UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
Commission File No.
State of Organization: |
| IRS Employer Identification No. |
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Telephone Number: ( |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act
Yes ☐
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 ☐
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. ☒
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 the 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 | ☐ | ||
☒ | Smaller Reporting Company | |||||
Emerging Growth Company |
If an 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No
No established market exists for the Registrant’s membership interests, so there is
Issuer has
EXPLANATORY NOTE
On May 5, 2023, Salamander Innisbrook, LLC (the “Company”) filed its Annual Report on Form 10-K (the “Original Form 10-K”). The purpose of this Amendment No. 1 to the Original Form 10-K is to replace the Consolidated Statement of Cash Flows which in the Original Form 10-K contained an inadvertent numerical error. No other items of the Original Form 10-K are being amended and this Amendment does not reflect any events occurring after the filing of the Original Form 10-K.
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SALAMANDER INNISBROOK, LLC
ANNUAL REPORT ON FORM 10-K
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
3
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.
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PART I
ITEM 1. BUSINESS
Background
Salamander Innisbrook, LLC (the “Company”) was organized on June 14, 2007, by Salamander Farms, LLC under the laws of the state of Florida for the purpose of owning and operating Innisbrook Resort and Golf Club (the “Resort”). The Company, and its wholly owned subsidiaries, Salamander Innisbrook Securities, LLC and Salamander Innisbrook Condominium, LLC, are hereinafter referred to as “we”, “us”, “our”. On July 16, 2007, we purchased the Resort, three condominiums, which became Salamander Innisbrook Condominiums, LLC, and all of the equity interests in Golf Host Securities, Inc. from Golf Trust of America, Inc. and its subsidiaries and affiliates. The Resort is a full service 72-hole destination golf and conference facility located near Tampa, Florida. The Resort features 1,216 condominium rooms, all of which are owned by third parties or affiliates. Approximately 296 condominium owners (representing 295 hotel rooms) participate in a rental pool (the “Rental Pool”) we operate.
Rental Pool Condominiums
Condominium ownership is a realty subdivision in which the individual “lots” are deemed apartment units. Instead of owning a plot of ground, the condominium owners own the space where their condominium units are located. This leaves substantial properties in interest which are not individually owned, such as the underlying land, driveways, parking lots, building foundations, exterior walls and roofs, garden areas and utility lines. These areas are termed common property or common elements. Each condominium owner has an undivided fractional interest in the common property.
The condominium owners at the Resort have established an Association of Condominium Owners (the “Association”), to administer and maintain this common property and to conduct the business of the condominium owners. In particular, the Association is responsible for maintaining insurance on the real property, upkeep of the structures, maintenance of the grounds, electricity for the common areas, water/sewer and security services. The Association assesses fees to defray these expenses and to establish necessary reserves. An assessment, if not timely paid, may result in a lien being placed upon the unit of a delinquent condominium owner. Each condominium owner must pay ad valorem property taxes, contents insurance, interior maintenance and other matters independent of the other unit owners. These expenses are incurred by each owner of condominium units whether or not the unit participates in the Rental Pool at the Resort. With respect to governing the affairs of the Association, the participating condominium owners are accorded one vote per condominium unit owned. State statutes also impact the way in which the Association’s affairs are administered.
Markets and Marketing
The Resort is located in Palm Harbor, Florida and is a destination golf resort that appeals to group convention business and leisure travelers within all market segments. The Resort caters to corporate meeting planners and sports enthusiasts within a variety of industries, the majority of which are located in central and eastern United States. The Resort markets through most of the typical channels utilizing e-commerce, print media, third party representation firms, travel agents and wholesalers.
The Resort provides condominium accommodations, four dining locations, room service, over 65,000 square feet of banquet and catering space, 72 holes of golf, golf instruction, a full-service spa and fitness center, tennis center and recreational entertainment to members, business meeting attendees, group meeting guests, leisure guests and their families. The Resort offers room-only rates, golf packages, and family vacation packages. Larger golf or conference groups typically involve contractual agreements. Accordingly, we do not believe that the loss of a single conference or even a few conferences of average size would have a significant adverse impact on our business taken as a whole.
The Resort’s accommodations are condominium units that are owned by third parties or us. These units are sold by registered securities brokers, including Golf Host Securities, Inc., which is one of our subsidiaries.
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Seasonality
The Florida resort industry is seasonal in nature and historically the Resort’s business levels are stronger in the winter and spring months as guests come from the northeast and other colder regions to enjoy the warm weather. In contrast, there is a decline in business levels during the summer months as the hot summer weather makes Florida less appealing for group golf outings and vacation destination golfers. The Resort uses seasonal pricing (peak, shoulder and off-peak) to maximize revenues. The Resort may also experience reduced bookings as a result of hurricane-related concerns.
PGA TOUR Event
The Valspar Championship, a nationally televised, annual PGA TOUR event, was contested on Innisbrook’s Copperhead course April 29 – May 2, 2021. This was a capacity restricted event by the PGA TOUR due to lingering COVID 19 concerns. The TOUR restricted attendance to 12,000 patrons per day. Further, there were mandated elimination of group gatherings, masking guidelines and spacing requirements.
The 2022 Valspar Championship was contested at Innisbook’s Copperhead course March 17-20, 2022 without any COVID related restrictions. Further, the tournament dates returned the event to the “Florida Swing” where four tournaments are contested on consecutive weekends in the state. There is a long-term agreement between the PGA TOUR, Copperhead Charities and Innisbrook through the 2025 event to contest the event on the Copperhead course. This coincides with the current agreement between Valspar and the PGA TOUR that expires after the 2025 event. Attendance estimates are expected to be roughly 30,000 patrons per day.
Intellectual Property
The Resort has registered service marks and domain names that are necessary for the Resort to effectively conduct business. Service marks include “Innisbrook” #955489, registered March 13, 1973, and the Innisbrook shield logo #955488 registered March 13, 1973. The operations of the Resort are not considered to be dependent upon the availability of raw materials, nor any adverse effects that may result from the duration of patents, licenses, franchises or concessions.
Competition
Conveniently located near the Florida Gulf Coast and Tampa International Airport, the Resort is located within 900 acres of a dramatically landscaped setting. The Resort competes using a unique price/value strategy through its offering of spacious accommodations, high levels of customer service, award-winning golf, and one of the largest conference facilities in the southeastern United States. The Resort’s major competitors are other similar golf and conference-oriented resorts in the southeastern United States.
Research and Development
We have no research and development expenses.
Environmental Matters
Operation of the golf courses at the Resort involves the use and storage of various hazardous materials such as herbicides, pesticides, fertilizers, motor oils and gasoline. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of hazardous substances. As of May 05, 2023, we are not aware of any violations of these laws, ordinances and regulations.
