. Legends Golf is a golf course management group
consisting of eight companies affiliated through common ownership that
operates a portfolio of golf courses owned by the Company. Legends Golf
manages and operates the golf courses as a lessee under triple net leases.
Legends Golf derives revenues from the operation of golf courses principally
through receipt of green fees, membership fees, golf cart rentals, and sales
of food, beverage and merchandise.

The following table sets forth certain combined condensed financial
information for Legends Golf.

JUNE 30, DECEMBER 31,
(IN THOUSANDS) 1998 1997
-------------------------------------------------------------------

Current assets $ 2,504 $ 2,454
Non-current assets 23,492 19,765
-------- --------
Total assets $ 25,996 $ 22,218
-------- --------
-------- --------
Payable to Golf Trust of America, LP $ 1,091 $ 1,004
Other current liabilities 1,511 1,720
Total long-term liabilities 13,652 10,897
Total owners' equity 9,742 8,597
-------- --------
Total liabilities and owners' equity $ 25,996 $ 22,218
-------- --------
-------- --------

FOR THE THREE MONTHS ENDED JUNE 30,
(IN THOUSANDS) 1998 1997
-------------------------------------------------------------------------

Total Revenues $ 7,908 $7,889
Operating Income $ 516 $ 252
Net Income $ 1,815 $1,471

Total revenues from golf course operations for Legends Golf remained the
same for the three months ended June 30, 1998 compared to 1997. An increase
attributed to increased greens fees at the Myrtle Beach area courses and a
full quarter of operations at the Virginia courses was offset by reduced cart
rentals.

Operating income increased by $.3 million to $.5 million for the three
months ended June 30, 1998 compared to $.3 million for the corresponding
period in 1997. The increase was primarily the result of reductions in
administrative and maintenance expenses. Net income was $1.8 million for the
three months ended June 30, 1998 compared to net income of $1.5 million for
the three months ended June 30, 1997 primarily due to the increase in the
equity in the earnings of Golf Trust of America, L.P. and the reductions in
adminstrative and maintenance expense.

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

7. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE (CONT'D)

FOR THE SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS) 1998 1997
--------------------------------------------------------------------------

Total Revenues $13,207 $12,996
Operating Loss $ 654 $ 352
Net Income $ 2,094 $ 1,144

Total revenues from golf course operations for Legends Golf increased by
$.2 million to $13.2 million for the six months ended June 30, 1998. The
increase was primarily attributed to increased greens fees at the Myrtle
Beach area courses net of reduced cart rentals.

Operating loss increased by $.3 million to $.7 million for the six
months ended June 30, 1998 compared to $.4 million for the corresponding
period in 1997. The increase was primarily the result of lease payments to
Golf Trust of America, L.P. for the full six months in 1998 versus only four
and one-half months in 1997 offset by the related reductions in depreciation
expense. Net income was $2.1 million for the six months ended June 30, 1998
compared to $1.1 million for the six months ended June 30, 1997 primarily due
to the increase in equity in the earnings of Golf Trust of America, L.P. of
$.9 million net of the items above.

8. SUBSEQUENT EVENTS

DECLARATION OF DIVIDENDS

On May 18, 1998, the Board of Directors declared a quarterly dividend
distribution of $.44 per share for the quarter ended June 30, 1998, to
stockholders of record on June 30, 1998, which was paid on July 15, 1998.

ACQUISITIONS

On July 10, 1998, the Company acquired Polo Trace Golf and Country Club,
an 18-hole upscale golf facility located in Delray Beach, Florida for $12.3
million. The Company leases the golf facility to an affiliate of Emerald
Dunes Golf Course. Emerald Dunes Golf Management and its affiliates now
lease four courses from the Company (Bonaventure (2), Emerald Dunes and Polo
Trace). For this acquisition the Company assumed a loan with NationsCredit
for approximately $5.0 million. The Company has agreed to maintain this debt
until January of 1999 to avoid certain prepayment penalties.

On July 17, 1998, the Company acquired Ohio Prestwick Country Club for
$6.4 million. The 18-hole upscale private facility, located near Akron,
Ohio, is leased to the lessee of Raintree Country Club, another current GTA
course.

GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)

OVERVIEW AND FORMATION

Golf Trust of America, Inc. (the "Company") conducts business through
Golf Trust of America, L.P. (the "Operating Partnership"), of which the
Company owns 59.7 percent interest through its two wholly owned subsidiaries
and is the general partner. Larry D. Young, a director of the Company, along
with his affiliates, owns 29.2 percent of the Operating Partnership and is a
significant lessee. The remaining interest in the Operating Partnership is
held by operators of the golf courses, their affiliates and officers of the
Company.

"Management's Discussion and Analysis of Financial Condition and Results
of Operations," and other sections of this report contain various
"forward-looking statements" which represent the Company's expectations
concerning future events including the following: statements regarding the
Company's continuing ability to target and acquire high-quality golf courses;
the expected availability of the Line-of-Credit and other debt and equity
financing; the Lessees' future cash flows, results of operations and overall
financial performance; the expected tax treatment of the Company's
operations; the Company's beliefs about continued growth in the golf
industry. Because of the foregoing factors, the actual results achieved by
the Company in the future may differ materially from the expected results
described in the forward-looking statements. The following discussion should
be read in conjunction with the accompanying Consolidated Financial Statements
appearing elsewhere herein.

The Company was formed to capitalize upon consolidation opportunities in
the ownership of upscale golf courses in the United States. The Company's
principal business strategy is to acquire upscale golf courses and then lease
the golf courses to qualified third party operators, including affiliates of
the sellers. The Company has the ability to issue units of limited
partnership interest ("OP Units") in the Operating Partnership. OP Units are
redeemable by their holder for cash or, at the election of the Company, for
shares of Common Stock on a one-for-one basis (their "Redemption Right").
When the Company acquires a golf course in exchange for OP Units, in most
instances the seller of the course does not recognize taxable income gain
until it exercises the Redemption Right. OP Units can thus provide an
attractive tax-deferred sale structure for golf course sellers. The Company
believes it has a distinct competitive advantage in the acquisition of
upscale golf courses, including those which might not otherwise be available
for purchases, because of (i) its utilization of a multiple independent
lessee structure (ii) management's substantial industry knowledge,
experience, and relationships within the golf community, (iii) the Company's
strategic alliances with prominent golf course operators and (iv) its ability
to issue OP Units to golf course owners on a tax-deferred basis.

GOLF COURSE ACQUISITIONS

During the first quarter of 1998, the Company acquired interests in 6
courses for an aggregate of approximately $100 million.

On January 2, 1998, the Company acquired Bonaventure Golf Courses,
comprised of two 18-hole golf courses located in Ft. Lauderdale, Florida for
$23.7 million in cash and repayment of mortgage indebtedness including
closing costs. The Company leases the golf courses to an affiliate of Emerald
Dunes Golf Course under a Participating Lease.

On January 16, 1998, the Company acquired Mystic Creek Golf Club and
Banquet Center, an 18-hole semi-private country club located near Dearborn,
Michigan for $8.5 million in cash and OP Units valued at approximately $1.5
million.

Effective February 1, 1998, the Company acquired Emerald Dunes Golf
Course, and 18-hole daily fee golf facility located in West Palm Beach,
Florida for a total purchase of $22.4 million, which includes $6.1 million in
OP Units. The Company acquired the course subject to an existing first lien
of $12.9 million.

GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)

GOLF COURSE ACQUISITIONS (CONT'D)

On March 6, 1998, the Company acquired Sandpiper Golf Course, an 18-hole
upscale daily fee golf facility near Santa Barbara, California for $32.0
million and an adjacent 14-acre development site valued at $4.5 million. The
course is leased to a joint venture consisting of one of the West Coast's
largest golf course contractors, Environmental Golf, and the owner of a
planned 400 room five star luxury hotel adjacent to the course to comply with
certain REIT restrictions. Mr. Blair and Mr. Young hold an approximate 5%
interest in the taxable subsidiary which holds the development site.

On March 9, 1998, the Company acquired Persimmon Ridge, an 18-hole
upscale private golf facility located near Louisville, Kentucky for $7.5
million. The course is leased to an affiliate of Granite Golf Group.

During the second quarter of 1998, the Company has acquired interest in
an additional 5.5 eighteen hole equivalent golf courses for an aggregate of
approximately $55.3 million. These acquisitions included Eagle Ridge Inn and
Resort, Silverthorn and Tierra Del Sol.

