10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

or

☐            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from      to

Commission File No: 0-17529

DIAMONDHEAD CASINO CORPORATION

 (Exact name of registrant as specified in charter)

Delaware	59-2935476
(State of Incorporation)	(I.R.S. EIN)

1013 Princess Street, Alexandria, Virginia  22314

(Address of principal executive offices)

Registrant's telephone number, including area code:  703-683-6800

Indicate by check mark whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑   No 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes þ No 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☑

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the Issuer's classes of common equity as of the latest practicable date: Number of shares outstanding as of November 4, 2016: 36,297,576.

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

TABLE OF CONTENTS

PART 1:	FINANCIAL INFORMATION	Page
ITEM 1:	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015	1
	Condensed Consolidated Statements of Loss for the Three Months Ended September 30, 2016 and September 30, 2015	2
	Condensed Consolidated Statements of Loss for the Nine Months Ended September 30, 2016 and September 30, 2015	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and September 30, 2015	4
	Notes to Condensed Consolidated Financial Statements	5
ITEM 2:	Management's Discussion and Analysis of Financial Condition and Financial Results	15
ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	19
ITEM 4:	Controls and Procedures	19
PART II:	OTHER INFORMATION
ITEM 1	Legal Proceedings	20
ITEM 1A	Risk Factors	22
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	22
ITEM 3	Default Upon Senior Securities	22
ITEM 4	Mine Safety Disclosures	22
ITEM 5	Other Information	22
ITEM 6	Exhibits	22
	Signatures	24

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			December 31,
	2016			2015
ASSETS
Current assets
Cash	$	47,100		$	15,655
Other current assets		1,064			498
Total current assets		48,164			16,153
Land held for development (Note 3)		5,476,097			5,476,097
Deferred financing costs (net of amortization of $84,415 at September 30, 2016 and $56,218 at December 31, 2015)		116,685			144,882
Other assets		80			80
	$	5,641,026		$	5,637,212
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Convertible notes due to related parties (Note 5)	$	75,000		$	75,000
Convertible notes and line of credit due others (Note 5)		1,887,500			1,887,500
Accounts payable and accrued expenses due related parties (Note 4)		2,618,727			2,204,545
Accounts payable and accrued expenses – other  (Note 4)		1,902,113			1,867,867
Total current liabilities		6,483,340			6,034,912
Notes payable due related parties (Note 6)		115,000			-
Notes payable due others  (Note 6)		22,500			-
Debenture payable (net of unamortized discount of $46,044 at September 30, 2016 and $47,703  at December 31, 2015) (Note 6)		3,956			2,297
Convertible debentures payable (net of unamortized discount of  $1,685,011 at September 30, 2016 and $1,733,157 at December 31, 2015) (Note 7)		114,989			66,843
Derivative liability (Note 7)		1,922,593			1,704,570
Total liabilities		8,662,378			7,808,622
Commitments and contingencies (Notes 2, 3,5,6,7 and 8)
Stockholders' deficiency (Note 8)
Preferred stock, $.01 par value; shares authorized 5,000,000, outstanding 2,086,000 at September 30, 2016 and December 31, 2015 (aggregate liquidation preference of $2,519,080 at September 30, 2016 and December 31,2015).		20,860			20,860
Common stock, $.001 par value; shares authorized 50,000,000, issued: 39,052,472 at September 30, 2016 and December 31, 2015, outstanding: 36,297,576 at September 30, 2016 and December 31, 2015.		39,052			39,052
Additional paid-in capital		35,757,201			35,757,201
Unearned ESOP shares		(3,439,476	)		(3,439,476	)
Accumulated deficit		(35,258,251	)		(34,408,309	)
Treasury stock, at cost, 448,071 shares at September 30, 2016 and December 31, 2015		(140,738	)		(140,738	)
Total stockholders' deficiency		(3,021,352	)		(2,171,410	)
	$	5,641,026		$	5,637,212

See the accompanying notes to these unaudited condensed consolidated financial statements

1

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS OF LOSS

FOR THE THREE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

	2016			2015
COSTS AND EXPENSES
Administrative and general	$	168,764		$	197,945
Stock-based compensation		-			295,222
Amortization		9,503			9,503
Other		19,989			15,532
		198,256			518,202
OTHER EXPENSES
Amortization of debt discount		19,805			9,595
Interest expense		105,142			95,478
Change in fair value of derivative liability		27,923			87,461
		152,870			192,534
NET LOSS		(351,126	)		(710,736	)
PREFERRED STOCK DIVIDENDS		(25,400	)		(25,400	)
NET  LOSS APPLICABLE TO COMMON STOCKHOLDERS	$	(376,526	)	$	(736,136	)
Net loss per common share, basic	$	(.001	)	$	(.020	)
Weighted average number of common shares, basic		36,297,576			36,297,576

See the accompanying notes to these unaudited condensed consolidated financial statements.

2

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS OF LOSS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

	2016			2015
COSTS AND EXPENSES
Administrative and general	$	509,550		$	822,502
Stock-based compensation		-			295,222
Amortization		28,198			28,198
Other		53,094			52,691
		590,842			1,198,613
OTHER (EXPENSE) INCOME
Amortization of debt discount		(49,805	)		(35,375	)
Net proceeds form litigation settlement		150,000			-
Reversal of previously accrued DOL penalties		240,050			-
Interest expense		(305,122	)		(264,563	)
Change in fair value of derivative liability		(218,023	)		788,511
		(182,900	)		488,573
NET LOSS		(773,742	)		(710,040	)
PREFERRED STOCK DIVIDENDS		(76,200	)		(76,200	)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS	$	(849,942	)	$	(786,240	)
Net  loss per common share, basic and fully diluted	$	(.023	)	$	(.020	)
Weighted average number of common shares, basic and fully diluted		36,297,576			36,297,576

See the accompanying notes to these unaudited condensed consolidated financial statements.

3

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

	2016			2015
OPERATING ACTIVITIES
Net loss	$	(773,742	)	$	(710,040	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization		28,198			28,198
Change in fair value of derivative liability		218,023			(788,511	)
Amortization of debt discount		49,805			35,375
Stock-based compensation		-			295,222
Change in other assets and liabilities:
Other current assets		(566	)		32,223
Accounts payable and accrued expenses		372,227			366,954
Net cash used in operating activities		(106,055	)		(740,579	)
FINANCING ACTIVITIES
Proceeds from notes payable issued to related parties		115,000			-
Proceeds from notes payable issued to others		22,500			-
Proceeds from short term note		2,946			-
Payment of  short term note		(2,946	)		(14,905	)
Proceeds from non-interest bearing advances from related parties		15,000			-
Payment of non-interest bearing advances from related parties		(15,000	)		-
Netcash provided by (used in)  financing activities		137,500			(14,905	)
Net increase (decrease)  in cash		31,445			(755,484	)
Cash beginning of period		15,655			843,083
Cash end of period	$	47,100		$	87,599
Cash paid for interest	$	715		$	10,835
Non-Cash Financing activities:
Warrants included in deferred financing costs	$	25,100		$	25,100
Unpaid preferred stock dividends included in accounts payable and accrued expenses	$	533,400		$	431,800

See the accompanying notes to these unaudited condensed consolidated financial statements.

4

DIAMONDHEAD CASINO CORPORATION

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Organization and Business

Diamondhead Casino Corporation and Subsidiaries (the "Company") own a total of approximately 404.5 acres of unimproved land in Diamondhead, Mississippi on which the Company plans, unilaterally, or in conjunction with one or more partners, to construct a casino resort and hotel and associated amenities.

Note 2. Liquidity and Going Concern

These unaudited condensed consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has no operations and generates no operating revenues. During the nine months ended September 30, 2016 and 2015 the Company incurred net losses applicable to common shareholders, exclusive of the recording of change in the fair value of derivatives, of $631,919 and $1,574,751, respectively.

The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi Property.The development of the Diamondhead Property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort.

In the past, in order to raise capital to continue to pay on-going costs and expenses, the Company has borrowed funds, through Private Placements of convertible instruments and other means, which are more fully described in Notes 5, 6 and 7 to these unaudited condensed consolidated financial statements. Some of these instruments are past due for payment of both principal and interest. In addition, at September 30, 2016, the Company had current liabilities totaling $6,483,340 and only $47,100 cash on hand.

The above conditions raise substantial doubt as to the Company's ability to continue as a going concern.

Note 3. Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission ("SEC").  Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the nine months ended September 30, 2016 are not necessarily indicative of the results that we will have for any subsequent period.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2015, attached as Exhibit 99.1 to our annual report on Form 10-K.

5

Principles of Consolidation

The consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the 2015 financial statements to conform to the unaudited condensed consolidated 2016 financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported.

Land Held for Development

Land held for development is carried at cost. Costs directly related to site development, such as licenses, permitting, engineering, and other costs, are capitalized.

Land development costs, which have been capitalized, consist of the following at September 30, 2016 and December 31, 2015:

Land under development	$	4,934,323
Licenses		77,000
Engineering and costs associated with permitting		464,774
	$	5,476,097

Fair Value Measurements

The Company follows the provisions of ASC Topic 820 "Fair Value Measurements" for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable input that reflectsmanagement's own assumptions.

6

The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at September 30, 2016 and December 31, 2015:

	September 30,		December 31,
	2016		2015
Beginning balance	$	1,704,570	$	3,754,233
Total decrease in unrealized appreciation
(depreciation) included in net assets		218,023		(2,049,663	)
Ending balance	$	1,922,593	$	1,704,570

Sensitivity Analysis to Changes in Level 3 Assumptions

Significant inputs include the dates when required conditions are expected to be met under the conversion terms of the debentures, the underlying market cap due to borrowings and losses and discount for lack of marketability while the stock was delisted and reversed when the Company's stock became publicly listed again on or about October 26, 2015. In addition, use of different ranges of bond discount rates and changes in historical volatility rates would also result in a higher or lower fair value.

Current assets and current liabilities are financial instruments and management believes that their carrying amounts are reasonable estimates of their fair values due to their short term nature.

The convertible debentures and derivative liability approximate fair value based on Level 3 inputs, as further discussed in Note 7.

Long-Lived Assets

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long‑lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at September 30, 2016.

Net Loss per Common Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet, and may never be, met.

The table below summarizes the components of potential dilutive securities at September 30, 2016 and 2015.

	September 30,		September 30,
Description	2016		2015
Convertible Preferred Stock		260,000		260,000
Options to Purchase Common Shares		3,440,000		3,440,000
Private Placement Warrants		1,061,500		2,086,500
Convertible Promissory Notes		1,925,000		1,925,000
Total		6,686,500		7,711,500

7

Stock Based Compensation

The Company follows the provisions of ASC Topic 718 "Compensation - Stock Compensation" which requires the measurement and recognition of compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values. In the third quarter of 2015, the Board of Directors voted to extend the expiration date of a previously-awarded option to the President to purchase 750,000 shares of common stock at $0.30 per share from October 27, 2015 to March 13, 2018 and voted to extend the expiration date of a previously-awarded option to the President to purchase 75,000 shares of common stock at $0.75 per share from October 27, 2015 to March 13, 2018. In addition, in the third quarter of 2015, the Board of Directors voted to extend the expiration date of a previously-awarded option granted to the current Chairman to purchase 150,000 shares of common stock at $1.25 per share, from October 27, 2015 to March 13, 2018 and to extend the expiration date of a previously-awarded option to purchase common stock granted to a Director of the Company to purchase 75,000 shares of common stock at $0.75, from October 27, 2015 to March 13, 2018. The Company also extended the expiration date on options issued to former employees of the Company and an Honorary Director of the Company to purchase a combined total of 90,000 shares of common stock at $0.75 per share, from October 27, 2015 to March 13, 2018.

In determining the fair value of each option modified, the Black-Scholes option-pricing model, consistent with the provisions of ASC Topic 718, was used. The valuations were determined using the weighted-average assumptions of 0% dividend yield, expected volatility of 209% and risk-free interest rates ranging from 0.027 to 0.97%. This resulted in a charge to the statement of loss in the amount of $295,222, increasing the loss per share of common stock $0.008 for the nine months ending September 30, 2015.

Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company's options.

Note 4. Accounts Payable and Accrued Expenses

The table below outlines the elements included in accounts payable and accrued expenses at September 30, 2016 and December 31, 2015:

	September 30,		December 31,
	2016		2015
Description
Related Parties:
Accrued payroll due officers		1,694,711		1,469,711
Accrued interest due officers and directors		525,740		414,513
Accrued director fees		288,750		221,250
Base rents due to the President		63,224		49,622
Associated rental costs		28,994		32,141
Other		17,308		17,308
Total Related Parties		2,618,727		2,204,545
Non-Related Parties:
Accrued interest		1,156,022		962,842
Accrued dividends		533,400		457,200
Accrued fines and penalties		13,231		232,849
Other accounts payable and accrued expenses		199,460		214,976
Total Non-related Parties		1,902,113		1,867,867
Total accounts payable and accrued expenses		4,520,840		4,072,412

8

Note 5.  Convertible Notes and Line of Credit

Line of Credit

On October 23, 2008, the Company entered into an agreement with an unrelated third party for an unsecured Line of Credit up to a maximum of $1,000,000. The Line of Credit provided for funds to be drawn as needed and carries an interest rate on amounts borrowed of 9% per annum, originally payable quarterly, based on the pro rata number of days outstanding. All funds originally advanced under the facility were due and payable by November 1, 2012. As an inducement to provide the facility, the lender was awarded an immediate option to purchase 50,000 shares of common stock of the Company at $1.75 per share. In addition, the lender received an option to purchase a maximum of 250,000 additional shares of common stock of the Company at $1.75 per share. The options expire following repayment in full by the Company of the amount borrowed. At September 30, 2016, the principal and accrued interest due on the obligation, which totals $1,650,984, remains unpaid.