Government Regulation
The Resort is subject to the Americans with Disabilities Act (“ADA”) of 1990. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities”, but generally requires public facilities such as clubhouses and recreation areas to be accessible to people with disabilities. Noncompliance could result in imposition of fines or an award of damages to private litigants. We are responsible for compliance costs incurred at the Resort. The condominiums in the Rental Pool are residential properties and are not subject to ADA.
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Employees
At December 31, 2022, we had 414 employees; 306 full-time and 108 part-time. We also periodically engage casual laborers as needed.
Code of Ethics
See Part III, Item 10 for discussion of our Code of Business Conduct.
ITEM 1A. RISK FACTORS
Not required for Smaller Reporting Company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Resort is situated on approximately 900 acres of land located in the northern portion of Pinellas County, Florida, near the Gulf of Mexico. It is approximately 9 miles north of Clearwater and approximately 20 miles west of Tampa. There are 938 condominium units, 36 of which are strictly residential, with the balance eligible for Rental Pool participation. Of the 902 remaining eligible units, approximately 250 participate in the Rental Pool. See additional discussion in Item 1 under the caption “Rental Pool Condominiums.” These condominium units are leased by us from the condominium owners and used as hotel accommodations for the Resort. We also own three condominium units, all of which participate in the Rental Pool in the same fashion as all other Rental Pool participants. Approximately 20% of the units have lockout master bedroom units, which allow the rental of the condominium unit as two hotel rooms. As a result of the potential use of lockout master bedroom units, the total number of rooms at the resort is 1,218 and the average number of units participating in the Rental Pool at any one time is equivalent to approximately 295 hotel rooms. The Resort complex includes 72 holes of golf, practice ranges, three clubhouses with retail, golf, and food and beverage outlets, three conference and exhibit buildings, a full-service spa and fitness center, six swimming pools including a themed water attraction, a recreation facility, a tennis facility, and numerous administrative and support structures. These amenities are owned by the Company and have undergone substantial renovation and improvements since we purchased the Resort in 2007.
ITEM 3. LEGAL PROCEEDINGS
At December 31 2021, we were involved in certain litigation arising from a full-service construction contract we previously entered (as agent for and on behalf of the Rental Pool participants) with AMH Construction, Inc. (“AMH”) in the amount of $3,420,670. The litigation arose from our decision to terminate the contract with AMH for breach of contract, including AMH’s failure to complete the renovation work in accordance with the contract schedule. On April 18, 2019, we served a demand letter to AMH asserting damages of $4,423,070 for the additional costs incurred by the Participating Owners and return of deposits made for work that was not 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.
ITEM 4. MINE SAFETY DISCLOSURES
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
We are a single member limited liability company and do not have any stock. Our membership interests are not publicly traded.
There are 902 deeded condominium units allowing Rental Pool participation by their owners, of which three are owned by us.
The condominium units that are leased to us for Rental Pool participation, are deemed to be securities. These units are hereinafter referred to as Rental Pool Securities. These securities are deemed securities pursuant to the Securities Act of 1933, as amended, but there is no market for such securities other than sales through the normal real estate market.
Because the Rental Pool Securities are real estate related, no dividends have been paid or will be paid to their owners. However, the Rental Pool lease agreements provide that the Rental Pool participants are entitled to a contractual distribution paid quarterly in exchange for our right to use their condominium units in the Rental Pool.
ITEM 6. SELECTED FINANCIAL DATA
Not required for Smaller Reporting Company.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
The following accounting policies are considered critical to the preparation of our consolidated financial statements. These and other accounting policies require that estimates be made based on assumptions and judgment, which can affect the reporting of revenues, expenses, assets, liabilities and disclosure of contingencies in our consolidated financial statements. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. However, actual results may differ from changes in these estimates and assumptions.
Revenue Recognition
Revenues are derived from a variety of sources including, but not limited to, hotel, food and beverage operations, retail sales, golf course operations and commissions on real estate transactions. With the exception of initiation fees and membership dues, all revenues net of any sales and other taxes collected are recognized as products are delivered or services are performed.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under the new revenue recognition standard. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our revenue is transactional, and the contracts performance obligation is generally satisfied at the time of the transaction.
Revenues from performance obligations satisfied over time include membership dues, annual fees and initiation fees. The membership initiation fees at the Resort are nonrefundable and are initially recorded when received as deferred revenue and amortized over the average life of a membership which, based on historical information, is deemed to be ten years for full golf members and five years for resort and executive memberships. Membership dues and annual fees are recognized over the applicable membership period (three months to one year depending on type of membership).
Intangible Assets
We evaluate our indefinite lived intangible assets for impairment annually or at an interim date if a significant event occurs or circumstances indicate that the assets may not be recoverable. Factors we consider important, and which could indicate impairment, include the following: (I) significant underperformance relative to historical or projected future operating results; (ii) significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and (iii) significant negative industry or economic trends.
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Our intangible assets consist of: (i) a water contract; and (ii) our trademark and trade name. The valuation of the water contract is based on the projected annual savings associated with having this contract. The valuation of the trademark and trade name is derived from the residual revenue streams from Resort revenues that is attributed to the Innisbrook trade name. We attribute an indefinite life to both of these intangibles.
During the year ending December 31, 2022, we evaluated our intangible assets, and determined that the carrying balances of such assets were recoverable.
Impairment of Other Long-Lived Assets
We review our other long-lived assets for impairment if a significant event occurs or circumstances arise that indicate the assets may not be recoverable by comparing the carrying values of the assets with their estimated future undiscounted cash flows. In reviewing impairment of our long-lived assets, we review the recent operating and pricing trends with the financial performance of the Resort in the aggregate for material variances from our expectations of the Resort’s revenues. At December 31, 2022, we believe the carrying values of our other long-lived assets are recoverable.
Loss Contingencies
We estimate loss contingencies in accordance with FASB ASC 450-20 Loss Contingencies, which states that a loss contingency shall be accrued by a charge to operations if both of the following conditions are met: (a) information available before the consolidated financial statements are issued or are available to be issued indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated.