On May 22, 1998, the Company acquired Eagle Ridge Inn and Resort,
located in Galena, Illinois for $47.0 million. The facility, comprised of
three 18-hole golf courses, a 9-hole executive course, the 80-room Eagle
Ridge Hotel, conference center facilities and other resort related amenities
is leased by the Company to an affiliate of Starwood Capital and Troon Golf.
This transaction was funded by approximately $45.8 million from the line of
credit and $1.2 million in OP Units.

On June 17, 1998, the Company acquired Silverthorn Country Club, an
18-hole private championship golf facility located in Brooksville, Florida,
north of Tampa, for $4.7 million. The Company leases the golf course to an
affiliate of Granite Golf Group, Inc. This transaction was all cash funded by
the bridge loan and operating proceeds.

GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)

GOLF COURSE ACQUISITIONS (CONT'D)

Thus far in the third quarter of 1998, the Company has purchased two
golf courses, Polo Trace and Ohio Prestwick. On July 10, 1998, the Company
acquired Polo Trace Golf and Country Club, an 18-hole upscale golf facility
located in Delray Beach, Florida for $12.3 million. The Company leases the
golf facility to an affiliate of Emerald Dunes Golf Management. On July 17,
1998, the Company acquired Ohio Prestwick Country Club for $6.4 million. The
18-hole upscale private facility, located near Akron, Ohio, is leased to the
lessee of Raintree Country Club, another current GTA course.

REVENUE GROWTH

The Company's primary sources of revenue are Lease Payments under the
Participating Leases and mortgage payments under the Participating Mortgage.
Participating Rent is generally equal to 33-1/3% of the increase in Gross
Golf Revenues over the Gross Golf Revenues for the Golf Course for the base
year. Base Rent will increase each year by the Base Rent Escalator during
the first five years of the lease term, generally equal to the lesser of (i)
3% or (ii) 200% of the change in the CPI over the prior year. Annual
increases in Lease Payments, including Annual Base Rent Escalation increases
and Participating Rents are generally limited to a maximum of 5% to 7% for a
given period.

Management believes the principal source of growth in Gross Golf
Revenues at the Golf Courses will be increased green fees, cart fees, and
other related fees. In order to achieve higher revenues, management believes
the Lessees will need to continue to offer golfers a high quality golf
experience as it relates to the pace of play, condition of the Golf Course
and overall quality of the facilities.

RESULTS OF OPERATIONS OF THE COMPANY

FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997

For the three months ended June 30, 1998, the Company received
$10,448,000 in revenue from the Participating Leases and the Mortgage Note
Receivable, including $155,000 in Participating Rent. For the three months
ended June 30, 1997, the Company received $3,998,000 in revenue from the
Participating Leases and the Mortgage Note Receivable, including $74,000 in
Participating Rent. The increase in revenues is due to 1) minimum rent
increases of approximately $95,000, 2) rent of $4,091,000, from new course
acquisitions and expansions, 3) the $81,000 increase in participating rent to
$155,000 from $74,000, and 4) $2,183,000 of interest recognized from the
Mortgage Note Receivable for 1998 compared to $181,000 for 1997. The
Mortgage was obtained on June 20, 1997.

Expenses totaling $3,756,000 for the three months ended June 30, 1998
and $1,400,000 for three months ended June 30, 1997, reflect depreciation,
amortization, general and administrative expenses. The increase in expenses
reflects 1) additional depreciation of $1,624,000 for the acquisitions made
subsequent to June 30, 1997 and 2) additional general and administrative
costs of $732,000, including additional compensation expense of $415,000,
loan amortization of $150,000 and increased administrative costs of $167,000.

Additional interest expense of $1,756,000 results from the approximate
$100,100,000 of acquisitions made in the first quarter of 1998 and the
$55,300,000 made in the second quarter of 1998.

The loss on the sale of assets was from one location where the golf carts
were traded in as part of a new leasing program and another location where a
new clubhouse was built and the old facility was disposed of.

For the three months ended June 30, 1998 net income was $2,639,000
compared to $1,292,000 for the three months ended, 1997.

GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)

RESULTS OF OPERATIONS OF THE COMPANY (CONT'D)

FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE PROFORMA SIX MONTHS ENDED
JUNE 30, 1997

For the six months ended June 30, 1998 and the proforma six months ended
June 30, 1997, the Company would have received $19,352,000 and $6,040,000 in
revenue from the Participating Leases and from the Mortgage Note Receivable
in 1998, including $520,000 and $112,000 in Participating Rent/Interest for
1998 and 1997, respectively. The 1997 proforma results have been computed
using actual results for 1997 and projected results for the period from
January 1 to February 12, 1997. The increase in revenues is due to 1) minimum
increases of approximately $190,000, 2) rent of $6,848,000 from new course
acquisitions and expansions 3) $4,128,000 of interest from the Mortgage Note
Receivable which was issued June 20, 1997 and 4) the $408,000 increase in
Participating Rent.

Expenses would have totaled $6,733,000 and $3,190,000 for the six months
ended June 30, 1998 and the proforma six months ended June 30, 1997, and
reflect depreciation, amortization, general and administrative expenses. The
increase reflects 1) additional depreciation of $2,153,000 for the
acquisitions made after June 30, 1998 and 2) additional general and
administrative costs of $1,390,000, including additional compensation expense
of $593,000, loan amortization of $280,000 and increased administrative costs
of $517,000.

Additional interest expense of $2,632,000 results from the acquisitions
made during and after the second quarter of 1997.

Net income for the six months ended June 30, 1998 and the proforma six
months ended 1997 would have been $5,720,000 and $2,378,000, respectively.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

Cash flow from operating activities for the six months ended June 30,
1998 was $10,902,000 compared to $3,578,000 for the period from February 12,
1997 to June 30, 1997. This reflects net income before minority interest,
plus noncash charges to income for depreciation, loan cost amortization and
working capital changes. Cash flows used in investing activities reflect
increases in the mortgage receivable related to the Westin Innisbrook
facility of $3,063,000 and golf course acquisitions of $136,236,000 for the
six months ended June 30, 1998. This compares to acquisitions of the ten
initial courses $54,898,000 and the Westin Innisbrook Mortgage for
$61,599,000 for the period from February 12 to June 30, 1997. Cash flows
provided by financing activities, totaling $114,754,000 represents the net
borrowing of $124,910,000 under the Credit and Bridge Facility less dividends
and partner distributions totaling $10,223,000 for the six months ended June
30, 1998. This compares to borrowings of $43,825,000 for the Westin
Innisbrook Mortgage and the initial offering proceeds of $73,055,000 for the
period from February 12, 1997 to June 30, 1997. Distributions to partners and
shareholders totaled $1,690,000 represented a partial period distribution of
$.21 per share through June 30, 1997.

On June 20, 1997, the Company entered into a Credit Facility with a
consortium of banks led by NationsBank N.A., as agent, to be used primarily
for the acquisition of golf courses, but a portion of which may also be used
for acquisition of expansion facilities, for capital expenditures or for
general working capital purposes. Prior to amendment, the Company had a $100
million secured revolving Credit Facility with a floating interest rate of
LIBOR plus 1.75%. On February 27, 1998, the Company amended and restated the
Credit Facility to increase the amount available to $125 million on an
unsecured basis. The Credit Facility availability is limited to the
unencumbered pool calculation (as defined in the Credit Facility) and up to
20% of the Facility may be used for working capital needs. Financial
covenants include net worth, liquidity and cash flow covenants.
Non-financial covenants include restrictions on loans outstanding,
construction in progress, loans to officers and changes to Board of
Directors. At of June 30, 1998, these covenants have been met.

GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)

At the beginning of the second quarter, the Company had $73.7 million
outstanding debt on its $125.0 million Facility. On May 6, 1998, the
Company negotiated an amendment to the Credit Facility whereby the Company
now has a grid pricing arrangement which provides incentives for the Company
to maintain a low ratio of total debt to total assets. The Company expanded
the definition of eligible properties for qualification into the unencumbered
pool in a manner consistent with the Company's own underwriting methods. The
Company also negotiated to reduce the coverage ratio for the unencumbered
pool calculation to offer greater flexibility for future capital needs.