Convertible Notes and Warrants

Pursuant to a Private Placement Memorandum dated March 1, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000 with interest at 12% per annum, together with a five year Warrant to purchase 50,000 shares of the Company's common stock at an exercise price of $1.00 per share. The Promissory Note is convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

Pursuant to an additional Private Placement Memorandum dated October 25, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000, together with a five year Warrant to purchase 50,000 shares of the Company's common stock at an exercise price of $1.00 per share. The Promissory Notes bear interest at 9% per annum and are convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

The Convertible Notes issued pursuant to the Private Placements discussed above total $962,500 and became due and payable beginning in March 2012 and extending at various dates through June 2013. As of the date of the filing of this report, all of the aforementioned debt obligations remain unpaid and in default under the repayment terms of the notes.

The table below summarizes the Company's debt arising from the above-described sources as of September 30, 2016 and December 31, 2015:

	Gross Amount		Amount Due		Amount Due
Loan Facility	Owed		Related Parties		Others
Line of Credit	$	1,000,000	$	-	$	1,000,000
Private Placements:
March 1, 2010		475,000		75,000		400,000
October 25, 2010		487,500		-		487,500
Total Private Placements		962,500		75,000		887,500
Total	$	1,962,500	$	75,000	$	1,887,500

9

Note 6. Notes Payable

In the first four months of 2016, the Company received cash advances totaling $47,500 from seven lenders which included $25,000 from three current Directors of the Company:  Proceeds from the cash advances were earmarked for the payment of accounting and auditing fees and other expenses required to file the Company's Form 10-Q.  On August 25, 2016, the Company issued a Note to the foregoing lenders which bears interest at 8% per annum, with a full year of interest accruing in any year in which the advance remains unpaid, and matures four years from the date of issuance.  The Company will file a lien on its Mississippi property in favor of the note holders to secure both principle and interest owed.

In the third quarter of 2016, the Chairman of the Board of Directors of the Company loaned the Company an additional $90,000. On August 25, 2016, the Company issued a Note to the Chairman of the Board. The Note bears interest at 14% per annum effective August 1, 2016 and matures four years from the date of issuance. The proceeds of the loan were used for the payment of Mississippi property taxes, and auditing, accounting and other corporate expenses. The Company will file a lien on its Mississippi property in favor of the Chairman to secure both principle and interest owed.

The principal due under the foregoing loans totals $137,500. A lien in the amount of $250,000 will be placed on the Company's Mississippi property to secure the principal and interest due on the debt. The lien to be placed on the Mississippi property will be second to the existing first lien on the Mississippi property in the amount of $3.85 million. The first lien is held by holders of previously-issued convertible and non-convertible Debentures ($1.85 million) and certain executives and directors ($2 million), as outlined in Note 9.

The table below summarizes the Company's long term notes payable as of September 30, 2016:

			Sept. 30, 2016
	Gross Amount		Amount Due		Amount Due
Loan Facility	Owed		Related Parties		Others
4 Year  8% secured note	$	47,500	$	25,000	$	22,500
4 Year  14% secured note		90,000		90,000		-
Total	$	137,500	$	115,000	$	22,500

Note 7. Convertible Debentures and Derivative Liability

Pursuant to a Private Placement Memorandum dated February 14, 2014 (the "Private Placement"), the Company offered up to a maximum of $3,000,000 of Collateralized Convertible Senior Debentures in three tranches of $1,000,000 each, to accredited or institutional investors. The Offering was conducted contingent on the deposit into Escrow of the purchase price for all of the Debentures offered in the principal amount of $3,000,000. The Debentures, once issued, bear interest at 4% per annum after 180 days, mature six years from the date of issuance, and are secured by a lien on the Company's Mississippi property. On March 31, 2014, the First Closing occurred when subscriptions in the amount of $3,000,000 were received in Escrow and accepted by the Company. The Escrow Agent released $1,000,000 to the Company and the Company issued First Tranche Debentures in the aggregate principle amount of $1,000,000.

On December 31, 2014, investors who had purchased $950,000 of First Tranche Debentures consented to  Amendment I to the Private Placement, which amended certain terms and conditions, including the conversion terms of the First Tranche Debentures. The remaining First Tranche Debenture in the amount of $50,000 remains as originally issued with no conversion rights. Thus, the First Tranche Debentures can be converted into a total of 3,166,666 shares of common stock.

10

On December 31, 2014, the Second Closing occurred when investors representing $850,000 of Second Tranche Debentures consented to Amendment II to the Private Placement, which amended certain terms and conditions, including those relating to issuance and conversion of the Second and Third Tranche Debentures, as well as the period of time within which to perform the Third Tranche Closing Obligations, as amended.  The Escrow Agent released $850,000 to the Company and the Company issued Second Tranche Debentures in the aggregate principle amount of $850,000. Thus, the Second Tranche Debentures can be converted into a total of 1,888,889 shares of common stock. The Escrow Agent refunded $300,000 to those investors who did not consent to Amendment II.

The Company did not meet the closing obligations for the Third Tranche Debentures as of June 30, 2015, as was required, pursuant to the terms of the Private Placement, as amended. Therefore, the remaining $850,000 being held in escrow for the purchase of the Third Tranche Debentures was returned to the investors in July 2015.

For purposes of determining the proper accounting treatment and valuation of the instruments, the Company applied the provisions set forth in ASC Topic 820, "Fair Value in Financial Instruments" and ASC Topic 815, "Accounting for Derivative Instruments and Hedging Activities."  Since the Notes issued have derivative features, the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the debt host and treated as a liability. In addition, the valuation is required to be conducted for each reporting period the instrument is in existence.

The Company's stock was not trading from approximately September 4, 2014, when its stock registration was revoked, through approximately October 26, 2015, when its' stock began to trade again. The Company engaged an independent valuation expert to determine the fair value of its shares of common stock for each quarter beginning with the quarter ended September 30, 2014. For periods from September 30, 2014 through September 30, 2015, the fair value of the common stock was estimated by adjusting the most recent market price by changes in the underlying market cap due to changes in the value of net assets and applying a discount for lack of marketability inasmuch as the stock was not trading. After the stock began to trade again on or about October 26, 2015, the closing price of the stock was used in the valuation beginning with the quarter ending December 31, 2015 through this most recent valuation at September 30, 2016. Monte Carlo models were developed to value the derivative liability within the Notes using a historical volatility rate, based on comparable companies, of 168% at September 30, 2016 and 132% at December 31, 2015, and using discount bond rates based on the expected remaining term of each instrument ranging from 5.62% to 6.39% at September 30, 2016 and 6.45% to 7.07% at December 31, 2015. In addition, the valuation assumed that conversion requirements for Tranche 1 Debentures, exclusive of price, were met as of September 30, 2016, while conversion requirements for Tranche 2 Debentures were expected to be met by December 31, 2016 for the September 30, 2016 calculation.

The estimatedfair value for the derivative liability relating to each Debenture at the balance sheet dates is as follows:

	September 30, 2016		December 31, 2015
Tranche 1	$	944,344	$	893,731
Tranche 2		978,249		810,839
Derivative Liability	$	1,923,593	$	1,704,570

At the initial valuation date of each Tranche, a portion of the derivative liability was allocated to the Convertible Debentures as debt discount, with the remainder being recorded as other income/expense. At March 31, 2014, the initial valuation of the First Tranche Debentures, $1,000,000 was allocated to debt discount and, at December 31, 2014, the initial valuation of the Second Tranche Debentures, $850,000 was allocated to debt discount. The debt discount is subsequently amortized to expense using an effective interest methodology.Amortization of debt discount amounted to $48,146 and $34,574 for Convertible Debentures and $1,659 and $801 for the non-convertible Debenture for the nine months ended September 30, 2016 and 2015, respectively.

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The interest payment on these Debentures for the calendar year 2015 in the approximate amount of $57,000 was due March 1, 2016. The Company failed to make the payment. This failure, if continuing, could represent an event of default under the terms of the Debenture.

On October 25, 2016,certain Debenture holdersfileda Complaint against the Company in the United States District Court for the District of Delawarefor monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million,plus interest from January 1, 2015,together with costs and fees.  The Company was served with the Complaint on October 31, 2016. The Company's Answer and responsive pleadings are due November 21, 2016.

Note 8.  Related Party Transactions

As of September 30, 2016, the President of the Company is owed deferred salary in the amount of $1,491,996. As of September 30, 2016, a Vice President and the current Chairman of the Board of Directors of the Company is owed deferred salary in the amount of $121,140. The Board of directors agreed to pay interest at 9% per annum on the foregoing amounts owed. Interest expense under this agreement amounted to $100,390 and $82,797 for the nine months ended September 30, 2016 and 2015, respectively. Total interest accrued under this agreement totaled $483,366 and $382,976 as of September 30, 2016 and December 31, 2015, respectively.

Effective September 1, 2011, the Company entered into a month-to-month lease with the President and then-Chairman of the Board of Directors of the Company, for office space in a furnished and fully equipped townhouse office building owned by the President in Alexandria, Virginia. The lease calls for monthly base rent in the amount of $4,534 and payment of associated costs of insurance, real estate taxes, utilities and other expenses. Rent expense associated with this lease amounted to base rent in the amount of $40,806 and associated rental costs of $9,303 for a total of $50,109 for the nine months ended September 30, 2016 and base rent in the amount of $40,806 and associated rental costs of $9,973 for a total of $50,779 for the nine months ended September 30, 2015. In the first nine months of 2016, the Company paid only $27,204 of the base rent due for that period. In the first nine months of 2015, the Company paid $36,272 for base rent. During the first nine months of 2016, the Company reimbursed the President for associated rental costs totaling $7,744 which had been paid personally by the President in prior periods. At September 30, 2016 and 2015, amounts owing for base rent and associated rental costs totaled $92,218 and $74,654, respectfully.

Directors of the Company are entitled to a director's fee of $15,000 per year for their services. The Company has been unable to pay directors' fees to date. A total of $288,750 and $221,250 was due and owing to the Company's current and former directors as of September 30, 2016 and December 31, 2015, respectively. Directors have previously been compensated and may, in the future, be compensated for their services with cash, common stock, or options to purchase common stock of the Company.

In June of 2016, the Company paid a Director $15,000 in connection with his efforts associated with certain litigation which resulted in the Company collecting net settlement proceeds of $150,000 in the second quarter of 2016.

In the second quarter of 2016, the Chairman of the Board of Directors and the President advanced funds to the Company totaling $15,000 with no interest, contingent upon an assignment of $15,000 from the above-referenced settlement proceeds.   These advances were repaid to them in the second quarter of 2016.

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Note 9.  Commitments and Contingencies

The Company's obligations under the Collateralized Convertible Senior Debentures are secured by a lien on the Company's Mississippi property (the "Investors Lien").  Liens were placed on the Property in favor of the Investors for $1,850,000. The Investors Lien is in pari passu with a lien placed on the Property in favor of the President of the Company, the Vice President of the Company, and certain directors of the Company, for past due wages, compensation, and expenses owed to them in the maximum aggregate amount of $2,000,000 (the "Executives Lien"). Ms. Vitale will serve as Lien Agent for the Executives Lien.

