10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


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

For the quarterly period ended September 30, 2023


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

For the transition period from to

COMMISSION FILE NUMBER: 333-147447

SALAMANDER INNISBROOK, LLC


State of Organization: Florida		IRS Employer Identification No. 26-0442888

36750 US Highway 19 North, Palm Harbor, FL 34684

Telephone Number: (727) 942-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

247 Condominium Rental Pool Units

_____________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such 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 the Regulation S-T (229.405 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  NO 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and emerging growth company” in Rule 12b-2 of the Exchange Act.


(Check one):	Large accelerated filer 	Accelerated filer 	Non-accelerated filer 
	Smaller reporting company 	Emerging growth company 

If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  NO 

No established market exists for the Registrant’s membership interests, so there is no market value for such membership interests. There are no membership interests held by non-affiliates as of November 14, 2023. Issuer has no common stock subject to this report.

SALAMANDER INNISBROOK, LLC

QUARTERLY REPORT ON FORM 10-Q

AS OF SEPTEMBER 30, 2023

INDEX


Item 1. Condensed Consolidated Financial Statements of Salamander Innisbrook, LLC		4

Salamander Innisbrook, LLC

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022		4
Condensed Consolidated Statements of Operations and Changes in Member’s Equity (Unaudited) for the three and nine months ended September 30, 2023 and 2022		5
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2023 and 2022		6
Notes to Condensed Consolidated Financial Statements (Unaudited)		7

Supplemental Schedules of the Rental Pool Lease Operation
Balance Sheets – Distribution Fund as of September 30, 2023 (Unaudited) and December 31, 2022		12
Balance Sheets – Maintenance Escrow Fund as of September 30, 2023 (Unaudited) and December 31, 2022		13
Statements of Operations- Distribution Fund (Unaudited) for the three and nine months ended September 30, 2023 and 2022		14
Statements of Changes in Participants’ Fund Balances -Distribution Fund (Unaudited) for the three and nine months ended September 30, 2023 and 2022		15
Statements of Changes in Participants’ Fund Balances -Maintenance Escrow Fund (Unaudited) for the three and nine months ended September 30, 2023 and 2022		16
Notes to Financial Statements		17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 3. Quantitative and Qualitative Disclosures about Market Risk		20

Item 4. Controls and Procedures		21

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		22
Item 1A. Risk Factors		22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22
Item 3. Defaults Upon Senior Securities		22
Item 4. Mine Safety Disclosures		22
Item 5. Other Information		22
Item 6. Exhibits		22

Signatures		24

Cautionary Note Regarding Forward-Looking Statements

The following report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that predict or describe future events or trends and that do not relate solely to historical matters. All of our projections in this annual report are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “appears,” “believe,” “expect,” “hope,” “may,” “will,” “anticipate,” “intend,” “estimate,” “project,” “assume” or other similar expressions. Certain factors that might cause such a difference include the following: changes in general economic conditions; including changes that may influence group conference and guests’ vacation plans; changes in travel patterns; changes in consumer tastes in destinations or accommodations for group conferences and vacations; changes in Rental Pool participation by the current condominium owners; our ability to continue to operate the Innisbrook Resort and Golf Club, or the “Resort” under our management contracts; and the resale of condominiums to owners who elect neither to participate in the Rental Pool nor to become members of the Resort. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known (and unknown) risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the limited information currently available to us and speak only as of the date on which this report was filed with the Securities Exchange Commission. Our continued internet posting or subsequent distribution of this dated report does not imply continued affirmation of the forward-looking statements included in it. We undertake no obligation, and we expressly disclaim any obligation, to issue any updates to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Future events are inherently uncertain. Moreover, it is particularly difficult to predict business activity levels at the Resort with any certainty. Accordingly, our projections in this annual report are subject to particularly high uncertainty.

Our projections should not be regarded as legal promises, representations or warranties of any kind whatsoever. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and harmful to your interests.