Results of Operations
Year ended December 31, |
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| 2022 |
| % |
| 2021 |
| % |
| Inc/(dec) |
| % Chg |
| ||||
Resort revenues: |
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Room revenues | $ | 8,853,581 |
| 20.0 | % | $ | 6,967,712 |
| 20.1 | % | $ | 1,885,869 |
| 27.1 | % | |
Other revenues |
| 35,343,422 |
| 80.0 | % |
| 27,641,314 |
| 79.9 | % |
| 7,702,108 |
| 27.9 | % | |
Total revenues |
| 44,197,003 |
| 100.0 | % |
| 34,609,026 |
| 100.0 | % |
| 9,587,977 |
| 27.7 | % | |
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Costs and expenses: | ||||||||||||||||
Operating costs and expenses |
| 17,987,886 |
| 40.7 | % |
| 17,365,673 |
| 50.2 | % |
| 622,213 |
| 3.6 | % | |
General and administrative |
| 22,686,634 |
| 51.3 | % |
| 14,974,490 |
| 43.3 | % |
| 7,712,144 |
| 51.5 | % | |
Depreciation and amortization |
| 2,563,774 |
| 5.8 | % |
| 2,592,004 |
| 7.5 | % |
| (28,230) |
| -1.1 | % | |
Total costs and expenses |
| 43,238,294 |
| 97.8 | % |
| 34,932,167 |
| 100.9 | % |
| 8,306,127 |
| 23.8 | % | |
Operating income (loss) |
| 958,709 |
| 2.2 | % |
| (323,141) |
| -0.9 | % |
| 1,281,850 |
| -396.7 | % | |
Gain on forgiveness of Paycheck Protection Program loan | 2,000,000 | 5.8 | % | 3,394,500 | 9.8 | % | (1,394,500) | -41.1 | % | |||||||
Interest expense |
| (422,265) |
| -1.2 | % |
| (348,771) |
| -1.0 | % |
| (73,494) |
| 21.1 | % | |
Net income | $ | 2,536,444 |
| 5.7 | % | $ | 2,722,588 |
| 7.9 | % | $ | (186,144) |
| -6.8 | % |
During 2022 overall resort revenues increased by $9,587,977 or 27.7% compared with the prior year. The increase in revenues was primarily driven by the ongoing recovery from the COVID-19 pandemic. Total costs and expenses increased year-over-year by $8,306,127 or 23.8% which is attributable to inflation and the increase in revenues across the same period.
Our revenues and results of operations improved considerably in 2022 as activity at the Resort increased due to certain restrictions imposed by the COVID 19 pandemic were relaxed.
In April 2020, we received a Paycheck Protection Program loan (“PPP loan”) of $3,394,500. At December 31, 2020, the loan had an interest rate of 1% and a term of 5 years, however under the program, the loan, and related accrued interest, was eligible to be forgiven by the Small Business Administration (“SBA”) for costs we incurred for payroll, rent, utilities, and other allowable expenses in 2020. In 2020, we used the full amount received from the PPP loan for eligible expenses and in 2021 received notice that the entire PPP loan had been forgiven by the SBA. As such, we recognized a gain on the extinguishment of the debt in the amount of the indebtedness in our 2021 consolidated statement of operations.
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In June 2021, we received a second PPP loan of $2,000,000 that had an interest rate of 1% and a term of 5 years. The loan and related accrued interest were eligible for forgiveness by the SBA assuming we used the proceeds for eligible costs (i.e. payroll, rent, utilities, and other allowable expenses). In 2021, we used the full amount received from the PPP loan for eligible expenses and in 2022 received notice that the entire second PPP loan had been forgiven. As such, we recognized a gain on the extinguishment of the debt in the amount of the indebtedness in our 2022 consolidated statement of operations.
Liquidity and Capital Resources
Cash generated from operating activities approximated $3,406,300 and $1,076,600 in 2022, and 2021, respectively. After accounting for the decline in net income in 2022 compared to 2021 of approximately $200,000, the increase in cash generated by operations was approximately $2,300,000 (which change resulted primarily from the following):
● | The gain on forgiveness of debt (which did not generate cash) was approximately $1,394,000 less in 2022 than it was in 2021 |
● | Net cash outflows arising from affiliate receivables and payables were approximately $840,000 less in 2022 compared to 2021. |
We used cash of approximately $1,426,800 and $930,800 for investing activities in 2022 and 2021, respectively. The increase resulted primarily from an increase in purchases of property and equipment of approximately $653,000.
We used cash of approximately $803,700 in 2022 for financing activities and generated cash from such activities of approximately $1,080,500 in 2021. The difference of approximately $1,884,000 resulted primarily from proceeds received from a $2,000,000 paycheck protection loan in 2021.
We are obligated under a note payable that requires monthly payments of principal (approximately $73,000) and interest. On July 5, 2022, the loan was amended whereby it will be paid via monthly principal payments of $73,051 commencing on August 5, 2022 and continuing thereafter until July 5, 2034 at which time the balance will be paid. 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. We believe that our cash on hand and additional cash generated from operations will be adequate to meet this and other obligations (both capital and operating) for the next twelve months.
Legal Entity Structure
Salamander Innisbrook, LLC is a single member limited liability company with Salamander Farms, LLC as the sole member.
Income Tax Status
With the exception of an entity owned by Salamander Innisbrook Securities, LLC for which income taxes have been minimal the Company and its subsidiaries are single member limited liability companies and therefore the results of our operations flow through to our member for inclusion in its income tax returns. Accordingly, no provision or liability for federal or state income taxes has been included in our consolidated financial statements presented in this report.
We have adopted the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this topic, we are required to evaluate each of our tax positions to determine if they are more likely than not to be sustained if the taxing authority examines the respective position. A tax position includes an entity’s tax status, as a pass-through entity, and the decision not to file a tax return. We have evaluated each of our tax positions and have determined that no provision or liability for income taxes is necessary.
We evaluate the validity of our conclusions regarding uncertain income tax positions on an annual basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under examination. Our member files income tax returns in the U.S. federal jurisdiction and the State of Virginia.
Environmental Matters
None.
Off Balance Sheet Arrangements
We do not have any unconsolidated subsidiaries.
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We do not have any relationships with unconsolidated entities or unconsolidated financial partnerships of the type often referenced as structured finance or special purpose entities, i.e., unconsolidated entities established for the purpose of facilitating off balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities, nor do we have any commitment or intent to provide additional funding to any such entities. Accordingly, we believe we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.