Litigation

College Health & Investment, L.P. v. Diamondhead Casino Corporation (Delaware Superior Court)(C.A. No. N15C-01-119-WCC)

On January 15, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed suit for breach of a Promissory Note issued March 25, 2010, in the principle amount of $150,000, with interest payable at 12% per annum, with a maturity date of March 25, 2012. Plaintiff seeks payment of principle of $150,000, interest due through December 31, 2014 in the amount of $45,000, and interest due of 12% per annum from December 31, 2014 until entry of judgment. The Notes, as well as the accrued interest thereon, are shown as current liabilities on the Company's balance sheet at December 31, 2015. On January 22, 2015, the defendant forwarded a Notice of Conversion to plaintiff, exercising the Borrower's right to convert the principal and any interest due on the Note into common stock. On February 11, 2015, the Company moved to dismiss the complaint as moot. The plaintiff filed an opposition to the motion to dismiss alleging that the Note was convertible only prior to its maturity date. On July 2, 2015, the Court agreed with the Plaintiff and denied the Company's motion to dismiss. On July 16, 2015, the Company filed an Answer and Grounds of Defense.  On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

College Health & Investment, L.P. v. Diamondhead Casino Corporation (In the Court of Chancery of the State of Delaware (C.A. No. 10663-CB)

On February 13, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed a Verified Complaint Pursuant to 8 Del.C.§211(c), with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn, seeking an order compelling the Company to hold an annual meeting. The Company agreed to entry of an Order setting  a new date for an annual meeting of June 8, 2015, a Record Date of April 24, 2015, and to clarify that there is no advance notice requirement for the submission of stockholder proposals at the Company's annual stockholders' meetings. The plaintiff sought costs and expenses, including attorneys' fees. On or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 for both this case and the following case.  The Company filed an opposition to this motion. On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

College Health & Investment, L.P. v. Edson R. Arneault, Deborah A. Vitale, Gregory A. Harrison, Martin Blount and Benjamin Harrell(In the Court of Chancery of the State of Delaware)(C.A. No. 10793-CB)

On March 14, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed a Verified Complaint, with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn. In Count I, the plaintiff alleges that the defendants breached their fiduciary duty of disclosure. In Count II, the plaintiff alleges that defendants breached their fiduciary duties of loyalty and care. The plaintiff sought injunctive relief, but no monetary damages other than attorney's fees. The defendants believe that plaintiff's claims are without merit and intend to vigorously defend this lawsuit.  In addition, on or about July 30, 2015, the defendant directors filed Defendants' Answer and Verified Counterclaims for defamation, breach of fiduciary duty and aiding and abetting a breach of fiduciary duty. On August 19, 2015, the plaintiff filed a Motion to Dismiss the Counterclaims. As noted above, on or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 in this case and the above-referenced case.  On or about August 26, 2015, the defendants filed an Opposition to Plaintiff's Motion for an Award of Fees and Reimbursement of Expenses.  On September 25, 2015, the parties entered into a Stipulation and [Proposed] Order Staying Litigation pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

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In re Diamondhead Casino Corporation (United States Bankruptcy Court)(District of Delaware)(Case No. 15-11647-LSS)

On August 6, 2015, an Involuntary Petition was filed in the United States Bankruptcy Court by three promissory note holders under title 11, United States Code, requesting an order for relief under chapter 7 of the Bankruptcy Code. The three creditors listed combined claims of $150,000 in principal, plus interest due on certain promissory notes. On August 28, 2015, the Company filed a Motion to Dismiss the Involuntary Petition or, in the Alternative, to Convert the Case to Chapter 11 (the "Motion to Dismiss"). The Company maintained that the Petition was filed in bad faith by supporters of the dissident slate which lost the proxy contest that was decided by the stockholders on June 8, 2015 and that it was filed in retaliation for the Company's refusal, following the stockholders' vote, to place several of the losing dissident's nominees on the Board of Directors. On September 11, 15 and 17, 2015, three additional promissory note holders filed Joinders to the Involuntary Petition listing additional combined claims of $237,500 plus interest. The Company does not recognize one of the joining petitioners as a bona fide creditor of the Company.  On September 17, 2015, the six Petitioners, who were represented by the same attorneys, filed an Objection to the Company's Motion to Dismiss. On September 18, 2015, the six Petitioners filed an Emergency Motion for Entry of an Order Directing the Appointment of (I) an Interim Chapter 7 Trustee, or (II) alternatively, a Chapter 11 Trustee Should the Involuntary Case be converted (the "Emergency Motion").  The Court held an evidentiary hearing on the Emergency Motion in October 2015. On November 13, 2015, the Court denied the Petitioners' Emergency Motion as it related to the request for an interim Chapter 7 trustee. On January 15, 2016, the Court held an evidentiary hearing on the Company's Motion to Dismiss the Involuntary Petitions. The parties filed briefs in support of and in opposition to the motion.

On June 7, 2016, the Court entered an Order granting the Company's Motion to Dismiss the Involuntary Petitions. In its accompanying Opinion, the Court found, in part, that based on the totality of the circumstances, the Creditors' primary concern in filing the involuntary petition was to effect a change in management to benefit their investments as stockholders, which was not a proper purpose for filing an involuntary bankruptcy petition. On June 30, 2016, the Company filed a Motion for an Award of Fees and Expenses and Punitive Damages. On August 11, 2016, the Petitioning Creditors filed an Opposition to the Company's Motion for an Award of Fees and Expenses and Punitive Damages. On August 31, 2016, the Court entered an Order awarding judgment to the Company for attorneys' fees and expenses against the Petitioners, jointly and severally, in the amount of $54,886. On September 1, 2016, the Court filed an Amended Order in which it further stated that the amounts awarded were not subject to any setoff against amounts owed by the Company to the Petitioners. The Petitioners have failed, to date, to pay the Company any amounts due pursuant to this Amended Order.

Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-UNA)

On October 25, 2016,the above-named Debenture holdersfileda Complaint against the Company in the United States District Court for the District of Delawarefor monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million,plus interest from January 1, 2015,together with costs and fees.  The Company was served with the Complaint on October 31, 2016. The Company's Answer and responsive pleadings are due November 21, 2016.

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Litigation Settlement

In the second quarter of 2016, the Company and its wholly-owned subsidiary, Mississippi Gaming Corporation, entered into confidential settlement agreements with an unrelated third party for aggregate gross proceeds in the total amount of $225,000. The attorneys' fees amounted to one-third of the gross amount of the recovery, or $75,000, and the Company recorded net income in the amount of $150,000. The attorneys waived all expenses incurred in connection with the litigation. In June of 2016, the Company paid a Director, who was not an officer of the Company, $15,000 from these net proceeds for his efforts associated with the litigation.

Employee Stock Ownership Plan

The Company failed to file information returns required to be filed in connection with its Employee Stock Ownership Plan ("ESOP") for the 2015 calendar year in a timely fashion. The filings were due to be filed with the Department of Labor by October 15, 2016. The Company did not have sufficient funds to pay professionals to audit its ESOP and/or prepare and file required documents and forms when due. Although these required filings normally do not result in any tax due to an agency of the government, the Company could be subject to penalties for failure to file these forms when due. The Company intends to bring its ESOP-required filings current and when current, will attempt to enroll in a voluntary compliance program with the Department of Labor and the Internal Revenue Service with respect to any penalties or fines incurred. However, there can be no assurance the Company will be able to enroll in any such program or obtain a reduction of the fines and penalties that may be due.

Reversal of Previously Accrued Department of Labor Penalties

On June 2, 2016, the Company electronically filed annual reports with the Department of Labor ("DOL") required to be filed by its Employee Stock Ownership Plan ("ESOP") for the years ending December 31, 2010, 2011, 2012, 2013 and 2014. Each of the annual reports filed was delinquent. The Company filed its Annual Reports pursuant to the Delinquent Filer Voluntary Compliance Program ("DFVCP"). The Program allows Plans that have not previously been notified by the DOL of a failure to file a timely annual report, to voluntarily file their delinquent reports and pay a significantly reduced penalty than would have otherwise been assessed had the Company been unable to take advantage of the Program. The Company electronically paid penalties prescribed under the Program with its filings in the amount of $4,000.

In prior reporting periods, the Company accrued significant amounts in anticipation of potential penalties that could have been assessed by the Department of Labor for failure to file the ESOP's annual reports. The Company believes it has now complied with the DFVCP by filing its delinquent reports and paying the prescribed penalty due under the Program. Therefore, the Company reversed the existing accrual of anticipated penalties and recorded income in the amount of $240,050 during the nine months ended September 30, 2016.

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

Forward Looking Statements

This section should be read together with the consolidated financial statements and related notes thereto, for the year ended December 31, 2015, attached as Exhibit 99.1 to our annual report filed on Form 10-K.

This Quarterly Report on Form 10-Q contains forward-looking statements and involves risks and uncertainties that could materially affect the Company's future plans, business strategy, expected results of operations, liquidity, cash flows, and business prospects. These statements include, among other things, statements regarding our ability to implement our business plan and business strategy, our ability to obtain financing to sustain the Company, our ability to finance our future development and future operations, our ability to attract key personnel, and our ability to operate profitably in the future. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Any statements contained in this document that are not statements of historical fact may be deemed to be forward-looking statements. You can identify forward-looking statements as those that are not historical in nature, particularly those that use terminology such as "may", "will", "should", "expects", "anticipates", "contemplates", "estimates", "believes", "assumes", "intends", "plans", "projects", "predicts", "potential" or "continue" or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider risks and uncertainties relating to various factors, including, but not limited to, financing, licensing, construction and development, competition, legal actions, federal, state, county and/or city government actions, general financing conditions, and general economic conditions.

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The Company's actual results may differ significantly from results projected in the forward-looking statements. We undertake no obligation to revise or update forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements

Throughout this report references to "we", "our", "us", "Diamondhead Casino Corporation", the "Company", and similar terms refer to Diamondhead Casino Corporation and its wholly-owned subsidiaries, unless the context indicates otherwise.

Overview

The Company's current priority is the development of a casino resort on its Property located 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, that the project will be successful.

Liquidity

The Company has no operations, generates no revenues and has been dependent on various short term financings to raise sufficient cash to satisfy the expenses it incurs. The Company is concentrating its efforts on the development of its Diamondhead, Mississippi Property. The development of the Diamondhead property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort. In the past, the Company has been able to sustain itself through various short term borrowing, however, at September 30, 2016, the Company's cash on hand amounted to $47,100, while current liabilities totaled $6,483,340. Therefore, in order to sustain itself, it is imperative that the Company secure a source of funds to provide further working capital. There can be no assurance the Company will be able to obtain such funding.

In addition, a line of credit in the amount of $1,000,000 obtained in October 2008, was payable in November 2012. Also, convertible notes issued pursuant to two Private Placements offered in 2010, totaling $962,500 at September 30, 2016, had become payable beginning in March 2012 and extending at various dates through June 2013. As of the date of the filing of this report, none of the aforementioned debt obligations have been satisfied and the Company is in default of the repayment terms of the notes. In addition, payment of accrued interest due on Tranche 1 and Tranche 2 Debentures issued in 2014, in the approximate amount of $57,000, was due and payable effective March 1, 2016, but remains unpaid.

The above conditions raise substantial doubt about the Company's ability to continue as a going concern.

Financial Results and Analysis

During the nine months ended September 30, 2016 and 2015, the Company incurred net losses applicable to common stockholders, exclusive of the recording of change in the fair value of derivatives, of $631,919 and $1,574,751, respectively. However, the Company recorded an increase in the fair value of the derivative liability in the amount of $218,023 which increased the net loss applicable to common stockholders to $849,942 for the nine months ended September 30, 2016. Conversely, the Company recorded a decrease in the fair value of the derivative liability in the amount of $788,511, which decreased the net loss applicable to common stockholders to $786,240 for the nine months ended September 30, 2015. Administrative and general expenses incurred totaled $509,550 and $822,502 for the nine months ending September 30, 2016 and 2015, respectively. The table below depicts the major categories comprising these expenses:

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	Sept. 30,		Sept. 30,
DESCRIPTION	2016		2015
Payroll and related taxes	$	225,000	$	375,432
Director fees		67,500		63,750
Professional services		83,200		106,289
Annual meeting expenses		-		61,711
Stock transfer and escrow fees		3,761		4,607
Rents and insurances		52,965		67,038
State franchise taxes and fees		5,031		5,644
Fines and penalties		24,432		65,121
Edgar reporting fees		5,419		15,174
Land valuation fee		-		12,500
Settlement fee paid to director		15,000		-
All  other expenses		27,242		45,236
Total Administrative and General Expenses		509,550	$	822,502

The decrease in payroll and related taxes in the amount of $150,432 for the nine months ended September 30, 2016 versus 2015 was the result of the resignation of the former Chairman, who served as President of Casino World, Inc., effective June 8, 2015. The President of the Company has received no payment for services rendered in 2016. Payroll to date in 2016 has been accrued and is unpaid.

Director fees increased $3,750 due to the addition of Directors.

Administrative and general expenses for the nine months ended September 30, 2015 were impacted by expenses associated with an annual meeting in the amount of $61,711 and a land valuation fee in the amount of $12,500. No comparable expenses were incurred in those categories during the first nine months of 2016. In addition, in the first nine months of 2015, the Company incurred significant professional fees in connection with various lawsuits, the filing of a registration statement, and an annual meeting of stockholders. In 2016, the Company incurred significantly lower costs for professional fees.

Other Income and Expense

The net loss, exclusive of recording the change in the derivative liability, incurred for the nine months ended September 30, 2016, was significantly lower than the first nine months of the prior year due to the two following, nonrecurring items, which occurred during that period of time.

The Company settled certain litigation in the second quarter of 2016 which resulted in net proceeds to the Company of $150,000.  In addition, the Company filed previously delinquent filings associated with its Employee Stock Ownership Plan for the years ended December 31, 2010 through 2014 with the Department of Labor ("DOL"). In the absence of the filings, the Company could have been subjected to extensive penalties associated with those delinquencies and had accrued a provision for that possibility in prior financial statements. The Company believes it has now complied with the DOL's Delinquent Filer Voluntary Compliance Program and, therefore, recaptured $240,050 of previously-accrued expense related to this matter.

Interest expense incurred totaled $305,122 and $264,563 for the nine months ended September 30, 2016 and 2015, respectively, an increase of $40,559. The increase in 2016 is primarily attributable to the impact of accrued interest on the Second Tranche Debentures which, under the terms of these Debentures, only began accruing interest on June 29, 2015, coupled with interest expense associated with the 8% notes payable borrowed in the first and second quarter of 2016, which accrued a full year of interest at their inception.