On May 22, 1998, Eagle Ridge was purchased for approximately $45.0
million in cash and $2.0 million in OP units. This pushed the amount
borrowed under the Credit Facility to its limit of $125.0 million. Also on
May 22, 1998, a $5.0 million temporary (30 day) bridge loan was obtained from
NationsBank N.A. for the purchase of the Silverthorn and Tierra Del Sol
courses. This temporary loan was rolled over into the $100.0 million bridge
facility on July 9, 1998 with NationsBank N.A. and Bank of America National
Trust and Savings Association.

The terms of the $100.0 million Bridge Loan has the same interest rates
and covenant requirements as the $125.0 million Credit Facility. The Bridge
Loan has an original term of 90 days with 3 options to extend for an
additional 30 days. As a result, the Company is currently considering
several equity and debt financing options. The total unsecured loans as of
June 30, 1998 were $125 million under the Credit Facility and $5 million
under the Bridge Loan.

The Company has agreed to maintain minimum loan balances of
approximately $17.2 million for up to ten years to accommodate certain prior
owners' efforts to minimize certain adverse tax consequences from their
contribution of their courses to the Company.

The Company intends to invest in additional golf courses as suitable
opportunities arise, but the Company will not undertake investments unless
adequate sources of financing are available. The Company anticipates that
future acquisitions would be funded with debt financing provided by the Line
of Credit, the issuance of OP Units or with proceeds of additional equity
offerings. In the future, the Company may negotiate additional credit
facilities or issue corporate debt instruments. Any debt issued or incurred
by the Company may be secured or unsecured, long-term or short-term, fixed or
variable interest rate and may be subject to such other terms, as the Board
of Directors deems prudent. The Company currently has one binding agreement
to acquire an additional golf course for approximately $4.2 million, subject
to satisfaction of various due diligence conditions. The Company is in
active negotiations regarding the acquisition of additional golf courses.

The Company's acquisition capabilities are enhanced by its existing
capital structure. The Company intends to maintain a capital structure with
consolidated indebtedness representing no more than 50% of its total market
capitalization.

GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)

COMMITMENTS

The Participating Leases generally require the Company to reserve
annually between 2.0% and 5.0% of the Gross Golf Revenues of the Golf Courses
to fund capital expenditures. The Lessees will fund any capital expenditures
in excess of such amounts.

Under certain circumstances, the Company agrees to make available to the
Lessees to fund significant capital improvements, to expand the existing golf
facilities and in limited circumstances to provide working capital for
existing lessees. When significant capital improvements are funded, the
underlying Base Rent will be increased. Working capital lines are evidenced
by promissory notes or set forth in the lease agreement. The Company has
agreed to fund the construction of an additional nine holes at Northgate
Country Club ($3.0 million), fund the construction at Lost Oaks of Innisbrook
for renovations of the clubhouse and golf course ($1.25 million), fund a
working capital line at Tiburon ($150,000), fund the renovations to the
conference facilities and construction of additional nine holes at the Westin
Innisbrook Resort ($9.0 million), fund a working capital line at Bonaventure
Golf Course ($750,000) and pay for renovations at that course ($3.2 million)
and pay for renovations at the Sandpiper Golf Course ($6.0 million) and to
fund a working capital line of ($5.0 million) at that course. The Company has
currently funded $10.6 million and is obligated to fund an additional $17.6
million in the next two years.

The Company is in various stages of negotiation and due diligence
review for various of these acquisitions. Completion of these transactions is
subject to negotiation and execution of definitive documentation and certain
other customary closing conditions. No assurances can be given that the
Company will continue to pursue or complete the acquisition of any of these
golf course acquisitions.

FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION

Funds from Operations and Cash Available for Distribution are calculated
as follows:

(IN THOUSANDS)
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
-----------------------------------
(UNAUDITED) (UNAUDITED)

Income before minority interest. . . . . $ 4,442 $ 2,665
Depreciation and amortization for real
estate assets. . . . . . . . . . . . . . 2,452 803
Loss on sale of assets . . . . . . . . . 370 -
-------- --------
Funds from Operations. . . . . . . . . . 7,244 3,468

Adjustments:
Noncash mortgage interest. . . . . . . (332) (30)
Capital expenditure reserve (net). . . (155) (180)
-------- --------
Cash Available for Distribution. . . . . 6,757 1,776
-------- --------
-------- --------

Noncash mortgage interest revenue represents the difference between
interest revenue on the Participating Mortgage reported by the Company in
accordance with generally accepted accounting principles ("GAAP") and the
actual cash payments received by the Company. The participating leases
generally require the Company to reserve annually between 2.0% and 5.0% of
the Gross Golf Revenues of the Golf Courses to fund capital expenditures.
The Lessees will fund any capital expenditures in excess of such amounts.