PART I

ITEM 1. Condensed Consolidated Financial Statements

SALAMANDER INNISBROOK, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash	$	2,666,142	$	4,402,268
Accounts receivable, net		1,152,582		1,722,160
Inventories and supplies		1,013,617		1,170,340
Due from affiliates		464,794		234,875
Prepaid expenses and other current assets		851,971		1,360,992
Total current assets		6,149,106		8,890,635

Property, buildings and equipment, net		33,058,005		32,208,946
Operating lease right-of-use assets		752,085		96,157
Intangibles		4,330,001		4,330,001
Deferred contract costs, net		237,449		927,337
Restricted cash		2,041,226		2,041,226
Deposits and other assets		835,360		751,763
Total assets	$	47,403,232	$	49,246,065

Liabilities and Member's Equity
Current liabilities:
Accounts payable	$	1,249,223	$	1,561,469
Accrued liabilities		2,104,293		2,222,130
Rental Pool liability		473,655		783,932
Current portion deferred revenues		4,740,014		4,868,236
Due to affiliates		794,234		295,640
Current portion - operating leases		220,674		96,157
Current portion - note payable		876,609		876,609
Total current liabilities		10,458,702		10,704,173

Deferred revenues, net of current portion		1,430,024		1,662,541
Operating leases, net of current portion		531,411		—
Note payable, net of current portion and unamortized deferred financing costs		8,558,532		9,219,524
Total liabilities		20,978,669		21,586,238

Member's equity		26,424,563		27,659,827
Total liabilities and member’s equity	$	47,403,232	$	49,246,065

See notes to condensed consolidated financial statements.

SALAMANDER INNISBROOK, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenues:
Room revenues	$	1,115,057		$	1,211,894		$	7,438,877		$	6,850,799
Other revenues		5,389,608			5,511,695			27,677,050			26,328,898
Total revenues		6,504,665			6,723,589			35,115,927			33,179,697

Costs and expenses:
Operating costs and expenses		6,852,648			6,464,752			18,285,648			15,900,868
General and administrative		1,993,323			1,769,775			15,398,694			13,744,621
Depreciation and amortization		650,022			576,441			1,942,476			1,916,169
Total costs and expenses		9,495,993			8,810,968			35,626,818			31,561,658

Operating (loss) income		(2,991,328	)		(2,087,379	)		(510,891	)		1,618,039

Gain on forgiveness of Paycheck Protection Program loan		—			—			—			2,000,000
Income tax		(185,296	)		—			(185,296	)		—
Interest expense		(22,269	)		(109,024	)		(539,077	)		(278,171	)

Net (loss) income		(3,198,893	)		(2,196,403	)		(1,235,264	)		3,339,868

Member's equity, beginning of period		29,623,456			30,659,654			27,659,827			25,123,383
Member's equity, end of period	$	26,424,563		$	28,463,251		$	26,424,563		$	28,463,251

See notes to condensed consolidated financial statements.

SALAMANDER INNISBROOK, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net (loss) income	$	(1,235,264	)	$	3,339,868
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Provision for bad debts		5,810			6,400
Gain on forgiveness of Paycheck Protection Program Loan		—			(2,000,000	)
Depreciation and amortization		1,942,476			1,916,169
Amortization of deferred financing costs		2,824			59,167
Amortization of lease right-of-use assets		162,750			279,225
Changes in operating assets and liabilities:
Accounts receivable		563,768			706,045
Inventories and supplies		156,723			(222,091	)
Prepaid expenses and other current assets		509,021			(199,110	)
Accounts payable		(312,246	)		(639,567	)
Accrued liabilities and Rental Pool liability		(428,114	)		(378,174	)
Deferred revenues		(360,739	)		(66,727	)
Deposits and other assets		(83,597	)		(148,270	)
Due to/from affiliates, net		268,675			(321,836	)
Operating lease liabilities		(162,750	)		(279,225	)
Net cash provided by operating activities		1,029,337			2,051,874

Cash flows from investing activities:
Cash paid for deferred contract costs		—			(4,204	)
Purchases of property and equipment		(2,101,647	)		(997,810	)
Net cash used in investing activities		(2,101,647	)		(1,002,014	)

Cash flows from financing activities:
Repayments of note payable		(663,816	)		(626,836	)
Net cash provided by (used in) financing activities		(663,816	)		(626,836	)

Net change in cash and restricted cash		(1,736,126	)		423,024
Cash and restricted cash, beginning of period		6,443,494			5,267,750
Cash and restricted cash, end of period	$	4,707,368		$	5,690,774

Supplemental disclosure of cash flow information:
Cash paid for interest	$	477,625		$	130,714
Cash paid for income taxes	$	185,296		$	—

Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liability	$	914,835		$	—
Operating lease termination and offset of Right-of-use asset and lease liability	$	96,157		$	—

See notes to condensed consolidated financial statements.