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Off-Balance Sheet Arrangements

Management Agreement

On June 19, 1993, two subsidiaries of the Company, Casino World Inc. and Mississippi Gaming Corporation, entered into a Management Agreement with Casinos Austria Maritime Corporation ("CAMC").  Subject to certain conditions, under the Management Agreement, CAMC would operate, on an exclusive basis, all of the Company's proposed dockside gaming casinos in the State of Mississippi, including any operation fifty percent (50%) or more of which is owned by the Company or its affiliates. Unless terminated earlier pursuant to the provisions of the Agreement, the Agreement terminates five years from the first day of actual Mississippi gaming operations and provides for the payment of an annual operational term management fee of 1.2% of all gross gaming revenues between zero and $100,000,000; plus 0.75% of gross gaming revenue between $100,000,000 and $140,000,000; plus 0.5% of gross gaming revenue above $140,000,000; plus two percent of the net gaming revenue between zero and $25,000,000; plus three percent of the net gaming revenue above twenty-five million dollars $25,000,000.  The Company believes this Agreement is no longer in effect. However, there can be no assurance that CAMC will not attempt to maintain otherwise which would lead to litigation.

There are no other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures, or capital resources, that are material to our stockholders.

Critical Accounting Policies

Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value Measurements

The Company follows the provisions of ASC Topic 820 "Fair Value Measurements" for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable input that reflectsmanagement's own assumptions.

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The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at September 30, 2016 and December 31, 2015:

	September 30,		December 31,
	2016		2015
Beginning balance	$	1,704,570	$	3,754,233
Total decrease in unrealized appreciation
(depreciation) included in net assets		218,023		(2,049,663	)
Ending balance	$	1,922,593	$	1,704,570

Sensitivity Analysis to Changes in Level 3 Assumptions

Significant inputs include the dates when required conditions are expected to be met under the conversion terms of the debentures, the underlying market cap due to borrowings and losses and discount for lack of marketability while the stock was delisted and reversed when the Company's stock became publicly listed again on or about October 26, 2015. In addition, use of different ranges of bond discount rates and changes in historical volatility rates would also result in a higher or lower fair value.

Current assets and current liabilities are financial instruments and management believes that their carrying amounts are reasonable estimates of their fair values due to their short term nature.

The convertible debentures and derivative liability approximate fair value based on Level 3 inputs.

Long-Lived Assets

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long‑lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at September 30, 2016.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

The Company currently is not subject to any trading or non-trading market risk-sensitive instruments. The note payable and the long-term debt listed on the Company's balance sheet are at fixed interest rates and, therefore, are not market risk-sensitive.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

In connection with the preparation of this quarterly report on Form 10-Q, our management, with the participation of ourChief Executive Officer, who also serves as Chief Financial Officer,carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2016. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are controls and other procedures that are designed to ensure that the information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's Rules and Forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on the results of this evaluation, the Chief Executive Officer/Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2016.

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended) during the quarter ended September 30, 2016 that are expected to materially affect, or are  reasonably likely to materially affect, our internal control over financial reporting.

PART II:   OTHER INFORMATION

Item 1.  Legal Proceedings

College Health & Investment, L.P. v. Diamondhead Casino Corporation (Delaware Superior Court)(C.A. No. N15C-01-119-WCC)

On January 15, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed suit for breach of a Promissory Note issued March 25, 2010, in the principle amount of $150,000, with interest payable at 12% per annum, with a maturity date of March 25, 2012. Plaintiff seeks payment of principle of $150,000, interest due through December 31, 2014 in the amount of $45,000, and interest due of 12% per annum from December 31, 2014 until entry of judgment. The Note, as well as the accrued interest thereon, are shown as current liabilities on the Company's balance sheet at December 31, 2015. On January 22, 2015, the defendant forwarded a Notice of Conversion to plaintiff, exercising the Borrower's right to convert the principal and any interest due on the Note into common stock. On February 11, 2015, the Company moved to dismiss the complaint as moot. The plaintiff filed an opposition to the motion to dismiss alleging that the Note was convertible only prior to its maturity date. On July 2, 2015, the Court agreed with the Plaintiff and denied the Company's motion to dismiss. On July 16, 2015, the Company filed an Answer and Grounds of Defense.  On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

College Health & Investment, L.P. v. Diamondhead Casino Corporation (In the Court of Chancery of the State of Delaware (C.A. No. 10663-CB)

On February 13, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed a Verified Complaint Pursuant to 8 Del.C.§211(c), with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn, seeking an order compelling the Company to hold an annual meeting. The Company agreed to entry of an Order setting  a new date for an annual meeting of June 8, 2015, a Record Date of April 24, 2015, and to clarify that there is no advance notice requirement for the submission of stockholder proposals at the Company's annual stockholders' meetings. The plaintiff sought costs and expenses, including attorneys' fees. On or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 for both this case and the following case.  The Company filed an opposition to this motion. On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

20

College Health & Investment, L.P. v. Edson R. Arneault, Deborah A. Vitale, Gregory A. Harrison, Martin Blount and Benjamin Harrell(In the Court of Chancery of the State of Delaware)(C.A. No. 10793-CB)

On March 14, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed a Verified Complaint, with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn. In Count I, the plaintiff alleges that the defendants breached their fiduciary duty of disclosure. In Count II, the plaintiff alleges that defendants breached their fiduciary duties of loyalty and care. The plaintiff sought injunctive relief, but no monetary damages other than attorney's fees. The defendants believe that plaintiff's claims are without merit and intend to vigorously defend this lawsuit.  In addition, on or about July 30, 2015, the defendant directors filed Defendants' Answer and Verified Counterclaims for defamation, breach of fiduciary duty and aiding and abetting a breach of fiduciary duty. On August 19, 2015, the plaintiff filed a Motion to Dismiss the Counterclaims. As noted above, on or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 in this case and the above-referenced case.  On or about August 26, 2015, the defendants filed an Opposition to Plaintiff's Motion for an Award of Fees and Reimbursement of Expenses.  On September 25, 2015, the parties entered into a Stipulation and [Proposed] Order Staying Litigation pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

In re Diamondhead Casino Corporation (United States Bankruptcy Court)(District of Delaware)(Case No. 15-11647-LSS)

On August 6, 2015, an Involuntary Petition was filed in the United States Bankruptcy Court by three promissory note holders under title 11, United States Code, requesting an order for relief under chapter 7 of the Bankruptcy Code. The three creditors listed combined claims of $150,000 in principal, plus interest due on certain promissory notes. On August 28, 2015, the Company filed a Motion to Dismiss the Involuntary Petition or, in the Alternative, to Convert the Case to Chapter 11 (the "Motion to Dismiss"). The Company maintained that the Petition was filed in bad faith by supporters of the dissident slate which lost the proxy contest that was decided by the stockholders on June 8, 2015 and that it was filed in retaliation for the Company's refusal, following the stockholders' vote, to place several of the losing dissident's nominees on the Board of Directors. On September 11, 15 and 17, 2015, three additional promissory note holders filed Joinders to the Involuntary Petition listing additional combined claims of $237,500 plus interest. The Company does not recognize one of the joining petitioners as a bona fide creditor of the Company.  On September 17, 2015, the six Petitioners, who were represented by the same attorneys, filed an Objection to the Company's Motion to Dismiss. On September 18, 2015, the six Petitioners filed an Emergency Motion for Entry of an Order Directing the Appointment of (I) an Interim Chapter 7 Trustee, or (II) alternatively, a Chapter 11 Trustee Should the Involuntary Case be converted (the "Emergency Motion").  The Court held an evidentiary hearing on the Emergency Motion in October 2015. On November 13, 2015, the Court denied the Petitioners' Emergency Motion as it related to the request for an interim Chapter 7 trustee. On January 15, 2016, the Court held an evidentiary hearing on the Company's Motion to Dismiss the Involuntary Petitions. The parties filed briefs in support of and in opposition to the motion.

On June 7, 2016, the Court entered an Order granting the Company's Motion to Dismiss the Involuntary Petitions. In its accompanying Opinion, the Court found, in part, that based on the totality of the circumstances, the Creditors' primary concern in filing the involuntary petition was to effect a change in management to benefit their investments as stockholders, which was not a proper purpose for filing an involuntary bankruptcy petition. On June 30, 2016, the Company filed a Motion for an Award of Fees and Expenses and Punitive Damages. On August 11, 2016, the Petitioning Creditors filed an Opposition to the Company's Motion for an Award of Fees and Expenses and Punitive Damages. On August 31, 2016, the Court entered an Order awarding judgment to the Company for attorneys' fees and expenses against the Petitioners, jointly and severally, in the amount of $54,886. On September 1, 2016, the Court filed an Amended Order in which it further stated that the amounts awarded were not subject to any setoff against amounts owed by the Company to the Petitioners. The Petitioners have failed, to date, to pay the Company any amounts due pursuant to this Amended Order.

21

Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-UNA)

On October 25, 2016,the above-named Debenture holdersfileda Complaint against the Company in the United States District Court for the District of Delawarefor monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million,plus interest from January 1, 2015,together with costs and fees.  The Company was served with the Complaint on October 31, 2016. The Company's Answer and responsive pleadings are due November 21, 2016.

Item 1A.  Risk Factors

As a smaller reporting company, information under this item is not required to be presented.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Default Upon Senior Securities

The Company is in arrears on the payment of dividends due on its three series of preferred stock currently issued and outstanding. The Company has not paid dividends due in the first nine months of 2016 in the amount of i) $22,500 on its Series S preferred stock; ii) $22,500 on its Series S-NR preferred stock; and iii) $31,200 on its Series S-PIK preferred stock. The table below summarizes total preferred stock dividends in arrears at September 30, 2016.

	Total Amount
Description	In Arrears
Series S	$	157,500
Series S-NR		157,500
Series S-PIK		218,400
Total In Arrears	$	533,400

Item 4.  Mine Safety Disclosures

Not Applicable.

Item 5.   Other Information

None.

Item 6.  Exhibits

Exhibits 31.1 and 31.2

Attached to this report is the certification of the Chief Executive Officer/Chief Financial Officer of the Company pursuant to Rule 13a-14 and Rule15d-14.

22

Exhibits 32.1 and 32.2

Attached to this report is the certification of  the Chief Executive Officer/Chief Financial Officer of the Company as required by 18 U.S.C. Section 1350.

101.INS	XBRL Instance Document
101.SHC	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

23

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	DIAMONDHEAD CASINO CORPORATION
DATE: November 7, 2016	/s/	Deborah A. Vitale
	By:	Deborah A. Vitale
		Chief Executive Officer

24

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Deborah A. Vitale, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Diamondhead Casino Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations and cash flows of the  issuer as of, and for, the periods presented in this report;

4.  As the Issuer's certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and I have:

(a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the  issuer's most recent fiscal quarter (the issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the  issuer's internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.

Date: November 7, 2016

/s/ Deborah A. Vitale

Deborah A. Vitale

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Deborah A Vitale, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Diamondhead Casino Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.  As the issuer's certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the issuer and I  have:

(a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the  issuer's most recent fiscal quarter (the issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

5.  I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent function):

(a)  all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and

(b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.

Date: November 7, 2016

/s/ Deborah A. Vitale

Deborah A. Vitale

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

In connection with the Quarterly Report of Diamondhead Casino Corporation (the "Company") on Form 10-Q for the period ending September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Deborah A. Vitale, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act  of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATE: November 7, 2016	/s/	Deborah A. Vitale
	By:	Deborah A. Vitale
		Chief Executive Officer

EX-32.2

EHIBIT 32.2

CERTIFICATION

In connection with the Quarterly Report of Diamondhead Casino Corporation (the "Company") on Form 10-Q for the period ending September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Deborah A. Vitale, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATE: November 7, 2016	/s/	Deborah A. Vitale
	By:	Deborah A. Vitale
		Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 04, 2016
Document and Entity Information:
Entity Registrant Name	DIAMONDHEAD CASINO CORP
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Trading Symbol	dhcc
Amendment Flag	false
Entity Central Index Key	0000844887
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		36,297,576
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Current assets
Cash	$ 47,100	$ 15,655
Other current assets	1,064	498
Total current assets	48,164	16,153
Land held for development (Note 3)	5,476,097	5,476,097
Deferred financing costs (net of amortization of $84,415 at September 30, 2016 and $56,218 at December 31, 2015)	116,685	144,882
Other assets	80	80
Total assets	5,641,026	5,637,212
Current liabilities
Convertible notes due to related parties (Note 5)	75,000	75,000
Convertible notes and line of credit due others (Note 5)	1,887,500	1,887,500
Accounts payable and accrued expenses due related parties (Note 4)	2,618,727	2,204,545
Accounts payable and accrued expenses - other (Note 4)	1,902,113	1,867,867
Total current liabilities	6,483,340	6,034,912
Notes payable due related parties (Note 6)	115,000
Notes payable due others (Note 6)	22,500
Debenture payable (net of unamortized discount of $46,044 at September 30, 2016 and $47,703 at December 31, 2015) (Note 6)	3,956	2,297
Convertible debentures payable (net of unamortized discount of $1,685,011 at September 30, 2016 and $1,733,157 at December 31, 2015) (Note 7)	114,989	66,843
Derivative liability (Note 7)	1,922,593	1,704,570
Total liabilities	8,662,378	7,808,622
Commitments and contingencies (Notes 2, 3,5,6,7 and 8)
Stockholders' deficiency (Note 8)
Preferred stock, $.01 par value; shares authorized 5,000,000, outstanding 2,086,000 at September 30, 2016 and December 31, 2015 (aggregate liquidation preference of $2,519,080 at September 30, 2016 and December 31,2015).	20,860	20,860
Common stock, $.001 par value; shares authorized 50,000,000, issued: 39,052,472 at September 30, 2016 and December 31, 2015, outstanding: 36,297,576 at September 30, 2016 and December 31, 2015.	39,052	39,052
Additional paid-in capital	35,757,201	35,757,201
Unearned ESOP shares	(3,439,476)	(3,439,476)
Accumulated deficit	(35,258,251)	(34,408,309)
Treasury stock, at cost, 448,071 shares at September 30, 2016 and December 31, 2015	(140,738)	(140,738)
Total stockholders' deficiency	(3,021,352)	(2,171,410)
Total liabilities and stockholders deficiency	$ 5,641,026	$ 5,637,212