GOLF TRUST OF AMERICA, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)

FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION (CONT'D)

In accordance with the resolution adopted by the Board of Governors of
the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"),
Funds From Operations represents net income (loss) (computed in accordance
with GAAP), excluding gains (or losses) from debt restructuring or sales of
property, plus depreciation of real property, and after adjustments for
unconsolidated partnership and joint ventures. Funds From Operations should
not be considered as an alternative to net income or other measurements under
GAAP as an indicator of operating performance or to cash flows from operating
investing or financial activities as a measure of liquidity. Funds From
Operations does not reflect working capital changes, cash expenditures for
capital improvements or principal payments on indebtedness. The Company
believes that Funds From Operations is helpful to investors as a measure of
the performance of an equity REIT, because along with cash flows from
operating activities, financing activities and investing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures. Compliance with the
NAREIT definition of Funds From Operations is voluntary. Accordingly, the
Company's calculation of funds from operations in accordance with the NAREIT
definition may be different than similarly titled measures used by other
REITs.

RECENT ACCOUNTING PRONOUNCEMENTS

In March, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") issued a ruling, EITF 97-11, entitled
"Accounting for Internal Costs Relating to Real Estate Property
Acquisitions". The ruling provides that internal costs of identifying and
acquiring operating property should be expensed as incurred. The effect of
the adoption of EITF 97-11 will not have a material impact on the financial
statements of the Company.

In May, 1998, the EITF of the FASB issued a ruling, EITF 98-9, entitled
"Accounting for Contingent Rent in Interim Financial Periods", that
potentially affects recognition of percentage rent of the Company. Under EITF
98-9, revenues from percentage rent are recognized in the quarterly periods
in which the specified target triggers the percentage rent is achieved. Under
the terms of the percentage leases entered into by the Company, percentage
rent is payable quarterly based on increases in revenue over a corresponding
quarter in a base year. The Company will continue to evaluate, together with
its accountants, the adoption of EITF 98-9 and any impact such adoption may
have on the Company in the future. Based on the structure of the Company's
leases, EITF 98-9 will not have a material effect on the Company's current
results of operations. Regardless of the application of EITF 98-9, no change
in the calculation of FFO will occur and on an annual basis there will be no
change in the Company's earnings.

GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not Applicable.

ITEM 2. CHANGES IN SECURITIES

RECENT SALES OF UNREGISTERED SECURITIES

On May 22, 1998, the Operating Partnership issued 35,794 OP Units to
Troon Eagle Ridge, LLC, for its contract right to acquire Eagle Ridge Inn &
Resort. On May 28, 1998, the Operating Partnership issued 26,357 OP units
to the Prior Owner of Tierra Del Sol for its interest in Tierra Del Sol
Golf Club. OP Units may generally be redeemed by their holder one year
after issuance for cash or, at the option of the Company, shares of Common
Stock on a one-for-one basis. In addition, options to acquire 20,000
shares of Common Stock were granted to J. Graffeo, J. Galcute, H. Rosthoff,
I. Sauder and D. Irelli as partial consideration for their interest in Polo
Trace Golf Course. One-half of the options vest on January 4, 1999 and
one-half vest on January 4, 2000, each at the trailing 5-day closing price
average immediately prior to vesting, and expire on July 1, 2000. These
issuances were effected in reliance upon an exemption from registration
under Section 4(2) of the Securities Act as a transaction not involving a
public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

The annual meeting of stockholders of the Company was held on May 18,
1998. The matters voted upon at the meeting were: (i) the election of two
directors to serve until the 2001 annual meeting of stockholders; and (ii)
the approval of the Company's 1997 Equity Participation Plan.