SALAMANDER INNISBROOK, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies

Nature of business

Salamander Innisbrook, LLC (the “Company”), owns and operates the Innisbrook Resort and Golf Club (the “Resort”). The Company is owned by a sole member who does not have any personal liability for any of the Company’s obligations except as expressly provided by law and/or contractual obligation. The Company owns three condominiums under Salamander Innisbrook Condominiums, LLC.

The Company controls and operates the Rental Pool Lease Operation (the “Rental Pool”), a securitized pool of condominiums owned by participating condominium owners (the “Participating Owners”) and rented as hotel rooms to guests of the Resort (an average of 247 units or 293 hotel rooms participate at any given time). Pursuant to the Innisbrook Rental Pool Master Lease Agreement, dated January 1, 2014 (the “Master Lease” or “MLA”), quarterly distributions of a percentage of room revenues are required to be made to the condominium owners participating in the Rental Pool. Other resort facilities include four 18-hole golf courses, four restaurants, three convention facilities, a health spa, fitness center, tennis and recreation facilities, themed water park and five swimming pools.

Basis of presentation

The accompanying condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Quarterly Report on Form 10-Q. Consequently, they do not include all disclosures normally provided in the audited financial statements included in the Company’s Annual Report on Form 10-K. Accordingly, these condensed financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

In the opinion of management, the condensed financial statements reflect all adjustments which are necessary for a fair presentation of the financial information. All such adjustments are of a normal recurring nature.

As a destination golf resort, open year round, the Resort’s performance is sensitive to weather conditions and seasonality as well as general trends in the economy, with economic downturns adversely affecting our operating results. Our operations are seasonal with the highest volume of revenue generated in the first two quarters of each calendar year. Due to the seasonal business of the Company, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year.

Reclassification - Certain current year expenses for the nine months ended September 30, 2023, have been reclassified for consistency with the current quarter presentation for the three months ended September 30, 2023. These reclassifications had no effect on the reported results of operations and no impact on 2022 prior period figures presented. Specifically, we reclassified $3,119,966 from general and administrative to operating costs and expenses and $163,976 from interest expense to income tax expense for the nine months ended September 30, 2023 presentation.

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates that are critical to the accompanying consolidated financial statements include our beliefs that all of our long-lived assets, are recoverable, and that our estimates of the average lives of memberships from which we base our revenue recognition are reasonable. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the periods they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term with respect to these matters.

2. Property, Buildings and Equipment

Property, buildings, and equipment consist of the following as of September 30, 2023 and December 31, 2022:


	September 30, 2023			December 31, 2022
Land and land improvements	$	21,955,901		$	21,846,601
Buildings		29,634,156			28,545,967
Furniture, fixtures and equipment		11,747,815			11,531,015
Construction in progress		1,175,713			493,129
		64,513,585			62,416,712
Less accumulated depreciation and amortization		(31,455,580	)		(30,207,766	)
	$	33,058,005		$	32,208,946

Depreciation expense was approximately $419,000 and $345,000 for the quarters ended September 30, 2023 and 2022, respectively, and approximately $1,249,000 and $1,223,000 for the nine months ended September 30, 2023 and 2022, respectively.

3. Leases

Operating Leases

On December 20, 2018, we entered into a master lease agreement with DLL Finance, LLC under which we had three leases of golf carts and utility vehicles. Total monthly payments under the leases of $32,300 commenced in April 2019, and continued through March 31, 2023.

On November 8, 2022, we entered into a new lease agreement with DLL Finance, LLC, for golf carts. Total monthly payments under the lease of $20,654 commenced in January 2023, and continue for a period of 48 months.

As of September 30, 2023, the remaining lease terms in years approximated three and a quarter years and the discount rate was 4.17%. Operating lease liabilities are recorded based on the present value of the future lease payments over the lease terms.