Contractual Commitments
The following is a summary of our contractual obligations as of December 31, 2022:
Contractual Obligations |
| Total |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 - 2034 | |||||||
Operating lease obligation (1) | $ | 96,865 | $ | 96,865 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Interest payments on outstanding lease obligation (2) |
| (708) |
| (708) |
| — |
| — |
| — |
| — |
| — | |||||||
Total | $ | 96,157 | $ | 96,157 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Long term debt obligation (1) | $ | 10,154,049 | $ | 876,609 | $ | 876,609 | $ | 876,609 | $ | 876,609 | $ | 876,609 | $ | 5,771,004 | |||||||
Interest payments on outstanding debt obligation (2) |
| 3,499,000 | 603,000 |
| 546,000 |
| 489,000 |
| 432,000 |
| 375,000 |
| 1,054,000 | ||||||||
Total | $ | 13,653,049 | $ | 1,479,609 | $ | 1,422,609 | $ | 1,365,609 | $ | 1,308,609 | $ | 1,251,609 | $ | 6,825,004 |
(1) | Amounts include principal payments only |
(2) | Projected interest payments are based on the outstanding principal amounts and interest rates at December 31, 2022 |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks arise from changes in interest rates, foreign currency exchange rates and other market changes that affect market sensitive instruments. The carrying value of variable rate debt financing reflected in our consolidated balance sheet at December 31, 2022, approximates fair value as the changes in their associated interest rates reflect the current market and credit risk is similar to when the loans were originally obtained.
We are obligated under a note payable with interest at the SOFR rate plus 2.30% per annum adjusted monthly. The loan is collateralized by our real and personal property and guarantees of certain affiliates. As of December 31, 2022, and 2021, the note payable consisted of the following:
Principal as of | Interest Rate as of | Principal as of | Interest Rate as of | |||||||||
Mortgage Loan |
| December 31, 2022 |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2021 |
| Maturity Date | ||
Truist Bank (formerly known as Branch Banking and Trust Company (BB&T)) | $ | 10,154,049 |
| 6.5000 | % | $ | 10,899,876 |
| 2.4375 | % | July 5, 2034 | |
Less unamortized debt issuance costs |
| (57,917) |
|
|
| (18,172) |
|
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| |||
Total | $ | 10,096,132 |
|
| $ | 10,881,704 |
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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements and Supplementary Data starting on page 19.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 15d -15 under the Securities Exchange Act of 1934, as amended) that are designed to provide reasonable assurance that information required to be reported in our SEC filings is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. At December 31, 2022, under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, at December 31, 2022, our disclosure controls and procedures were effective.
Management’s Report on Internal Controls Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2022, based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on the assessment, management concluded that, as of December 31, 2022, the Company’s internal control over financial reporting was effective.
This annual report does not include an attestation report of our registered certified public accounting firm regarding internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Land Development and Sale Contract
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 53 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. We filed a plan amendment application with Pinellas County on December 15, 2021. As our development team continues to progress through the Pinellas County regulatory process, our applications received unanimous approval from the Pinellas Local Planning Authority on April 14, 2022. 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. This action paved the way for Toll Brothers, Inc. to begin the permitting approval phase for the 175 home development. Permitting approval for the site plan is expected summer of 2023.
12
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forth below is information about our executive officers:
Name |
| Age |
| Position |
|
Prem Devadas | 65 | Manager | |||
Dale Pelletier | 63 | CFO, Salamander Hospitality LLC |
Biographical Information
Prem Devadas, Manager, is a forty plus year veteran of the hospitality industry. After ten years with The Potomac Hotel Group in Washington, DC, he left the Regional Director of Operations position to manage the lodging portfolio for CCA Industries whose holdings include The Jefferson Hotel in Richmond, VA, The Hermitage Hotel in Nashville, TN and Kiawah Island Resort near Charleston, SC. As Managing Director, he re-positioned the Jefferson Hotel and the Hermitage Hotel through extensive renovations and achieved Mobil 5-Star and AAA Five-Diamond awards for the respective properties. At Kiawah Island he directed the development and successful opening of the Sanctuary at Kiawah Island, the new 255 room ultra-luxury hotel opened in August 2004.
Dale Pelletier, Chief Financial Officer, is a forty plus year veteran of the hospitality industry. Mr. Pelletier oversees the company’s financial, accounting, tax, information systems, treasury, planning and reporting activities. His extensive experience with over seventy hotels includes full service, limited service, all suites, resorts and condominium hotels both at the property and corporate levels. He also served as Chief Financial Officer for MEI Hotels, a hotel development, ownership, management and investment group. He was responsible for all financial activities for the company’s managed and asset managed hotels, construction and development projects and three private equity funds. Prior to MEI, Mr. Pelletier was Chief Financial Officer for the US operations of City Hotels, an international hotel and airline company listed on the Brussels stock exchange, with hotels in the US and Europe.
Directors and Officers Insurance
The Company maintains directors’ and officers’ liability insurance that insures our Salamander officers, managers and committee members from claims arising out of an alleged wrongful act by such persons while acting as executive officers, managers or committee members of our company, and it insures our company to the extent that we have indemnified our officers, managers and committee members for such loss.
Indemnification
Our organizational documents provide that we shall indemnify our officers, committee members and managers against certain liabilities to the fullest extent permitted under applicable law. Our organizational documents also provide that our officers, committee members and managers shall be exculpated from monetary damages to us to the fullest extent permitted under applicable law.
Code of Ethics
Our Code of Business Conduct applies to all of our officers and other employees. Our Code of Business Conduct was filed as Exhibit 14.1 to our Annual Report on Form 10-K filed with the SEC on April 4, 2011. You may also obtain a free copy of our Code of Ethics by writing to our attention at 36750 US Highway 19 North, Palm Harbor, FL 34684.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following tables set forth the remuneration paid, distributed or accrued by us during the year ended December 31, 2022, to our executive officers.
|
|
|
|
|
| Other |
|
| ||||||
Salary and | Annual | All Other | ||||||||||||
Name and Principal Position | Commission | Bonus | Compensation | Compensation | ||||||||||
Prem Devadas, Manager |
| 2022 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Dale Pelletier, Chief Financial Officer |
| 2022 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Prem Devadas, Manager (1) |
| 2021 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Dale Pelletier, Chief Financial Officer (1) |
| 2021 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
(1) | Messrs. Devadas and Pelletier are not compensated directly by us for services as our executive officers; rather they receive compensation from an affiliate of our member, to whom we pay management fees. |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
We are wholly owned by Salamander Farms, LLC which has sole voting and dispositive power over our interests.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
(a) | Transactions with Management and Others |
None.
(b) | Certain Business Relationships |
Under the Master Lease Agreement (the “Agreement” or “MLA”) with the Rental Pool participants, the Resort pays Participants 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. Adjusted Gross Revenues are defined as Gross Revenues less agent’s commissions, audit fees, and occupancy fees and when the unit is used for Rental Pool Comps or as a model, linen replacements and credit card fees. Each participant receives a fixed occupancy fee, based upon apartment size for each day the unit is occupied. After allocation of occupancy fees and the payment of general Rental Pool expenses, the balance is allocated proportionally to the participants, based on the Participation Factor as defined in the Agreement. Additionally, occupancy fees are paid by the Resort to participants as rental fees for complimentary rooms unrelated to the Rental Pool operations. Associate room fees are also paid by the Resort to Participants for total room revenues earned from the rental of condominiums by our employees. In 2022 and 2021, amounts available to Participants under the Agreement approximated $4,638,000 and $2,725,000, respectively, of which approximately $690,000 and $596,000 was owed as of December 31, 2022 and 2021, respectively. The balances owed, along with the incentives discussed in the following paragraph, are reflected as a Rental Pool liability in our consolidated balance sheets. The amounts were paid in 2023 and 2022, respectively.