The results of the voting for election of Mr. David Dick Joseph and Mr.
Roy C. Chapman to the Board of Directors are as follows:

AUTHORITY
DIRECTOR SHARES CAST FOR WITHHELD
-------- --------------- ---------

Mr. David Dick Joseph 5,370,354 7,325
Mr. Roy C. Chapman 5,370,354 7,325

In addition to the above directors, the following directors will
continue in office:

TERM
NAME EXPIRES
---- -------

Mr. W. Bradley Blair, II 1999
Mr. Raymond V. Jones 1999
Mr. Larry D. Young 2000
Mr. Edward L. Wax 2000
Mr. Fred W. Reams 2000

GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONT'D)

The vote with respect to the approval of the Company's 1997 Stock-Based
Incentive Plan was as follows:

For: 3,665,882
Against: 549,188
Abstain: 21,099
Broker No Vote: 3,395,525

The vote with respect to ratification to approve the amendment to the
Company's Charter regarding indemnification of directors and advance payment
of expenses was as follows:

For: 5,158,403
Against: 197,247
Abstain: 22,027
Broker No Vote: 2,254,017

The vote with respect to the approval of the Employee Stock Purchase
Plan was as follows:

For: 5,377,679
Against: -
Abstain: -
Broker No Vote: -

ITEM 5. OTHER INFORMATION

Not Applicable.

GOLF TRUST OF AMERCIA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The following exhibits are part of this quarterly report on Form 10-Q
for the quarterly period ended June 30, 1998 (and are numbered in accordance
with Item 601 of Regulation S-K). Items marked with an asterisk (*) are
filed herewith.

Exhibit
No. Description
- ------- ---------------------------------------------------------------------

3.1A Articles of Amendment and Restatement of the Company, as filed with
the State Department of Assessments and Taxation of Maryland on
January 31, 1997, (previously filed as Exhibit 3.1A to the Company's
Registration Statement on Form S-11 (Commission File No. 333-15965)
Amendment No. 2 (filed January 30, 1997) and incorporated herein by
reference).

3.1B* Articles of Amendment of the Company, as filed with the Maryland
State Department of Assessments and Taxation on June 9, 1998 and as
currently in effect.

3.2 Bylaws of the Company as amended by the Board of Directors on
February 16, 1998 and as currently in effect (previously filed as
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
(Commission File No. 000-22091), filed May 15, 1998, and
incorporated herein by reference).

10.1.2 First Amendment to the Partnership Agreement, dated as of February 1,
1998 (previously filed as Exhibit 10.1.2 to the Company's Annual
Report on Form 10-K (Commission File No. 000-22091), filed March 31,
1998, and incorporated herein by reference).

10.2.12 Lease, dated May 22, 1998, between Golf Trust of America, L.P., as
Landlord, and Eagle Ridge Lease Company L.L.C., as Tenant
(previously filed as Exhibit 10.3 to the Company's Form 8-K
(Commission File No. 000-22091), filed June 5, 1998, and
incorporated herein by reference).

10.2.13 Assignment and Assumption of Purchase and Sale Agreement, dated
May 20, 1998, between Eagle Ridge L.L.C., as Assignor, and Golf
Trust of America, L.P., as Assignee (previously filed as Exhibit
10.2 to the Company's Form 8-K (Commission File No. 000-22091),
filed June 5, 1998, and incorporated herein by reference).

10.2.14* Lease, dated June 19, 1998, by and between Golf Trust of America,
L.P., as landlord, and Granite Silverthorn, Inc., as tenant.

10.2.15* Lease, dated July 10, 1998, by and between Golf Trust of America,
L.P., as landlord, and Emerald Dunes-Polo Trace, Inc., as tenant.

10.2.16* Lease, dated May 29, 1998, by and between Golf Trust of America, L.P.,
as landlord, and GCR-New Mexico, L.L.C., as tenant.

10.2.17* Contribution and Leaseback Agreement dated May 29, 1998, by and
between Golf Classic Resorts, L.L.C., as Transferor, and Golf Trust of
America, L.P., as Transferee.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT'D)

10.2.18* Assignment, Assumption and Modification of Purchase Agreement, dated
June 17, 1998 by and between Scarborough, Sembler Joint Venture, II and
Silverthorn Country Club, collectively as Seller, Granite Golf Group,
Inc., as Assignor, and Golf Trust of America, L.P., as Assignee.