XML

CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Deferred financing costs, amortization	$ 84,415	$ 56,218
Preferred stock, par or stated value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	2,086,000	2,086,000
Preferred stock, shares outstanding	2,086,000	2,086,000
Preferred stock, aggregate liquidation preference	$ 2,519,080	$ 2,519,080
Common stock, par or stated value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	39,052,472	39,052,472
Common stock, shares outstanding	36,297,576	36,297,576
Treasury stock, shares	448,071	448,071
Corporate Debt Securities
Unamortized discount	$ 46,044	$ 47,703
Convertible Debt Securities
Unamortized discount	$ 1,685,011	$ 1,733,157

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
COSTS AND EXPENSES
Administrative and general	$ 168,764	$ 197,945	$ 509,550	$ 822,502
Stock-based compensation		295,222		295,222
Amortization	9,503	9,503	28,198	28,198
Other	19,989	15,532	53,094	52,691
Costs and Expenses	198,256	518,202	590,842	1,198,613
OTHER EXPENSES
Amortization of debt discount	(19,805)	(9,595)	(49,805)	(35,375)
Amortization of debt discount	19,805	9,595	49,805	35,375
Net proceeds from litigation settlement			150,000
Reversal of previously accrued DOL penalties			240,050
Interest expense	(105,142)	(95,478)	(305,122)	(264,563)
Interest expense	105,142	95,478	305,122	264,563
Change in fair value of derivative liability	27,923	87,461	(218,023)	788,511
Other Expense	152,870	192,534
Other (Expense) Income			(182,900)	488,573
NET LOSS	(351,126)	(710,736)	(773,742)	(710,040)
PREFERRED STOCK DIVIDENDS	(25,400)	(25,400)	(76,200)	(76,200)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS	$ (376,526)	$ (736,136)	$ (849,942)	$ (786,240)
Net loss per common share, basic	$ (0.001)	$ (0.020)	$ (0.023)	$ (0.020)
Weighted average number of common shares, basic	36,297,576	36,297,576	36,297,576	36,297,576

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
OPERATING ACTIVITIES
Net loss	$ (773,742)	$ (710,040)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization	28,198	28,198
Change in fair value of derivative liability	218,023	(788,511)
Amortization of debt discount	49,805	35,375
Stock-based compensation		295,222
Change in other assets and liabilities:
Other current assets	(566)	32,223
Accounts payable and accrued expenses	372,227	366,954
Net cash used in operating activities	(106,055)	(740,579)
FINANCING ACTIVITIES
Proceeds from notes payable issued to related parties	115,000
Proceeds from notes payable issued to others	22,500
Proceeds from short term note	2,946
Payment of short term note	(2,946)	(14,905)
Proceeds from non-interest bearing advances from related parties	15,000
Payment of non-interest bearing advances from related parties	(15,000)
Net cash provided by (used in) financing activities	137,500	(14,905)
Net increase (decrease) in cash	31,445	(755,484)
Cash beginning of period	15,655	843,083
Cash end of period	47,100	87,599
Cash paid for interest	715	10,835
Non-Cash Financing activities:
Warrants included in deferred financing costs	25,100	25,100
Unpaid preferred stock dividends included in accounts payable and accrued expenses	$ 533,400	$ 431,800

XML

Note 1. Organization and Business

9 Months Ended

Sep. 30, 2016

Notes

Note 1. Organization and Business

Note 1. Organization and Business

Diamondhead Casino Corporation and Subsidiaries (the "Company") own a total of approximately 404.5 acres of unimproved land in Diamondhead, Mississippi on which the Company plans, unilaterally, or in conjunction with one or more partners, to construct a casino resort and hotel and associated amenities.

XML

Note 2. Liquidity and Going Concern

9 Months Ended

Sep. 30, 2016

Notes

Note 2. Liquidity and Going Concern

Note 2. Liquidity and Going Concern

These unaudited condensed consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has no operations and generates no operating revenues. During the nine months ended September 30, 2016 and 2015 the Company incurred net losses applicable to common shareholders, exclusive of the recording of change in the fair value of derivatives, of $631,919 and $1,574,751, respectively.

The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi Property. The development of the Diamondhead Property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort.

In the past, in order to raise capital to continue to pay on-going costs and expenses, the Company has borrowed funds, through Private Placements of convertible instruments and other means, which are more fully described in Notes 5, 6 and 7 to these unaudited condensed consolidated financial statements. Some of these instruments are past due for payment of both principal and interest. In addition, at September 30, 2016, the Company had current liabilities totaling $6,483,340 and only $47,100 cash on hand.

The above conditions raise substantial doubt as to the Company's ability to continue as a going concern.

XML

Note 3. Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Notes

Note 3. Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission ("SEC").  Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the nine months ended September 30, 2016 are not necessarily indicative of the results that we will have for any subsequent period.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2015, attached as Exhibit 99.1 to our annual report on Form 10-K.

Principles of Consolidation

The consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the 2015 financial statements to conform to the unaudited condensed consolidated 2016 financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported.

Land Held for Development

Land held for development is carried at cost. Costs directly related to site development, such as licenses, permitting, engineering, and other costs, are capitalized.

Land development costs, which have been capitalized, consist of the following at September 30, 2016 and December 31, 2015:

Land under development	$4,934,323
Licenses	77,000
Engineering and costs associated with permitting	464,774
	$5,476,097

Fair Value Measurements

The Company follows the provisions of ASC Topic 820 "Fair Value Measurements" for financial assets and

liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable input that reflects management's own assumptions.

The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at September 30, 2016 and December 31, 2015:

	September 30,	December 31,
	2016	2015
Beginning balance	$1,704,570	$3,754,233
Total decrease in unrealized appreciation (depreciation) included in net assets	218,023	(2,049,663)
Ending balance	$1,922,593	$1,704,570

Sensitivity Analysis to Changes in Level 3 Assumptions

Significant inputs include the dates when required conditions are expected to be met under the conversion terms of the debentures, the underlying market cap due to borrowings and losses and discount for lack of marketability while the stock was delisted and reversed when the Company's stock became publicly listed again on or about October 26, 2015. In addition, use of different ranges of bond discount rates and changes in historical volatility rates would also result in a higher or lower fair value.

Current assets and current liabilities are financial instruments and management believes that their carrying amounts are reasonable estimates of their fair values due to their short term nature.

The convertible debentures and derivative liability approximate fair value based on Level 3 inputs, as further discussed in Note 7.

Long-Lived Assets

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at September 30, 2016.

Net Loss per Common Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet, and may never be, met.

The table below summarizes the components of potential dilutive securities at September 30, 2016 and 2015.

	September 30,	September 30,
Description	2016	2015
Convertible Preferred Stock	260,000	260,000
Options to Purchase Common Shares	3,440,000	3,440,000
Private Placement Warrants	1,061,500	2,086,500
Convertible Promissory Notes	1,925,000	1,925,000
Total	6,686,500	7,711,500

Stock Based Compensation

The Company follows the provisions of ASC Topic 718 "Compensation - Stock Compensation" which requires the measurement and recognition of compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values. In the third quarter of 2015, the Board of Directors voted to extend the expiration date of a previously-awarded option to the President to purchase 750,000 shares of common stock at $0.30 per share from October 27, 2015 to March 13, 2018 and voted to extend the expiration date of a previously-awarded option to the President to purchase 75,000 shares of common stock at $0.75 per share from October 27, 2015 to March 13, 2018. In addition, in the third quarter of 2015, the Board of Directors voted to extend the expiration date of a previously-awarded option granted to the current Chairman to purchase 150,000 shares of common stock at $1.25 per share, from October 27, 2015 to March 13, 2018 and to extend the expiration date of a previously-awarded option to purchase common stock granted to a Director of the Company to purchase 75,000 shares of common stock at $0.75, from October 27, 2015 to March 13, 2018. The Company also extended the expiration date on options issued to former employees of the Company and an Honorary Director of the Company to purchase a combined total of 90,000 shares of common stock at $0.75 per share, from October 27, 2015 to March 13, 2018.

In determining the fair value of each option modified, the Black-Scholes option-pricing model, consistent with the provisions of ASC Topic 718, was used. The valuations were determined using the weighted-average assumptions of 0% dividend yield, expected volatility of 209% and risk-free interest rates ranging from 0.027 to 0.97%. This resulted in a charge to the statement of loss in the amount of $295,222, increasing the loss per share of common stock $0.008 for the nine months ending September 30, 2015.

Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company's options.

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Note 4. Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2016

Notes

Note 4. Accounts Payable and Accrued Expenses

Note 4. Accounts Payable and Accrued Expenses

The table below outlines the elements included in accounts payable and accrued expenses at September 30, 2016 and December 31, 2015:

	September 30,	December 31,
	2016	2015
Description
Related Parties:
Accrued payroll due officers	1,694,711	1,469,711
Accrued interest due officers and directors	525,740	414,513
Accrued director fees	288,750	221,250
Base rents due to the President	63,224	49,622
Associated rental costs	28,994	32,141
Other	17,308	17,308
Total Related Parties	2,618,727	2,204,545
Non-Related Parties:
Accrued interest	1,156,022	962,842
Accrued dividends	533,400	457,200
Accrued fines and penalties	13,231	232,849
Other accounts payable and accrued expenses	199,460	214,976
Total Non-related Parties	1,902,113	1,867,867
Total accounts payable and accrued expenses	4,520,840	4,072,412

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Note 5. Convertible Notes and Line of Credit

9 Months Ended

Sep. 30, 2016

Notes

Note 5. Convertible Notes and Line of Credit

Note 5.  Convertible Notes and Line of Credit

Line of Credit

On October 23, 2008, the Company entered into an agreement with an unrelated third party for an unsecured Line of Credit up to a maximum of $1,000,000. The Line of Credit provided for funds to be drawn as needed and carries an interest rate on amounts borrowed of 9% per annum, originally payable quarterly, based on the pro rata number of days outstanding. All funds originally advanced under the facility were due and payable by November 1, 2012. As an inducement to provide the facility, the lender was awarded an immediate option to purchase 50,000 shares of common stock of the Company at $1.75 per share. In addition, the lender received an option to purchase a maximum of 250,000 additional shares of common stock of the Company at $1.75 per share. The options expire following repayment in full by the Company of the amount borrowed. At September 30, 2016, the principal and accrued interest due on the obligation, which totals $1,650,984, remains unpaid.

Convertible Notes and Warrants

Pursuant to a Private Placement Memorandum dated March 1, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000 with interest at 12% per annum, together with a five year Warrant to purchase 50,000 shares of the Company's common stock at an exercise price of $1.00 per share. The Promissory Note is convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

Pursuant to an additional Private Placement Memorandum dated October 25, 2010, the Company offered Units consisting of a two year unsecured, convertible promissory note in the principal amount of $25,000, together with a five year Warrant to purchase 50,000 shares of the Company's common stock at an exercise price of $1.00 per share. The Promissory Notes bear interest at 9% per annum and are convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor. The five-year Warrants issued in connection with the Units have expired.

The Convertible Notes issued pursuant to the Private Placements discussed above total $962,500 and became due and payable beginning in March 2012 and extending at various dates through June 2013. As of the date of the filing of this report, all of the aforementioned debt obligations remain unpaid and in default under the repayment terms of the notes.

The table below summarizes the Company's debt arising from the above-described sources as of September 30, 2016 and December 31, 2015:

	Gross Amount	Amount Due	Amount Due
Loan Facility	Owed	Related Parties	Others
Line of Credit	$1,000,000	-	$1,000,000
Private Placements:
March 1, 2010	475,000	75,000	400,000
October 25, 2010	487,500	-	487,500
Total Private Placements	962,500	75,000	887,500
Total	$1,962,500	75,000	$1,887,500

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Note 6. Notes Payable

9 Months Ended

Sep. 30, 2016

Notes

Note 6. Notes Payable

Note 6. Notes Payable

In the first four months of 2016, the Company received cash advances totaling $47,500 from seven lenders which included $25,000 from three current Directors of the Company:  Proceeds from the cash advances were earmarked for the payment of accounting and auditing fees and other expenses required to file the Company's Form 10-Q.  On August 25, 2016, the Company issued a Note to the foregoing lenders which bears interest at 8% per annum, with a full year of interest accruing in any year in which the advance remains unpaid, and matures four years from the date of issuance.  The Company will file a lien on its Mississippi property in favor of the note holders to secure both principle and interest owed.