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 to 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 their units continue to participate in the Rental Pool. Incentive payments due as of December 31, 2022, and 2021 totaled $93,767 and $76,790, respectively.
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On July 2, 2019, the Third Addendum to the MLA became effective. The addendum provided Participants 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.
The Agreement expires on December 31, 2023, and we expect to enter into a new ten-year agreement with the Rental Pool before such expiration date.
Pursuant to the terms of the Agreement, the Rental Pool Lease Operation reimbursed us approximately $197,000 and $181,000 in 2022 and 2021, respectively, for maintenance and housekeeping labor, use of the telephone lines, and other supplies.
All three condominiums that we own participated in the Rental Pool under the Agreement in the same manner as all other Rental Pool participants in 2022.
At December 31, 2022 and 2021 we were owed $99,047 and $110,304, respectively, from Innisbrook Condominium Association, a third party collectively owned by the condominium owners at Innisbrook.
We incurred management fees to Salamander Hospitality, LLC, an entity related to us by virtue of common ownership, of approximately $1,303,000 and $1,020,000 in 2022 and 2021, respectively.
At December 31, 2022 and 2021, we owed our affiliates approximately $295,600 and $512,000, respectively, and had receivables from affiliates of approximately $234,900 and $17,900, respectively. The affiliate receivables and payables are unsecured, non-interest bearing and are due on demand.
(c)Indebtedness of Management
None.
(d)Transactions with Promoters
Not applicable.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following fees were incurred from Cherry Bekaert LLP, the independent registered public accounting firm, for services provided in the years ended December 31, 2022 and 2021.
Audit Fees were $105,000 and $90,000 for the years ended December 31, 2022, and 2021, respectively, for professional services rendered for the audits of our annual consolidated financial statements and services that are normally provided by the auditors in connection with statutory filings or engagements for those fiscal years.
Audit-Related Fees: None.
Tax Fees were $4,250 and $3,925 for the years ended December 31, 2022 and 2021, respectively, for tax preparation services rendered for Golf Host Securities and Innisbrook Rental Pool Trust.
All other fees: None.
15
PART IV
ITEM 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Consolidated Financial Statements and Schedules
The consolidated financial statements and exhibits filed as part of this annual report on Form 10-K are listed on pages 20 and 34 and are incorporated herein by reference.
16
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | |
Consolidated Financial Statements of Salamander Innisbrook, LLC | |
Report of Independent Registered Public Accounting Firm (PCAOB ID 00 | 18 |
Consolidated Balance Sheets as of December 31, 2022 and 2021 | 20 |
21 | |
Consolidated Statements of Cash Flows for the year ended December 31, 2022 and 2021 | 22 |
23 | |
Supplemental Schedules of the Rental Pool Lease Operation—Historical Summary | 31 |
Financial Statements of the Rental Pool Lease Operation | |
Report of Independent Registered Public Accounting Firm (PCAOB ID 00677) | 32 |
Balance Sheets—Distribution Fund as of December 31, 2022 and 2021 | 33 |
Balance Sheets—Maintenance Escrow Fund as of December 31, 2022 and 2021 | 34 |
Statements of Operations—Distribution Fund for the year ended December 31, 2022 and 2021 | 35 |
36 | |
37 | |
38 |
17
Report of Independent Registered Public Accounting Firm
To the Sole Member and Manager
Salamander Innisbrook, LLC
Palm Harbor, Florida
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Salamander Innisbrook, LLC (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and changes in member’s equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Critical Audit Matter – Amortization Period of Full Golf Membership Initiation Fees
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter, in any way, our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Description of Matter
As described further in Note 2 to the consolidated financial statements, the Company recognizes revenue for membership initiation fees over time based on the estimated average life of a membership. Management uses a ten-year amortization period to recognize membership initiation fees for full golf members.
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Management made significant judgments when determining the estimated average life of full golf memberships based on historical information of former and existing full golf members. As a result, a high degree of auditor judgment and increased audit effort was required in performing audit procedures to evaluate the reasonableness of management’s estimates.
How We Addressed the Matter in Our Audit
Our principal audit procedures performed to address this critical audit matter included the following:
· | We obtained an understanding of the various types of memberships and the process for recognizing revenue over the amortization period. |
· | We assessed management’s estimate of average life of full golf memberships based on historical data for cancelled and existing memberships. |
· | We performed procedures to test the accuracy and completeness of the information used to assess the reasonableness of the amortization period. |
/s/
We have served as the Company’s auditor since 2021.
May 5, 2023
19
SALAMANDER INNISBROOK, LLC
CONSOLIDATED BALANCE SHEETS
As of December 31, 2022 and 2021
| 2022 |
| 2021 | |||
Assets |
|
| ||||
Current assets: |
|
| ||||
Cash | $ | | $ | | ||
Accounts receivable, net |
| |
| | ||
Inventories and supplies |
| |
| | ||
Due from affiliates | | | ||||
Prepaid expenses and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Property, buildings and equipment, net |
| |
| | ||
Operating lease right-of-use assets | | | ||||
Intangibles |
| |
| | ||
Deferred contract costs, net |
| |
| | ||
Restricted cash |
| |
| | ||
Deposits and other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and Member’s Equity |
|
|
| |||
Current liabilities: |
|
|
| |||
Accounts payable | $ | | $ | | ||
Accrued liabilities |
| |
| | ||
Rental Pool liability |
| |
| | ||
Current portion deferred revenues |
| |
| | ||
Due to affiliates |
| |
| | ||
Current portion - operating leases |
| |
| | ||
Current portion - note payable, net of unamortized deferred financing costs at December 31, 2021 |
| |
| | ||
Total current liabilities |
| |
| | ||
Deferred revenues, net of current portion |
| |
| | ||
Operating leases, net of current portion |
| — |
| | ||
Note payable, net of current portion and unamortized deferred financing costs at December 31, 2022 |
| |
| — | ||
Paycheck Protection Program Loan | — | | ||||
Total liabilities |
| |
| | ||
Member’s equity |
| |
| | ||
Total liabilities and member’s equity | $ | | $ | |
See notes to consolidated financial statements.
