January 21, 2008

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section should be read together with “Management’s Discussion and Analysis of Financial Condition and Plan of Operation” and the Consolidated Financial Statements and related notes thereto in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006, as well as the condensed consolidated financial statements for the nine months ended September 30, 2007 and accompanying notes included elsewhere in this document.

The Company’s current priority is the development of a casino resort on its 404-acre property located on the Bay of St. Louis in Diamondhead, Mississippi. The Company’s management, financial resources and assets will be devoted towards the development of this property. There can be no assurance that the property can be developed or, that if developed, the project will be successful.

The Company has had no operations since it ended its gambling cruise ship operations in 2000. The Company incurred a net loss applicable to common shareholders of $978,852 and $1,448,105 for the nine months ending September 30, 2007 and 2006 respectively. Costs and expenses for the nine months ended September 30, 2007 were $919,879 as compared to $2,603,945 for the same period one year ago. The decrease in costs and expenses in 2007 was primarily attributable to additional compensation in the amount of $450,000 awarded to the Company President in the first quarter of 2006 and stock-based compensation valued at $1,238,348 for options granted in April 2006.

During 2006 and through the first nine months of 2007, the Company was able to sustain its cash position and continue to satisfy its ongoing expenses through the sale of common stock formerly held in treasury and receipt of cash from the exercise of options to purchase common stock. During the first quarter of 2007, the Company received a total of $321,650 from the exercise of options to purchase 241,000 shares of common stock. Management of the Company has examined the historical and planned future spending patterns of the Company and believes that it has sufficient cash on hand to operate for the future twelve month period. The Company continues to consider various asset-backed and securities-backed financing alternatives for the longer term, as well as any potential capital which may be derived from a joint venture or upon development or sale of part of or all of the Company’s Diamondhead, Mississippi property.

The Company is currently in discussions or negotiations with various parties interested in funding and/or developing all or part of the Diamondhead property. As previously disclosed, the Company had entered into a non-binding agreement with a viable entity for the sale of a minimum of five acres of the property located on the far west side of the property. That agreement has expired, however, the Company remains in discussions with the party involved concerning that sale or other options. In July 2007, the Board of Directors rejected, as not being in the best interests of the shareholders, a $100 million offer to purchase the entire 404 acre property.

        convert this post to rtf.