Future minimum lease payments under operating leases for the remaining three months ended December 31, 2023 and the year ended December 31, 2024 through 2026 are as follows:


Periods Ending December 31,
2023 (Remaining 3 months)	$	61,961
2024		247,842
2025		247,842
2026		247,842
Total future minimum lease payments		805,487
Less current portion		(220,674	)
Less imputed interest		(53,402	)
Non-current present value of future minimum lease payments	$	531,411

Operating lease expense approximated $62,000 and $97,000 for each of the quarters ended September 30, 2023 and 2022, respectively, and approximately $330,000 and $262,000 for each of the nine months ended September 30, 2023 and 2022, respectively.

4. Contingency

performed. On July 13, 2022, we and AMH entered into a settlement agreement with certain amounts to be paid over a two-year period, and included a signed a confessed judgment in the amount of $4,012,154. Payments began on August 1, 2022 and were supposed to continue through December 1, 2024; however, on December 15, 2022, AMH filed for Chapter 7 (also commonly known as “liquidation”) bankruptcy. We received total payments of approximately $165,000 prior to such bankruptcy filing. We are working with our legal counsel to determine next steps.

5. Retirement Plan

We sponsor a defined contribution retirement plan, which provides retirement benefits for all eligible employees. Employees must fulfill a 90-day service requirement to be eligible to participate in this plan. We match one half of the first 6% of the contributions of each employee. We made matching contributions of approximately $82,000 and $60,000 for the quarters ended September 30, 2023 and 2022, respectively, and approximately $260,000 and $186,000 for the nine months ended September 30, 2023 and 2022, respectively.

6. Rental Pool Operations

In December 2013, we entered a Master Lease Agreement (“Agreement”) with the Rental Pool’s Lessors Advisory Committee (“LAC”). The Agreement commenced on January 1, 2014 and expires on December 31, 2023. Negotiations for a new agreement are underway and we anticipate finalizing such agreement during Q4 2023. Under the Agreement, the Resort pays the Participant a quarterly distribution equal to 40% of the Adjusted Gross Revenues on the first $10 million, 45% between $10 million and $11 million, and 50% above $11 million. The Participants are also entitled to 35 nights in-season and complimentary gift certificates for golf and food & beverage. Their guests will be entitled to the same privileges as the Participants when occupying the participant’s units. As of September 30, 2023 and December 31, 2022, amounts available to Participants under the Agreement approximated $362,000 and $690,000, respectively. The balances, along with the incentives discussed in the following paragraph are reflected as Rental Pool liabilities in the accompanying consolidated balance sheets. The liabilities were paid subsequent to the respective period ends.

On August 20, 2018, the Second Addendum to the Master Lease Agreement became effective. The addendum defined the Turn-Key renovation, the customization of certain units that did not require a full renovation, and provided for an incentive payment plan (“Incentive”) to be paid by us to the Participants. The Incentive provides for a quarterly payment to each participant, beginning on January 1, 2019 and ending on December 31, 2023, so long as the unit continues to participate in the Rental Pool. Incentive payments due as of September 30, 2023 and December 31, 2022 totaled $111,972 and $93,769, respectively.

On July 2, 2019, the Third Addendum to the MLA became effective. The addendum provided with two options for funding of the cost overruns created by the default of AMH. The first option provided that we would fund the cost overruns in exchange for the Participating Owner’s dedication of their unit to the Rental Pool as evidenced by a Memorandum of Lease recorded against the title of such participant’s unit in the land records of Pinellas County. The second option provided an additional incentive payment equal to the cost overrun amount in the form of quarterly payments, adjusted annually, resulting in a reimbursement of 10% of the total amount in 2019, 15% in 2020, 20% in 2021, 25% in 2022, and the remainder in 2023. Participants choosing option 1 represented 192 units (233 doors) and Participants choosing option 2 represented 13 units (15 doors). For option 1, we paid Participants $3,146,363 in 2019, which amount is being amortized over the five-year term of the participants’ lease dedication beginning January 1, 2019 and ending on December 31, 2023. Amortization expense of this asset (i.e. Deferred Contract Costs) during the quarters ended September 30, 2023 and 2022 approximated $231,000 and $229,000, respectively, and approximately $693,000 for the nine months ended September 30, 2023 and 2022, respectively, and are included in depreciation and amortization expense.