In the third quarter of 2016, the Chairman of the Board of Directors of the Company loaned the Company an additional $90,000. On August 25, 2016, the Company issued a Note to the Chairman of the Board. The Note bears interest at 14% per annum effective August 1, 2016 and matures four years from the date of issuance. The proceeds of the loan were used for the payment of Mississippi property taxes, and auditing, accounting and other corporate expenses. The Company will file a lien on its Mississippi property in favor of the Chairman to secure both principle and interest owed.

The principal due under the foregoing loans totals $137,500. A lien in the amount of $250,000 will be placed on the Company's Mississippi property to secure the principal and interest due on the debt. The lien to be placed on the Mississippi property will be second to the existing first lien on the Mississippi property in the amount of $3.85 million. The first lien is held by holders of previously-issued convertible and non-convertible Debentures ($1.85 million) and certain executives and directors ($2 million), as outlined in Note 9.

The table below summarizes the Company's long term notes payable as of September 30, 2016:

		Sept. 30, 2016
	Gross Amount	Amount Due	Amount Due
Loan Facility	Owed	Related Parties	Others
4 Year  8% secured note	$47,500	$25,000	$22,500
4 Year  14% secured note	90,000	90,000	-
Total	$137,500	$115,000	$22,500

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Note 7. Convertible Debentures and Derivative Liability

9 Months Ended

Sep. 30, 2016

Notes

Note 7. Convertible Debentures and Derivative Liability

Note 7. Convertible Debentures and Derivative Liability

Pursuant to a Private Placement Memorandum dated February 14, 2014 (the "Private Placement"), the Company offered up to a maximum of $3,000,000 of Collateralized Convertible Senior Debentures in three tranches of $1,000,000 each, to accredited or institutional investors. The Offering was conducted contingent on the deposit into Escrow of the purchase price for all of the Debentures offered in the principal amount of $3,000,000. The Debentures, once issued, bear interest at 4% per annum after 180 days, mature six years from the date of issuance, and are secured by a lien on the Company's Mississippi property. On March 31, 2014, the First Closing occurred when subscriptions in the amount of $3,000,000 were received in Escrow and accepted by the Company. The Escrow Agent released $1,000,000 to the Company and the Company issued First Tranche Debentures in the aggregate principle amount of $1,000,000.

On December 31, 2014, investors who had purchased $950,000 of First Tranche Debentures consented to  Amendment I to the Private Placement, which amended certain terms and conditions, including the conversion terms of the First Tranche Debentures. The remaining First Tranche Debenture in the amount of $50,000 remains as originally issued with no conversion rights. Thus, the First Tranche Debentures can be converted into a total of 3,166,666 shares of common stock.

On December 31, 2014, the Second Closing occurred when investors representing $850,000 of Second Tranche Debentures consented to Amendment II to the Private Placement, which amended certain terms and conditions, including those relating to issuance and conversion of the Second and Third Tranche Debentures, as well as the period of time within which to perform the Third Tranche Closing Obligations, as amended.  The Escrow Agent released $850,000 to the Company and the Company issued Second Tranche Debentures in the aggregate principle amount of $850,000. Thus, the Second Tranche Debentures can be converted into a total of 1,888,889 shares of common stock. The Escrow Agent refunded $300,000 to those investors who did not consent to Amendment II.

The Company did not meet the closing obligations for the Third Tranche Debentures as of June 30, 2015, as was required, pursuant to the terms of the Private Placement, as amended. Therefore, the remaining $850,000 being held in escrow for the purchase of the Third Tranche Debentures was returned to the investors in July 2015.

For purposes of determining the proper accounting treatment and valuation of the instruments, the Company applied the provisions set forth in ASC Topic 820, "Fair Value in Financial Instruments" and ASC Topic 815, "Accounting for Derivative Instruments and Hedging Activities."  Since the Notes issued have derivative features, the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the debt host and treated as a liability. In addition, the valuation is required to be conducted for each reporting period the instrument is in existence.

The Company's stock was not trading from approximately September 4, 2014, when its stock registration was revoked, through approximately October 26, 2015, when its' stock began to trade again. The Company engaged an independent valuation expert to determine the fair value of its shares of common stock for each quarter beginning with the quarter ended September 30, 2014. For periods from September 30, 2014 through September 30, 2015, the fair value of the common stock was estimated by adjusting the most recent market price by changes in the underlying market cap due to changes in the value of net assets and applying a discount for lack of marketability inasmuch as the stock was not trading. After the stock began to trade again on or about October 26, 2015, the closing price of the stock was used in the valuation beginning with the quarter ending December 31, 2015 through this most recent valuation at September 30, 2016. Monte Carlo models were developed to value the derivative liability within the Notes using a historical volatility rate, based on comparable companies, of 168% at September 30, 2016 and 132% at December 31, 2015, and using discount bond rates based on the expected remaining term of each instrument ranging from 5.62% to 6.39% at September 30, 2016 and 6.45% to 7.07% at December 31, 2015. In addition, the valuation assumed that conversion requirements for Tranche 1 Debentures, exclusive of price, were met as of September 30, 2016, while conversion requirements for Tranche 2 Debentures were expected to be met by December 31, 2016 for the September 30, 2016 calculation.

The estimated fair value for the derivative liability relating to each Debenture at the balance sheet dates is as follows:

	September 30, 2016	December 31, 2015
Tranche 1	$944,344	$893,731
Tranche 2	978,249	810,839
Derivative Liability	$1,923,593	$1,704,570

At the initial valuation date of each Tranche, a portion of the derivative liability was allocated to the Convertible Debentures as debt discount, with the remainder being recorded as other income/expense. At March 31, 2014, the initial valuation of the First Tranche Debentures, $1,000,000 was allocated to debt discount and, at December 31, 2014, the initial valuation of the Second Tranche Debentures, $850,000 was allocated to debt discount. The debt discount is subsequently amortized to expense using an effective interest methodology. Amortization of debt discount amounted to $48,146 and $34,574 for Convertible Debentures and $1,659 and $801 for the non-convertible Debenture for the nine months ended September 30, 2016 and 2015, respectively.

The interest payment on these Debentures for the calendar year 2015 in the approximate amount of $57,000 was due March 1, 2016. The Company failed to make the payment. This failure, if continuing, could represent an event of default under the terms of the Debenture.

On October 25, 2016, certain Debenture holders filed a Complaint against the Company in the United States District Court for the District of Delaware for monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million, plus interest from January 1, 2015, together with costs and fees.  The Company was served with the Complaint on October 31, 2016. The Company's Answer and responsive pleadings are due November 21, 2016.

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Note 8. Related Party Transactions

9 Months Ended

Sep. 30, 2016

Notes

Note 8. Related Party Transactions

Note 8.  Related Party Transactions

As of September 30, 2016, the President of the Company is owed deferred salary in the amount of $1,491,996. As of September 30, 2016, a Vice President and the current Chairman of the Board of Directors of the Company is owed deferred salary in the amount of $121,140. The Board of directors agreed to pay interest at 9% per annum on the foregoing amounts owed. Interest expense under this agreement amounted to $100,390 and $82,797 for the nine months ended September 30, 2016 and 2015, respectively. Total interest accrued under this agreement totaled $483,366 and $382,976 as of September 30, 2016 and December 31, 2015, respectively.

Effective September 1, 2011, the Company entered into a month-to-month lease with the President and then-Chairman of the Board of Directors of the Company, for office space in a furnished and fully equipped townhouse office building owned by the President in Alexandria, Virginia. The lease calls for monthly base rent in the amount of $4,534 and payment of associated costs of insurance, real estate taxes, utilities and other expenses. Rent expense associated with this lease amounted to base rent in the amount of $40,806 and associated rental costs of $9,303 for a total of $50,109 for the nine months ended September 30, 2016 and base rent in the amount of $40,806 and associated rental costs of $9,973 for a total of $50,779 for the nine months ended September 30, 2015. In the first nine months of 2016, the Company paid only $27,204 of the base rent due for that period. In the first nine months of 2015, the Company paid $36,272 for base rent. During the first nine months of 2016, the Company reimbursed the President for associated rental costs totaling $7,744 which had been paid personally by the President in prior periods. At September 30, 2016 and 2015, amounts owing for base rent and associated rental costs totaled $92,218 and $74,654, respectfully.

Directors of the Company are entitled to a director's fee of $15,000 per year for their services. The Company has been unable to pay directors' fees to date. A total of $288,750 and $221,250 was due and owing to the Company's current and former directors as of September 30, 2016 and December 31, 2015, respectively. Directors have previously been compensated and may, in the future, be compensated for their services with cash, common stock, or options to purchase common stock of the Company.

In June of 2016, the Company paid a Director $15,000 in connection with his efforts associated with certain litigation which resulted in the Company collecting net settlement proceeds of $150,000 in the second quarter of 2016.

In the second quarter of 2016, the Chairman of the Board of Directors and the President advanced funds to the Company totaling $15,000 with no interest, contingent upon an assignment of $15,000 from the above-referenced settlement proceeds.   These advances were repaid to them in the second quarter of 2016.

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Note 9. Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Notes

Note 9. Commitments and Contingencies

Note 9. Commitments and Contingencies

The Company's obligations under the Collateralized Convertible Senior Debentures are secured by a lien on the Company's Mississippi property (the "Investors Lien").  Liens were placed on the Property in favor of the Investors for $1,850,000. The Investors Lien is in pari passu with a lien placed on the Property in favor of the President of the Company, the Vice President of the Company, and certain directors of the Company, for past due wages, compensation, and expenses owed to them in the maximum aggregate amount of $2,000,000 (the "Executives Lien"). Ms. Vitale will serve as Lien Agent for the Executives Lien.

Litigation

College Health & Investment, L.P. v. Diamondhead Casino Corporation (Delaware Superior Court)(C.A. No. N15C-01-119-WCC)

On January 15, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed suit for breach of a Promissory Note issued March 25, 2010, in the principle amount of $150,000, with interest payable at 12% per annum, with a maturity date of March 25, 2012. Plaintiff seeks payment of principle of $150,000, interest due through December 31, 2014 in the amount of $45,000, and interest due of 12% per annum from December 31, 2014 until entry of judgment. The Notes, as well as the accrued interest thereon, are shown as current liabilities on the Company's balance sheet at December 31, 2015. On January 22, 2015, the defendant forwarded a Notice of Conversion to plaintiff, exercising the Borrower's right to convert the principal and any interest due on the Note into common stock. On February 11, 2015, the Company moved to dismiss the complaint as moot. The plaintiff filed an opposition to the motion to dismiss alleging that the Note was convertible only prior to its maturity date. On July 2, 2015, the Court agreed with the Plaintiff and denied the Company's motion to dismiss. On July 16, 2015, the Company filed an Answer and Grounds of Defense.  On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

College Health & Investment, L.P. v. Diamondhead Casino Corporation (In the Court of Chancery of the State of Delaware (C.A. No. 10663-CB)

On February 13, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed a Verified Complaint Pursuant to 8 Del.C.§211(c), with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn, seeking an order compelling the Company to hold an annual meeting. The Company agreed to entry of an Order setting  a new date for an annual meeting of June 8, 2015, a Record Date of April 24, 2015, and to clarify that there is no advance notice requirement for the submission of stockholder proposals at the Company's annual stockholders' meetings. The plaintiff sought costs and expenses, including attorneys' fees. On or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 for both this case and the following case.  The Company filed an opposition to this motion. On August 18, 2015, the Company filed a Suggestion of Bankruptcy and Automatic Stay. The matter was stayed pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

College Health & Investment, L.P. v. Edson R. Arneault, Deborah A. Vitale, Gregory A. Harrison, Martin Blount and Benjamin Harrell(In the Court of Chancery of the State of Delaware)(C.A. No. 10793-CB)

On March 14, 2015, the plaintiff, a beneficial owner of in excess of 5% of the common stock of the Company, filed a Verified Complaint, with a Verification signed by the plaintiff's General Partner, Samuel I. Burstyn. In Count I, the plaintiff alleges that the defendants breached their fiduciary duty of disclosure. In Count II, the plaintiff alleges that defendants breached their fiduciary duties of loyalty and care. The plaintiff sought injunctive relief, but no monetary damages other than attorney's fees. The defendants believe that plaintiff's claims are without merit and intend to vigorously defend this lawsuit.  In addition, on or about July 30, 2015, the defendant directors filed Defendants' Answer and Verified Counterclaims for defamation, breach of fiduciary duty and aiding and abetting a breach of fiduciary duty. On August 19, 2015, the plaintiff filed a Motion to Dismiss the Counterclaims. As noted above, on or about July 7, 2015, the Plaintiff filed a Motion for an Award of Attorneys' Fees and Reimbursement of Expenses in the total amount of $150,000 in this case and the above-referenced case.  On or about August 26, 2015, the defendants filed an Opposition to Plaintiff's Motion for an Award of Fees and Reimbursement of Expenses.  On September 25, 2015, the parties entered into a Stipulation and [Proposed] Order Staying Litigation pending the below-referenced bankruptcy action (Case No. 15-11647) which has now concluded.