20
SALAMANDER INNISBROOK, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY
For the Years Ended December 31, 2022 and 2021
| 2022 |
| 2021 | |||
Revenues: | ||||||
Room revenues | $ | | $ | | ||
Other revenues | | | ||||
Total revenues | | | ||||
Costs and expenses: |
|
|
|
| ||
Operating costs and expenses |
| |
| | ||
General and administrative |
| |
| | ||
Depreciation and amortization |
| |
| | ||
Total costs and expenses |
| |
| | ||
Operating income (loss) |
| |
| ( | ||
Gain on forgiveness of Paycheck Protection Program loan | | | ||||
Interest expense |
| ( |
| ( | ||
Net income |
| |
| | ||
Member’s equity, beginning of period | | | ||||
Member’s equity, end of period | $ | | $ | |
See notes to consolidated financial statements.
21
SALAMANDER INNISBROOK, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022 and 2021
| 2022 |
| 2021 | |||
Cash flows from operating activities: |
|
|
|
| ||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
| ||||
Provision for bad debts | | | ||||
Gain on forgiveness of Paycheck Protection Program Loans | ( | ( | ||||
Depreciation and amortization |
| |
| | ||
Amortization of deferred financing costs |
| |
| | ||
Amortization of lease right-of-use assets | | | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | | ( | ||||
Inventories and supplies | ( | ( | ||||
Prepaid expenses and other current assets | ( | ( | ||||
Accounts payable | | ( | ||||
Accrued liabilities and Rental Pool liability | | | ||||
Deferred revenues | | | ||||
Deposits and other assets |
| ( |
| ( | ||
Due to/from affiliates, net | ( | ( | ||||
Operating lease liabilities |
| ( |
| ( | ||
Net cash provided by operating activities |
| |
| | ||
Cash flows from investing activities: |
|
|
|
| ||
Cash paid for deferred contract costs |
| ( |
| ( | ||
Purchases of property and equipment |
| ( |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
Cash flows from financing activities: |
|
|
|
| ||
Repayments of note payable |
| ( |
| ( | ||
Proceeds from Paycheck Protection Program Loan |
| — |
| | ||
Net cash (used in) provided by financing activities |
| ( |
| | ||
Net change in cash and restricted cash |
| |
| | ||
Cash and restricted cash, beginning of period |
| |
| | ||
Cash and restricted cash, end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: |
|
|
|
| ||
Cash paid for interest | $ | | $ | |
See notes to consolidated financial statements.
22
SALAMANDER INNISBROOK, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
1. Nature of Business
Salamander Innisbrook, LLC (the “Company”), own 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
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
2. Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated financial statements include the accounts and balances of the Company and its wholly owned subsidiaries, Salamander Innisbrook Securities, LLC and Salamander Innisbrook Condominium, LLC (hereinafter collectively referred to as “we”, “us”, or “our”). All significant intercompany balances and transactions have been eliminated in consolidation.
Statements of Cash Flows - For purposes of the statements of cash flows, we consider all liquid investments purchased with an original maturity of three months or less to be cash equivalents.
The following tables provide additional detail, by consolidated financial statement line item, of the ASU 2016-18 impacts in the accompanying statements of cash flows for the years ended December 31, 2022 and 2021.
| 2022 |
| 2021 | |||
Cash | $ | | $ | | ||
Restricted cash |
| |
| | ||
$ | | $ | |
Revenues, Deferred Revenue and Accounts Receivable - Revenues are derived from a variety of sources including, but not limited to, hotel, food and beverage operations, retail sales, golf course operations and commissions on real estate transactions. With the exception of initiation fees and membership dues, all revenues net of any sales and other taxes collected are recognized as products are delivered or services are performed.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under the new revenue recognition standard. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our revenue is transactional, and the contracts performance obligation is generally satisfied at the time of the transaction.
Revenues from performance obligations satisfied over time include membership dues, annual fees and initiation fees. The membership initiation fees at the Resort are nonrefundable and are initially recorded when received as deferred revenue and amortized over the average life of a membership which, based on historical information, is deemed to be
Accounts receivable represent amounts due from our memberships, resort guests and companies or individuals that held conferences or group stays at the Resort, net of the allowance for doubtful accounts. We perform periodic credit evaluations of our customers and members and generally do not require collateral because we believe we have procedures in place to minimize the possibility of significant losses occurring. Companies with a recent prior direct billing positive history with the Resort are granted credit for billing.
23
If companies have not been to the Resort within the past two years, an updated credit evaluation is conducted. Terms are negotiable by group contract, but invoices are typically due 30 days from the receipt of invoice.
We review accounts receivable monthly to determine if any receivables are uncollectible. Any receivable considered to be doubtful of collection is included in the allowance for doubtful accounts. The balances in the allowance for doubtful accounts were $
In addition, gift card purchases and advanced event deposits are collected and deferred and recognized as income as the service is performed at a future date. Deferred revenue includes unrecognized initiation fee liabilities, unearned member dues, gift card liability and advanced events deposits. Deferred revenue was as follows as of December 31:
| 2022 |
| 2021 | |||
Current portion of deferred revenues | $ | | $ | | ||
Deferred revenues, net of current portion | | | ||||
$ | | $ | |
Practical Expedients and Exemption - There are several practical expedients and exemptions allowed under ASC 606 that impact timing of revenue recognition and our disclosures. In our adoption and application of ASC 606, we elected to treat similar contracts (primarily initiation fee contracts) as part of a portfolio of contracts, primarily initiation fee contracts. The contracts have the same provisions, and we believe our revenues would not be materially different if we had chosen to treat each contract separately.
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.
Concentrations of Credit Risk - Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. Cash consists of bank deposits which may, at times, exceed federally insured limits. No losses have been experienced in such accounts.
We used the following methods and assumptions in estimating the fair values of our financial instruments:
● | Accounts receivable and accounts payable: Due to their short-term nature, the carrying amounts reported on the accompanying consolidated balance sheets for these accounts approximate their fair values. |
● | Deferred revenues: The carrying amounts of these accounts approximate their fair values because they approximate their net present values considering relevant risk factors. |
● | Debt: The carrying values of variable rate debt financing reflected in the balance sheets at December 31, 2022 and 2021 approximates their fair values as the changes in their associated interest rates reflect the current market and credit risk is similar to when the loans were originally obtained. |
Inventories and Supplies - Inventories and supplies are recorded at the lower of cost, on a first-in, first-out basis, or market.
