ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the financial statements in Part I, Item 1 of this Report and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8. "Financial Statements and Supplementary Data" of the Form 10-K. Any capitalized terms used but not defined in the remaining Items of this Form 10-Q are defined in the "Glossary of Defined Terms" contained in Appendix A. Except as otherwise noted, all references to Notes refer to the Notes to Unaudited Condensed Consolidated Financial Statements included herein.
This Quarterly Report on Form 10-Q contains statements which constitute "forward-looking statements" within the meaning of the PSLRA. These statements appear in a number of places in this report. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "should," "could," "plans," "intends," "projects," "seeks," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy or objectives. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. Actual results could vary materially from the forward-looking statements as a result of various factors. These factors include the effectiveness of management's strategies and decisions, general economic and business conditions, developments in technology, the ability to obtain financing, new or modified statutory, environmental or regulatory requirements, litigation developments, and changing prices and market conditions. This Form 10-Q and the Form 10-K identify other factors which could cause differences between such forward-looking statements and actual results. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. Results of Operations
This section contains statements which constitute "forward-looking statements" within the meaning of the PSLRA. See the second paragraph of this Item 2 for cautionary information with respect to such forward-looking statements.
The Company now operates in two primary industries: real estate investment and development (through various subsidiaries and joint ventures) and racing operations (through SHRP). MGHI owns 100% of MGI and is a wholly owned subsidiary of the Company. Any reference herein to a company includes the subsidiaries of that company unless otherwise noted or the context indicates otherwise.
The Company faces rapidly declining cash balances, limited opportunities to generate operating revenues, and uncertainties as to its future liquidity, resulting from ongoing economic recessions in the United States and Puerto Rico and adverse developments and ongoing depressed conditions in both of the Company's lines of business.
Sales by the Company's real estate subsidiaries have fallen off dramatically since 2005. In 2005 and 2006, the Company's real estate operations realized substantial revenues related to sales at the Company's Fountain Hills (located near Phoenix, Arizona), Mirada (located in California) and Palmas (located in Puerto Rico) real estate developments. Commencing in 2007 and continuing through 2008 and into 2009, there have been significant declines in real estate demand in areas where the Company operates, due primarily to general economic recessions in Puerto Rico and in the United States. Property sales revenues fell from $147.6 million for the year ended December 31, 2005 to $6.0 million for the year ended December 31, 2008, and the Company has had no property sales since June of 2008. There has also been a steady decline in resort revenues at the Company's Palmas development attributable to lower member spending and a high member attrition rate, reflecting the impact of the economic recession in Puerto Rico (see Note 6 for additional discussion regarding the liquidity issues of PCCI, a Palmas subsidiary). Moreover, the Company does not foresee any near term recovery for its real estate business, particularly since the Company's real estate developments are primarily second home or seasonal home communities in Phoenix, Arizona and Puerto Rico and those markets are expected to be slow to recover.
As to the Company's racing operations, the Company has tried to increase revenues through its longstanding pursuit of Texas gaming legislation favorable to the Company. However, such gaming legislation failed to pass in the regular biennial session of the Texas Legislature that ended in May 2009, and was not considered in the subsequently called special session. While the Company intends to continue pursuing favorable Texas gaming legislation, there is no way for the Company to predict if such legislation will ever be enacted.

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