In re Diamondhead Casino Corporation (United States Bankruptcy Court)(District of Delaware)(Case No. 15-11647-LSS)

On August 6, 2015, an Involuntary Petition was filed in the United States Bankruptcy Court by three promissory note holders under title 11, United States Code, requesting an order for relief under chapter 7 of the Bankruptcy Code. The three creditors listed combined claims of $150,000 in principal, plus interest due on certain promissory notes. On August 28, 2015, the Company filed a Motion to Dismiss the Involuntary Petition or, in the Alternative, to Convert the Case to Chapter 11 (the "Motion to Dismiss"). The Company maintained that the Petition was filed in bad faith by supporters of the dissident slate which lost the proxy contest that was decided by the stockholders on June 8, 2015 and that it was filed in retaliation for the Company's refusal, following the stockholders' vote, to place several of the losing dissident's nominees on the Board of Directors. On September 11, 15 and 17, 2015, three additional promissory note holders filed Joinders to the Involuntary Petition listing additional combined claims of $237,500 plus interest. The Company does not recognize one of the joining petitioners as a bona fide creditor of the Company.  On September 17, 2015, the six Petitioners, who were represented by the same attorneys, filed an Objection to the Company's Motion to Dismiss. On September 18, 2015, the six Petitioners filed an Emergency Motion for Entry of an Order Directing the Appointment of (I) an Interim Chapter 7 Trustee, or (II) alternatively, a Chapter 11 Trustee Should the Involuntary Case be converted (the "Emergency Motion").  The Court held an evidentiary hearing on the Emergency Motion in October 2015. On November 13, 2015, the Court denied the Petitioners' Emergency Motion as it related to the request for an interim Chapter 7 trustee. On January 15, 2016, the Court held an evidentiary hearing on the Company's Motion to Dismiss the Involuntary Petitions. The parties filed briefs in support of and in opposition to the motion.

On June 7, 2016, the Court entered an Order granting the Company's Motion to Dismiss the Involuntary Petitions. In its accompanying Opinion, the Court found, in part, that based on the totality of the circumstances, the Creditors' primary concern in filing the involuntary petition was to effect a change in management to benefit their investments as stockholders, which was not a proper purpose for filing an involuntary bankruptcy petition. On June 30, 2016, the Company filed a Motion for an Award of Fees and Expenses and Punitive Damages. On August 11, 2016, the Petitioning Creditors filed an Opposition to the Company's Motion for an Award of Fees and Expenses and Punitive Damages. On August 31, 2016, the Court entered an Order awarding judgment to the Company for attorneys' fees and expenses against the Petitioners, jointly and severally, in the amount of $54,886. On September 1, 2016, the Court filed an Amended Order in which it further stated that the amounts awarded were not subject to any setoff against amounts owed by the Company to the Petitioners. The Petitioners have failed, to date, to pay the Company any amounts due pursuant to this Amended Order.

Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-UNA)

On October 25, 2016, the above-named Debenture holders filed a Complaint against the Company in the United States District Court for the District of Delaware for monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. The plaintiffs are seeking $1.4 million, plus interest from January 1, 2015, together with costs and fees.  The Company was served with the Complaint on October 31, 2016. The Company's Answer and responsive pleadings are due November 21, 2016.

Litigation Settlement

In the second quarter of 2016, the Company and its wholly-owned subsidiary, Mississippi Gaming Corporation, entered into confidential settlement agreements with an unrelated third party for aggregate gross proceeds in the total amount of $225,000. The attorneys' fees amounted to one-third of the gross amount of the recovery, or $75,000, and the Company recorded net income in the amount of $150,000. The attorneys waived all expenses incurred in connection with the litigation. In June of 2016, the Company paid a Director, who was not an officer of the Company, $15,000 from these net proceeds for his efforts associated with the litigation.

Employee Stock Ownership Plan

The Company failed to file information returns required to be filed in connection with its Employee Stock Ownership Plan ("ESOP") for the 2015 calendar year in a timely fashion. The filings were due to be filed with the Department of Labor by October 15, 2016. The Company did not have sufficient funds to pay professionals to audit its ESOP and/or prepare and file required documents and forms when due. Although these required filings normally do not result in any tax due to an agency of the government, the Company could be subject to penalties for failure to file these forms when due. The Company intends to bring its ESOP-required filings current and when current, will attempt to enroll in a voluntary compliance program with the Department of Labor and the Internal Revenue Service with respect to any penalties or fines incurred. However, there can be no assurance the Company will be able to enroll in any such program or obtain a reduction of the fines and penalties that may be due.

Reversal of Previously Accrued Department of Labor Penalties

On June 2, 2016, the Company electronically filed annual reports with the Department of Labor ("DOL") required to be filed by its Employee Stock Ownership Plan ("ESOP") for the years ending December 31, 2010, 2011, 2012, 2013 and 2014. Each of the annual reports filed was delinquent. The Company filed its Annual Reports pursuant to the Delinquent Filer Voluntary Compliance Program ("DFVCP"). The Program allows Plans that have not previously been notified by the DOL of a failure to file a timely annual report, to voluntarily file their delinquent reports and pay a significantly reduced penalty than would have otherwise been assessed had the Company been unable to take advantage of the Program. The Company electronically paid penalties prescribed under the Program with its filings in the amount of $4,000.

In prior reporting periods, the Company accrued significant amounts in anticipation of potential penalties that could have been assessed by the Department of Labor for failure to file the ESOP's annual reports. The Company believes it has now complied with the DFVCP by filing its delinquent reports and paying the prescribed penalty due under the Program. Therefore, the Company reversed the existing accrual of anticipated penalties and recorded income in the amount of $240,050 during the nine months ended September 30, 2016.

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Note 3. Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Estimates

Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Reclassifications

Certain reclassifications have been made to the 2015 financial statements to conform to the unaudited condensed consolidated 2016 financial statement presentation. These reclassifications had no effect on net earnings or cash flows as previously reported.

Land Held For Development

Land Held for Development

Land held for development is carried at cost. Costs directly related to site development, such as licenses, permitting, engineering, and other costs, are capitalized.

Land development costs, which have been capitalized, consist of the following at September 30, 2016 and December 31, 2015:

Land under development	$4,934,323
Licenses	77,000
Engineering and costs associated with permitting	464,774
	$5,476,097

Fair Value Measurements

Fair Value Measurements

The Company follows the provisions of ASC Topic 820 "Fair Value Measurements" for financial assets and

liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable input that reflects management's own assumptions.

The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at September 30, 2016 and December 31, 2015:

	September 30,	December 31,
	2016	2015
Beginning balance	$1,704,570	$3,754,233
Total decrease in unrealized appreciation (depreciation) included in net assets	218,023	(2,049,663)
Ending balance	$1,922,593	$1,704,570

Sensitivity Analysis To Changes in Level 3 Assumptions

Sensitivity Analysis to Changes in Level 3 Assumptions

Significant inputs include the dates when required conditions are expected to be met under the conversion terms of the debentures, the underlying market cap due to borrowings and losses and discount for lack of marketability while the stock was delisted and reversed when the Company's stock became publicly listed again on or about October 26, 2015. In addition, use of different ranges of bond discount rates and changes in historical volatility rates would also result in a higher or lower fair value.

Current assets and current liabilities are financial instruments and management believes that their carrying amounts are reasonable estimates of their fair values due to their short term nature.

The convertible debentures and derivative liability approximate fair value based on Level 3 inputs, as further discussed in Note 7.

Long-lived Assets

Long-Lived Assets

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of long lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. No impairment existed at September 30, 2016.

Net Loss Per Common Share

Net Loss per Common Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. The dilutive securities below do not include 5,055,555 potentially convertible Debentures since the requirements for possible conversion have not yet, and may never be, met.

The table below summarizes the components of potential dilutive securities at September 30, 2016 and 2015.

	September 30,	September 30,
Description	2016	2015
Convertible Preferred Stock	260,000	260,000
Options to Purchase Common Shares	3,440,000	3,440,000
Private Placement Warrants	1,061,500	2,086,500
Convertible Promissory Notes	1,925,000	1,925,000
Total	6,686,500	7,711,500

Stock Based Compensation

Stock Based Compensation

The Company follows the provisions of ASC Topic 718 "Compensation - Stock Compensation" which requires the measurement and recognition of compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values. In the third quarter of 2015, the Board of Directors voted to extend the expiration date of a previously-awarded option to the President to purchase 750,000 shares of common stock at $0.30 per share from October 27, 2015 to March 13, 2018 and voted to extend the expiration date of a previously-awarded option to the President to purchase 75,000 shares of common stock at $0.75 per share from October 27, 2015 to March 13, 2018. In addition, in the third quarter of 2015, the Board of Directors voted to extend the expiration date of a previously-awarded option granted to the current Chairman to purchase 150,000 shares of common stock at $1.25 per share, from October 27, 2015 to March 13, 2018 and to extend the expiration date of a previously-awarded option to purchase common stock granted to a Director of the Company to purchase 75,000 shares of common stock at $0.75, from October 27, 2015 to March 13, 2018. The Company also extended the expiration date on options issued to former employees of the Company and an Honorary Director of the Company to purchase a combined total of 90,000 shares of common stock at $0.75 per share, from October 27, 2015 to March 13, 2018.

In determining the fair value of each option modified, the Black-Scholes option-pricing model, consistent with the provisions of ASC Topic 718, was used. The valuations were determined using the weighted-average assumptions of 0% dividend yield, expected volatility of 209% and risk-free interest rates ranging from 0.027 to 0.97%. This resulted in a charge to the statement of loss in the amount of $295,222, increasing the loss per share of common stock $0.008 for the nine months ending September 30, 2015.

Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses projected volatility rates, which are based upon historical volatility rates, trended into future years. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company's options.

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Note 3. Summary of Significant Accounting Policies: Land Held For Development: Land development costs (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Land development costs

Land development costs, which have been capitalized, consist of the following at September 30, 2016 and December 31, 2015:

Land under development	$4,934,323
Licenses	77,000
Engineering and costs associated with permitting	464,774
	$5,476,097

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Note 3. Summary of Significant Accounting Policies: Fair Value Measurements: Schedule of Derivative Liability Reconciliation (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Schedule of Derivative Liability Reconciliation

The table listed below provides a reconciliation of the beginning and ending net balances for the derivative liability measured at fair value using significant unobservable inputs (Level 3) at September 30, 2016 and December 31, 2015:

	September 30,	December 31,
	2016	2015
Beginning balance	$1,704,570	$3,754,233
Total decrease in unrealized appreciation (depreciation) included in net assets	218,023	(2,049,663)
Ending balance	$1,922,593	$1,704,570

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Note 3. Summary of Significant Accounting Policies: Net Loss Per Common Share: Schedule of Components of Potential Dilutive Securities (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Schedule of Components of Potential Dilutive Securities

The table below summarizes the components of potential dilutive securities at September 30, 2016 and 2015.

	September 30,	September 30,
Description	2016	2015
Convertible Preferred Stock	260,000	260,000
Options to Purchase Common Shares	3,440,000	3,440,000
Private Placement Warrants	1,061,500	2,086,500
Convertible Promissory Notes	1,925,000	1,925,000
Total	6,686,500	7,711,500

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Note 4. Accounts Payable and Accrued Expenses: Schedule of Accounts Payable and Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Schedule of Accounts Payable and Accrued Expenses

The table below outlines the elements included in accounts payable and accrued expenses at September 30, 2016 and December 31, 2015:

	September 30,	December 31,
	2016	2015
Description
Related Parties:
Accrued payroll due officers	1,694,711	1,469,711
Accrued interest due officers and directors	525,740	414,513
Accrued director fees	288,750	221,250
Base rents due to the President	63,224	49,622
Associated rental costs	28,994	32,141
Other	17,308	17,308
Total Related Parties	2,618,727	2,204,545
Non-Related Parties:
Accrued interest	1,156,022	962,842
Accrued dividends	533,400	457,200
Accrued fines and penalties	13,231	232,849
Other accounts payable and accrued expenses	199,460	214,976
Total Non-related Parties	1,902,113	1,867,867
Total accounts payable and accrued expenses	4,520,840	4,072,412

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Note 5. Convertible Notes and Line of Credit: Schedule of Convertible Notes and Line of Credit (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Schedule of Convertible Notes and Line of Credit

The table below summarizes the Company's debt arising from the above-described sources as of September 30, 2016 and December 31, 2015:

	Gross Amount	Amount Due	Amount Due
Loan Facility	Owed	Related Parties	Others
Line of Credit	$1,000,000	-	$1,000,000
Private Placements:
March 1, 2010	475,000	75,000	400,000
October 25, 2010	487,500	-	487,500
Total Private Placements	962,500	75,000	887,500
Total	$1,962,500	75,000	$1,887,500

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Note 6. Notes Payable: Schedule of Notes Payable (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Schedule of Notes Payable

The table below summarizes the Company's long term notes payable as of September 30, 2016:

		Sept. 30, 2016
	Gross Amount	Amount Due	Amount Due
Loan Facility	Owed	Related Parties	Others
4 Year  8% secured note	$47,500	$25,000	$22,500
4 Year  14% secured note	90,000	90,000	-
Total	$137,500	$115,000	$22,500

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Note 7. Convertible Debentures and Derivative Liability: Schedule of Derivative Liabilities at Fair Value (Tables)