Property, Buildings and Equipment, net – Property, buildings and equipment are stated at cost less accumulated depreciation and amortization. We capitalize any asset purchase of $
24
amortization are recorded using the straight-line basis over the shorter of the estimated useful lives of the assets, or if applicable, the lease terms. Estimated useful lives are generally as follows:
Average Lives | ||
Category |
| (in Years) |
Buildings |
| |
Land improvements |
| |
Machinery and equipment |
| |
Assets recorded under finance leases |
|
Costs of maintenance and repairs of property and equipment used in operations are charged to expense as incurred, while renewals and betterments are capitalized. When property and equipment are replaced, retired or otherwise disposed of, the costs are deducted from the asset and accumulated depreciation accounts. Gains or losses on sales or retirements of equipment are recorded in operating income.
Impairment of Long-Lived Assets - We regularly review long-lived assets for impairment by comparing the carrying values of the assets with their estimated future undiscounted cash flows. If it is determined that an impairment loss has occurred, the loss is recognized during that period. Any impairment loss would be calculated as the difference between asset carrying values and fair value as determined by prices of similar items and other valuation techniques, giving consideration to recent operating performance and pricing trends. There were
Intangibles - Our indefinite life intangibles consist of our trade name valued at $
Deferred Financing Costs – Deferred financing costs, which arose from costs incurred to originate the financing discussed at Note 10, are being amortized to interest expense over the term of the related indebtedness. The unamortized portions of these costs are reflected as reductions of such debt.
Deferred contract costs, net – Deferred contract costs, which arose from the costs of obtaining long term commitments on rental pool agreements that we would not have incurred if the pool participants did not commit to five-year contracts, are being amortized over the contract lives using the straight-line method.
Loss Contingencies - We estimate loss contingencies in accordance with FASB ASC 450-20, Loss Contingencies, which states that a loss contingency shall be accrued by a charge to income if both of the following conditions are met: (a) information available before the consolidated financial statements are issued or are available to be issued indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated.
Advertising - Advertising costs, which are expensed as incurred, were $
Leases - Leases are classified as finance leases or operating leases dependent on whether the lease transfers substantially all of the benefits and risks of ownership of property. Assets and liabilities are recorded at amounts equal to the present value of the minimum lease payments at the beginning of the lease term. Interest expense relating to the lease liabilities is recorded to affect constant rates of interest over the terms of the leases.
Income Taxes - With the exception of an entity owned by Salamander Innisbrook Securities, LLC for which income taxes have been minimal the Company, and its subsidiaries are single member limited liability companies, and therefore, no provision or liability for federal or state income taxes has been included in the accompanying consolidated financial statements. The results of our consolidated operations are included in the income tax return of our member.
Under FASB ASC 740-10, we are required to evaluate each of our tax positions to determine if they are more likely than not to be sustained if the taxing authority examines the respective position. A tax position includes an entity’s tax status as a pass-through
25
entity, and the decision not to file a tax return. We have evaluated each of our tax positions and have determined that no provision or liability for income taxes is necessary.
We evaluate the validity of our conclusions regarding uncertain income tax positions on an annual basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under examination. Our member files income tax returns in the U.S. federal jurisdiction and the State of Virginia. At December 31, 2022, we do not believe that any uncertain tax positions exist.
3. Property, Buildings and Equipment
Property, buildings, and equipment consist of the following as of December 31, 2022 and 2021:
| 2022 |
| 2021 | |||
Land and land improvements | $ | | $ | | ||
Buildings |
| |
| | ||
Furniture, fixtures and equipment |
| |
| | ||
Construction in progress |
| |
| | ||
| |
| | |||
Less accumulated depreciation and amortization |
| ( |
| ( | ||
$ | | $ | |
Depreciation and amortization expense was $
4. Leases
Operating Leases
On December 20, 2018, we entered into a master lease agreement with DLL Finance, LCC for under which we have
As of December 31, 2022, the remaining lease terms in years approximated
Years Ending December 31, |
|
| |
2023 | $ | | |
Total future minimum lease payments |
| | |
Less imputed interest |
| ( | |
Total present value of future minimum lease payments | $ | |
Operating lease expense approximated $
5. Contingency
At December 31 2021, we were involved in certain litigation arising from a full-service construction contract we previously entered (as agent for and on behalf of the Rental Pool participants) with AMH Construction, Inc. (“AMH”) in the amount of $
26
period, and included a signed a confessed judgment in the amount of $
6. Retirement Plan
We sponsor a defined contribution retirement plan, which provides retirement benefits for all eligible employees. Employees must fulfill a
7. Rental Pool Operations
In December 2013, we entered a Master Lease Agreement (“Agreement”) with the Rental Pool’s Lessors Advisory Committee (“LAC”). The Agreement, which commenced on January 1, 2014 and expires on December 31, 2023, replaced all lease agreements previously in existence. Negotiations are underway on a new contract and it is expected that a new
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 December 31, 2022 and 2021 totaled $
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
8. Other Related Party Transactions
We incurred management fees to Salamander Hospitality, LLC, an entity related to us by virtue of common ownership, of $
At December 31, 2022 and 2021, we owed our affiliates approximately $
27
At December 31, 2022 and 2021, we had net amounts due to affiliates of approximately $
Pursuant to terms of the Agreement, the Innisbrook Rental Pool Lease Operation reimbursed us approximately $
At December 31, 2022 and 2021 we were owed $
All
9. Paycheck Protection Program Loans
In April 2020, we received a Paycheck Protection Program loan (“PPP loan”) of $
In June 2021, we received a second PPP loan of $
10. Note Payable
On March 28, 2017, we obtained a loan in the amount of fifteen million dollars ($
On July 5, 2022, the loan was amended again whereby monthly principal payments of $
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 December 31, 2022:
Year ending December 31, |
| ||
2023 | $ | | |
2024 | | ||
2025 | | ||
2026 | | ||
2027 | | ||
2028-2034 |
| | |
| | ||
Less current portion | ( | ||
Less unamortized deferred financing costs |
| ( | |
$ | |
28
11. Unaudited 2022 Quarterly Financial Information
The following tables show the unaudited quarterly financial information for the Company:
March 31, 2022 | June 30, 2022 | September 30, 2022 | |||||||
|
| (unaudited and not |
| (unaudited and not | |||||
Assets | (unaudited) | previously presented) | previously presented) | ||||||
Current assets: | |||||||||
Cash | $ | | $ | | $ | | |||
Accounts receivable, net | | | | ||||||
Inventories and supplies | | | | ||||||
Due from affiliates | | | | ||||||
Prepaid expenses and other current assets | | | | ||||||
Total current assets | | | | ||||||
Property, buildings and equipment, net | | | | ||||||
Operating lease right-of-use assets | | | | ||||||
Intangibles | | | | ||||||
Deferred contract costs, net | | | | ||||||
Restricted cash | | | | ||||||
Deposits and other assets | | | | ||||||
Total assets | $ | | $ | | $ | | |||
Liabilities and Member’s Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | | $ | | $ | | |||
Accrued liabilities | | | | ||||||
Rental Pool liability | | | | ||||||
Current portion deferred revenues | | | | ||||||
Due to affiliates | | | | ||||||
Current portion - operating leases | | | | ||||||
Current portion - note payable | | | | ||||||
Total current liabilities | | | | ||||||
Deferred revenues, net of current portion | | | | ||||||
Note payable, net of current portion and unamortized deferred financing costs | — | | | ||||||
Paycheck Protection Program Loan | | — | — | ||||||
Total liabilities | | | | ||||||
Member’s equity | | | | ||||||
Total liabilities and member’s equity | $ | | $ | | $ | |
29
Three months | Three months | Six Months | Three months | Nine Months | |||||||||||
ended | ended | ended | ended | ended | |||||||||||
March 31, 2022 | June 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2022 | |||||||||||
|
| (unaudited and not |
| (unaudited and not |
| (unaudited and not |
| (unaudited and not | |||||||
(unaudited) | previously presented) | previously presented) | previously presented) | previously presented) | |||||||||||
Revenues: | |||||||||||||||
Room revenues | $ | | $ | | $ | | $ | | $ | | |||||
Other revenues | | | | | | ||||||||||
Total revenues | | | | | | ||||||||||
Costs and expenses: | |||||||||||||||
Operating costs and expenses | | | | | | ||||||||||
General and administrative | | | | | | ||||||||||
Depreciation and amortization | | | | | | ||||||||||
Total costs and expenses | | | | | | ||||||||||
Operating income (loss) | | | | ( | | ||||||||||
Gain on forgiveness of Paycheck Protection Program loan | — | | | — | | ||||||||||
Interest expense | ( | ( | ( | ( | ( | ||||||||||
Net income (loss) | $ | | $ | | $ | | $ | ( | $ | |
12. Land Development and Sale Contract
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
13. Subsequent Events
None.