10.2.19* Purchase and Sale Agreement dated May 28, 1998, by and between Polo
Trace Management, Inc., as Seller, and Golf Trust of America, L.P., as
Buyer.

10.2.20 Purchase and Sale Agreement, dated March 12, 1998, between Eagle
Ridge, L.P., as Seller and Troon Eagle Ridge, L.L.C., as Purchaser,
(previously filed as Exhibit 10.1 to the Company's Form 8-K
(Commission File No. 000-22091), filed June 5, 1998, and
incorporated herein by reference).

10.2.21* Lease, dated July 17, 1998, by and between Golf Trust of America,
L.P., as landlord, and Prestwick Golf Club, Inc., as tenant.

10.2.22* Purchase and Sale Agreement dated July 17, 1998, by and between John
J. Raineiri, Sr. and Betty Rainieri, husband and wife., as Seller, and
Golf Trust of America, L.P., as Buyer.

27.1* Financial Data Schedule

* Filed Herewith

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 TRUST OF AMERICA, INC., registrant

By: /s/ W. Bradley Blair, II
------------------------------------
W. Bradley Blair, II
President and Chief Executive Officer

/s/ W. Bradley Blair, II 8/14/98
- -------------------------------------- ------------------------------------
W. Bradley Blair, II Date
President, Chief Executive Officer and
Chairman of the Board of Directors

/s/ Scott D. Peters 8/14/98
- -------------------------------------- ------------------------------------
Scott D. Peters Date
Senior Vice President and
Chief Financial Officer

EXHIBIT INDEX

Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index
immediately precedes the exhibits.

The following exhibits are part of this Quarterly Report on Form 10-Q
(and are numbered in accordance with Item 601 of Regulation S-K). Items
marked with asterisk (*) are filed herewith.

Exhibit No. Description
- ----------- ---------------------------------------------------------------------

3.1B* Articles of Amendment of the Company, as filed with the Maryland
State Department of Assessments and Taxation on June 9, 1998 and
as currently in effect.

10.2.12 Lease, dated May 22, 1998, between Golf Trust of America, L.P., as
landlord, and Eagle Ridge Lease Company, L.L.C., as tenant
(previously filed as Exhibit 10.3 to the Company's Form 8-K
(Commission File No. 000-22091), filed June 5, 1998, and
incorporated herein by reference).

10.2.13 Assignment and Assumption of Purchase and Sale Agreement, dated
May 20, 1998, by and between Eagle Ridge, LLC, as Assignor, and Golf
Trust of America, L.P., as Assignee (previously filed as Exhibit
10.2 to the Company's Form 8-K (Commission File No. 000-22091),
filed June 5, 1998, and incorporated herein by reference).

10.2.14* Lease, dated June 19, 1998, by and between Golf Trust of America,
L.P., as landlord, and Granite Silverthorn, Inc., as tenant.

10.2.15* Lease, dated July 10, 1998, by and between Golf Trust of America,
L.P., as landlord, and Emerald Dunes-Polo Trace, Inc., as tenant.

10.2.16* Lease, dated May 29, 1998, by and between Golf Trust of America, L.P.,
as landlord, and GCR-New Mexico, L.L.C., as tenant.

10.2.17* Contribution and Leaseback Agreement dated May 29, 1998, by and
between Golf Classic Resorts, L.L.C., as Transferor, and Golf Trust of
America, L.P., as Transferee.

10.2.18* Assignment, Assumption and Modification of Purchase Agreement dated
June 17, 1998 by and between Scarborough, Sembler Joint Venture, II and
Silverthorn Country Club, collectively as Seller, Granite Golf Group,
Inc., as Assignor, and Golf Trust of America, L.P., as Assignee.

10.2.19* Purchase and Sale Agreement dated May 28, 1998, by and between Polo
Trace Management, Inc., as Seller, and Golf Trust of America, L.P., as
Buyer.

10.2.21* Lease, dated July 17, 1998, by and between Golf Trust of America,
L.P., as landlord, and Prestwick Golf Club, Inc., as tenant.

10.2.22* Purchase and Sale Agreement dated July 17, 1998, by and between John
J. Raineiri, Sr. and Betty Rainieri, husband and wife, as Seller, and
Golf Trust of America, L.P., as Buyer.

27.1* Financial Data Schedule

* Filed Herewith