9 Months Ended

Sep. 30, 2016

Tables/Schedules

Schedule of Derivative Liabilities at Fair Value

The estimated fair value for the derivative liability relating to each Debenture at the balance sheet dates is as follows:

	September 30, 2016	December 31, 2015
Tranche 1	$944,344	$893,731
Tranche 2	978,249	810,839
Derivative Liability	$1,923,593	$1,704,570

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Note 1. Organization and Business (Details)	Sep. 30, 2016 a
Details
Area of Land, owned	404.5

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Note 2. Liquidity and Going Concern (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014
Details
Net losses applicable to common shareholders, exclusive of recording of change in derivatives	$ (631,919)	$ (1,574,751)
Total current liabilities	6,483,340		$ 6,034,912
Cash	$ 47,100	$ 87,599	$ 15,655	$ 843,083

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Note 3. Summary of Significant Accounting Policies: Land Held For Development: Land development costs (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Details
Land under development	$ 4,934,323
Licenses	77,000
Engineering and costs associated with permitting	464,774
Land held for development	$ 5,476,097	$ 5,476,097

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Note 3. Summary of Significant Accounting Policies: Fair Value Measurements: Schedule of Derivative Liability Reconciliation (Details) - Derivative Financial Instruments, Liabilities - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Beginning balance	$ 1,704,570	$ 3,754,233
Total decrease in unrealized appreciation (depreciation) included in net assets	218,023	(2,049,663)
Ending balance	$ 1,922,593	$ 1,704,570

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Note 3. Summary of Significant Accounting Policies: Net Loss Per Common Share (Details)	9 Months Ended
	Sep. 30, 2016 shares
Convertible Debt Securities
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	5,055,555

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Note 3. Summary of Significant Accounting Policies: Net Loss Per Common Share: Schedule of Components of Potential Dilutive Securities (Details) - shares	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Details
Convertible Preferred Stock	260,000	260,000
Options to Purchase Common Shares	3,440,000	3,440,000
Private Placement Warrants	1,061,500	2,086,500
Convertible Promissory Notes	1,925,000	1,925,000
Total	6,686,500	7,711,500

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Note 3. Summary of Significant Accounting Policies: Stock Based Compensation (Details) - Employee Stock Option	9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Fair Value Assumptions, Method Used	Black-Scholes option-pricing model
Dividend yield	0.00%
Expected volatility	209.00%
Allocated Share-based Compensation Expense | $	$ 295,222
Minimum
Risk-free interest rate	0.03%
Maximum
Risk-free interest rate	0.97%
President | Award 1
Deferred Compensation Arrangement with Individual, Shares Issued | shares	750,000
Deferred Compensation Arrangement with Individual, Exercise Price | $ / shares	$ 0.30
President | Award 2
Deferred Compensation Arrangement with Individual, Shares Issued | shares	75,000
Deferred Compensation Arrangement with Individual, Exercise Price | $ / shares	$ 0.75
Board of Directors Chairman
Deferred Compensation Arrangement with Individual, Shares Issued | shares	150,000
Deferred Compensation Arrangement with Individual, Exercise Price | $ / shares	$ 1.25
Director
Deferred Compensation Arrangement with Individual, Shares Issued | shares	75,000
Deferred Compensation Arrangement with Individual, Exercise Price | $ / shares	$ 0.75
Former Employees And Honorary Director
Deferred Compensation Arrangement with Individual, Shares Issued | shares	90,000
Deferred Compensation Arrangement with Individual, Exercise Price | $ / shares	$ 0.75

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Note 4. Accounts Payable and Accrued Expenses: Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Details
Accrued payroll due officers	$ 1,694,711	$ 1,469,711
Accrued interest due officers	525,740	414,513
Accrued director fees	288,750	221,250
Base rents due to the President	63,224	49,622
Associated rental costs	28,994	32,141
Other	17,308	17,308
Total Related Parties	2,618,727	2,204,545
Accrued interest	1,156,022	962,842
Accrued dividends	533,400	457,200
Accrued fines and penalties	13,231	232,849
Other accounts payable and accrued expenses	199,460	214,976
Total Non-related Parties	1,902,113	1,867,867
Total accounts payable and accrued expenses	$ 4,520,840	$ 4,072,412

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Note 5. Convertible Notes and Line of Credit (Details) - USD ($)	1 Months Ended	9 Months Ended
	Oct. 31, 2008	Sep. 30, 2016	Oct. 23, 2008
Line of Credit Facility, Maximum Borrowing Capacity			$ 1,000,000
Line of Credit
Debt Instrument, Interest Rate, Stated Percentage			9.00%
Debt Instrument, Maturity Date	Nov. 01, 2012
Line of Credit | Employee Stock Option | October 23, 2008
Options, Granted		50,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Weighted Average Grant Date Fair Value		$ 1.75
Line of Credit, Current		$ 1,650,984
Line of Credit | Employee Stock Option | October 23, 2008 - 2
Options, Granted		250,000
Convertible Promissory Note
Debt Instrument, Face Amount		$ 962,500
Convertible Promissory Note | March 1, 2010 Private Placement
Debt Instrument, Interest Rate, Stated Percentage		12.00%
Debt Instrument, Face Amount		$ 25,000
Warrants per unit		50,000
Warrant Exercise Price		$ 1.00
Debt Instrument, Convertible, Terms of Conversion Feature		convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor.
Convertible Promissory Note | October 25, 2010 Private Placement
Debt Instrument, Interest Rate, Stated Percentage		9.00%
Debt Instrument, Face Amount		$ 25,000
Warrants per unit		50,000
Warrant Exercise Price		$ 1.00
Debt Instrument, Convertible, Terms of Conversion Feature		convertible into 50,000 shares of common stock of the Company immediately upon issuance at the option of the investor.

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Note 5. Convertible Notes and Line of Credit: Schedule of Convertible Notes and Line of Credit (Details)	Sep. 30, 2016 USD ($)
Notes Payable, Current	$ 1,962,500
Related Parties
Notes Payable, Current	75,000
Others
Notes Payable, Current	1,887,500
Line of Credit
Notes Payable, Current	1,000,000
Line of Credit | Related Parties
Notes Payable, Current	0
Line of Credit | Others
Notes Payable, Current	1,000,000
Convertible Promissory Note
Notes Payable, Current	962,500
Convertible Promissory Note | March 1, 2010 Private Placement
Notes Payable, Current	475,000
Convertible Promissory Note | October 25, 2010 Private Placement
Notes Payable, Current	487,500
Convertible Promissory Note | Related Parties
Notes Payable, Current	75,000
Convertible Promissory Note | Related Parties | March 1, 2010 Private Placement
Notes Payable, Current	75,000
Convertible Promissory Note | Related Parties | October 25, 2010 Private Placement
Notes Payable, Current	0
Convertible Promissory Note | Others
Notes Payable, Current	887,500
Convertible Promissory Note | Others | March 1, 2010 Private Placement
Notes Payable, Current	400,000
Convertible Promissory Note | Others | October 25, 2010 Private Placement
Notes Payable, Current	$ 487,500

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Note 6. Notes Payable (Details)	9 Months Ended
	Sep. 30, 2016 USD ($)
Notes Payable, Noncurrent	$ 137,500
Notes Payable, Current	1,962,500
Proceeds from notes payable issued to related parties	115,000
Mississippi property
Secured Debt	$ 250,000
President
Debt Instrument, Interest Rate, Stated Percentage	9.00%
Proceeds from notes payable issued to related parties	$ 90,000
Related Party Transaction, Rate	14.00%
4 Year 8% secured note
Notes Payable, Noncurrent	$ 47,500
4 Year 8% secured note | Director
Notes Payable, Current	$ 25,000
Debt Instrument, Interest Rate, Stated Percentage	8.00%

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Note 6. Notes Payable: Schedule of Notes Payable (Details)	Sep. 30, 2016 USD ($)
Notes Payable, Noncurrent	$ 137,500
Related Parties
Notes Payable, Noncurrent	115,000
Others
Notes Payable, Noncurrent	22,500
4 Year 8% secured note
Notes Payable, Noncurrent	47,500
4 Year 8% secured note | Related Parties
Notes Payable, Noncurrent	25,000
4 Year 8% secured note | Others
Notes Payable, Noncurrent	22,500
4 Year 14% secured note
Notes Payable, Noncurrent	90,000
4 Year 14% secured note | Related Parties
Notes Payable, Noncurrent	90,000
4 Year 14% secured note | Others
Notes Payable, Noncurrent	$ 0

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Note 7. Convertible Debentures and Derivative Liability (Details)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 31, 2014 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)	Mar. 31, 2014 USD ($)
Amortization of debt discount		$ 19,805	$ 9,595	$ 49,805	$ 35,375
Tranche 1
Unamortized discount							$ 1,000,000
Tranche 2
Unamortized discount							$ 850,000
Convertible Debt Securities
Unamortized discount		1,685,011		1,685,011		$ 1,733,157
Amortization of debt discount				48,146	34,574
Convertible Debt Securities | February 14, 2014 Private Placement
Maximum Offering Amount				3,000,000
Debt Instrument, Face Amount		$ 1,000,000		$ 1,000,000
Debt Instrument, Interest Rate, Stated Percentage		4.00%		4.00%
Debt Instrument, Maturity Date, Description				mature six years from the date of issuance
Convertible Debt Securities | February 14, 2014 Private Placement | Derivative Financial Instruments, Liabilities
Fair Value Measurements, Valuation Techniques				Monte Carlo models
Fair Value Assumptions, Expected Volatility Rate				168.00%		132.00%
Convertible Debt Securities | February 14, 2014 Private Placement | Derivative Financial Instruments, Liabilities | Minimum
Fair Value Inputs, Discount Rate				5.62%		6.45%
Convertible Debt Securities | February 14, 2014 Private Placement | Derivative Financial Instruments, Liabilities | Maximum
Fair Value Inputs, Discount Rate				6.39%		7.07%
Convertible Debt Securities | February 14, 2014 Private Placement | Tranche 1
Investors that consented to amended conversion terms, amount of offering	$ 950,000
Investors that did not consent to amended conversion terms, amount of offering	$ 50,000
Debt Instrument, Convertible, Number of Equity Instruments	3,166,666
Convertible Debt Securities | February 14, 2014 Private Placement | Tranche 2
Investors that consented to amended conversion terms, amount of offering	$ 850,000
Investors that did not consent to amended conversion terms, amount of offering	$ 300,000
Debt Instrument, Convertible, Number of Equity Instruments	1,888,889
Non-convertible Debenture
Amortization of debt discount				$ 1,659	$ 801
Corporate Debt Securities
Unamortized discount		$ 46,044		46,044		$ 47,703
Interest payable		$ 57,000		$ 57,000

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Note 7. Convertible Debentures and Derivative Liability: Schedule of Derivative Liabilities at Fair Value (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Derivative Liability, Current	$ 1,923,593	$ 1,704,570
Tranche 1
Derivative Liability, Current	944,344	893,731
Tranche 2
Derivative Liability, Current	$ 978,249	$ 810,839

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Note 8. Related Party Transactions (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Accrued payroll due officers	$ 1,694,711		$ 1,469,711
Accrued interest	1,156,022		962,842
Operating Leases, Rent Expense, Net		$ 50,779
Accrued director fees	288,750		221,250
Litigation Settlement, Amount	150,000
Office Space Lease
Debt Instrument, Periodic Payment	4,534
Base rent expense	40,806	40,806
Associated rental costs	9,303	9,973
Operating Leases, Rent Expense, Net	50,109
Payments for Rent	27,204	36,272
President
Accrued payroll due officers	$ 1,491,996
Debt Instrument, Interest Rate, Stated Percentage	9.00%
Rent reimbursed	$ 7,744
Accrued rents	92,218		$ 74,654
Proceeds from Collection of Advance to Affiliate	15,000
Payment for Advance	15,000
Vice President
Accrued payroll due officers	121,140
Management
Accrued interest	100,390	$ 82,797
Director
Directors Fees	15,000
Litigation Settlement, Expense	$ 15,000

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Note 9. Commitments and Contingencies (Details)	9 Months Ended
	Sep. 30, 2016 USD ($)
Proceeds from Legal Settlements	$ 225,000
Legal Fees	75,000
Litigation Settlement, Amount	150,000
Employee Stock Ownership Plan Penalties Prescribed	4,000
Reversal of previously accrued DOL penalties	$ 240,050
College Health & Investment, L.P. v. Diamondhead Casino Corporation
Debt Instrument, Interest Rate, Stated Percentage	12.00%
College Health & Investment, L.P. v. Diamondhead Casino Corporation | Principal
Loss Contingency, Damages Sought, Value	$ 150,000
College Health & Investment, L.P. v. Diamondhead Casino Corporation | Interest
Loss Contingency, Damages Sought, Value	45,000
College Health & Investment, L.P. v. Diamondhead Casino Corporation 2
Loss Contingency, Damages Sought, Value	150,000
College Health & Investment, L.P. v. Edson R. Arneault, Deborah A. Vitale, Gregory A. Harrison, Martin Blount and Benjamin Harrell
Loss Contingency, Damages Sought, Value	150,000
United States Bankruptcy Court
Loss Contingency, Damages Sought, Value	$ 237,500
College Health & Investment, L.P.
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	5.00%
Management
Lien Amount	$ 2,000,000