The remaining balance of this asset as of September 30, 2023 was $237,449 and such amount is expected to be fully amortized by December 31, 2023.

7. Other Related Party Transactions

We incurred management fees to Salamander Hospitality, LLC, an entity related to us by virtue of common ownership, of approximately $189,000 and $198,000 during the quarters ended September 30, 2023 and 2022, respectively, and approximately $1,041,000 and $975,000 during the nine months ended September 30, 2023 and 2022, respectively. These fees are included in general and administrative expenses in the accompanying consolidated statements of operations.

At September 30, 2023 and December 31, 2022, we owed our affiliates approximately $794,000 and $296,000, respectively, and had receivables from our affiliates of approximately $465,000 and $235,000, respectively. The affiliate receivables and payables are unsecured, non-interest bearing and are due on demand.

Pursuant to terms of the Agreement, the Innisbrook Rental Pool Lease Operation reimbursed us approximately $52,000 and $31,000 during the respective quarters ended September 30, 2023 and 2022, and approximately $140,000 and $126,000 for the respective nine month periods ended September 30, 2023 and 2022, for maintenance and housekeeping labor, use of the telephone lines and other supplies. These reimbursements are reflected as reductions of general and administrative expenses in the accompanying consolidated statements of operations.

All three of the condominiums that we own participated in the Rental Pool under the Agreement in 2023 and 2022, in the same manner as all other Rental Pool participants.

8. Note Payable

We are obligated under a loan agreement with Truist Bank. The loan requires monthly principal payments of $73,051 plus interest through July 5, 2034 at which time the balance will be paid (the interest rate was 7.7% at September 30, 2023).

The loan is collateralized by our real and personal property, the assignment and/or subordination of leases and our management agreement with an affiliate and guarantees by certain affiliates.

Future maturities of the note payable are as follows as of September 30, 2023:


Year ending December 31,
2023 (Remaining 3 months)	$	219,152
2024		876,609
2025		876,609
2026		876,609
2027		876,609
2028-2034		5,771,008
		9,496,596
Less current portion		(876,609	)
Less unamortized deferred financing costs		(61,455	)
Note payable - non current	$	8,558,532

9. Sale of Land

On April 13, 2021, we entered into an Agreement for the Sale and Purchase of Real Property with Toll Brothers, Inc. for the sale and residential development of approximately 54 acres of land along the northern boundary of the property. The sale is contingent upon approval of a land use plan amendment and an amendment to the RPD master plan for Innisbrook from Pinellas County and other governmental agencies, as well as receipt of an approved site plan. On May 24, 2022, our application for an amendment to our Land Use Plan and an amendment to the RPD master plan was unanimously approved for transmission to the State of Florida by the Board of County Commissioners of Pinellas County. We are continuing through the regulatory approval process. On October 25, 2022, the Pinellas County Board of County Commissioners unanimously approved Innisbrook’s application to amend our Master Plan and Plan Amendments and adopted Ordinance No. 22-31 amending the Countywide Plan Map, ordinance No. 22-36 amending the Future Land Use Map, and Resolution No. 22-95 for modification of the Development Master Plan on a Residential Planned Development. Toll Brothers received final site plan approval from Pinellas County on October 6, 2023. The closing of the sale is expected to occur by November 17, 2023.

10. Other Subsequent Events

None.

SUPPLEMENTAL SCHEDULES OF RENTAL POOL LEASE OPERATION

HISTORICAL SUMMARY

The operation of the Rental Pool is tied closely to the Resort operations. The Rental Pool Master Lease Agreement provides for a quarterly distribution of a percentage of the room revenues to participating condominium owners (“Participants”), as defined in the agreements (see Note 1 of the Rental Pool Lease Operation financial statements). Because the Rental Pool participants share in a percentage of the room revenues, the condominium units allowing Rental Pool participation are deemed to be securities. However, there is no market for such securities other than through sales of the normal real estate market. Since the security is related to real estate, no dividends have been paid or will be paid.