30
SUPPLEMENTAL SCHEDULES OF RENTAL POOL LEASE OPERATION
HISTORICAL SUMMARY
The following financial statements of the Innisbrook Rental Pool Lease Operation (the “Rental Pool”) are for the years ended December 31, 2022 and 2021.
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.
31
Report of Independent Registered Public Accounting Firm
To the Sole Member and Manager
Salamander Innisbrook, LLC and
the Lessors of the Innisbrook Rental Pool Lease Obligation
Palm Harbor, Florida
Opinion on the Financial Statements
We have audited the accompanying balance sheets of the Distribution Fund and the Maintenance Fund of the Innisbrook Rental Pool Lease Operation (the “Rental Pool”) (funds created for participants who have entered into a rental pool agreement as explained in Note 1) as of December 31, 2022 and 2021, and the related statements of operations and changes in participants’ fund balances of the Distribution Fund and statements of changes in participants’ fund balances of the Maintenance Escrow Fund for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Rental Pool as of December 31, 2022 and 2021, and the results of its operations and changes in participants’ fund balances for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Rental Pool’s management. Our responsibility is to express an opinion on the Rental Pool’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Rental Pool in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Rental Pool is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Rental Pool’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined there are no critical audit matters.
/s/ Cherry Bekaert LLP
We have served as the Rental Pool’s auditor since 2021.
Tampa, Florida
May 5, 2023
32
INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS - DISTRIBUTION FUND
December 31, 2022 and 2021
| 2022 |
| 2021 | |||
ASSETS | ||||||
RECEIVABLE FROM SALAMANDER INNISBROOK, LLC FOR DISTRIBUTION | $ | | $ | | ||
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND |
| |
| | ||
$ | | $ | | |||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES | ||||||
DUE TO PARTICIPANTS FOR DISTRIBUTION | $ | | $ | | ||
$ | | $ | |
See notes to financial statements.
33
INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS - MAINTENANCE ESCROW FUND
December 31, 2022 and 2021
| 2022 |
| 2021 | |||
ASSETS | ||||||
CASH | $ | | $ | | ||
$ | | $ | | |||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES | ||||||
ACCOUNTS PAYABLE | $ | | $ | | ||
TOTAL LIABILITIES |
| |
| | ||
CARPET CARE RESERVE |
| |
| | ||
PARTICIPANTS’ FUND BALANCES |
| |
| | ||
$ | | $ | |
See notes to financial statements.
34
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF OPERATIONS - DISTRIBUTION FUND
For the Years Ended December 31, 2022 and 2021
| 2022 |
| 2021 | |||
GROSS REVENUES | $ | | $ | | ||
DEDUCTIONS: |
|
|
|
| ||
Agents’ commissions |
| |
| | ||
Credit card fees |
| |
| | ||
Audit fees |
| |
| | ||
Linen replacements |
| |
| | ||
Rental pool complimentary fees |
| |
| | ||
| |
| | |||
ADJUSTED GROSS REVENUES |
| |
| | ||
AMOUNT RETAINED BY LESSEE |
| ( |
| ( | ||
GROSS INCOME DISTRIBUTION |
| |
| | ||
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION: |
|
|
|
| ||
General pooled expense |
| ( |
| ( | ||
Miscellaneous pool adjustments |
| |
| ( | ||
Corporate complimentary occupancy fees |
| — |
| | ||
Occupancy fees |
| ( |
| ( | ||
Office Supplies | — | ( | ||||
Advisory Committee expenses |
| ( |
| ( | ||
NET INCOME DISTRIBUTION |
| |
| | ||
ADJUSTMENTS TO NET INCOME DISTRIBUTION: |
|
|
|
| ||
Occupancy fees |
| |
| | ||
Hospitality suite fees |
| |
| | ||
Corporate Comp | | — | ||||
Associate room fees |
| |
| | ||
Incentives | | | ||||
AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS | $ | | $ | |
See notes to financial statements.
35
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES - DISTRIBUTION FUND
For the Years Ended December 31, 2022 and 2021
| 2022 |
| 2021 | |||
BALANCE, beginning of period | $ | | $ | | ||
ADDITIONS: |
|
|
|
| ||
Amounts available for distribution |
| |
| | ||
Interest received or receivable from Maintenance Escrow Fund |
| |
| | ||
REDUCTIONS: |
|
|
|
| ||
Amounts accrued or paid to participants |
| ( |
| ( | ||
BALANCE, end of period | $ | | $ | |
See notes to financial statements.
36
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES - MAINTENANCE ESCROW FUND
For the Years Ended December 31, 2022 and 2021
| 2022 |
| 2021 | |||
BALANCE, beginning of period | $ | | $ | | ||
ADDITIONS: |
|
|
|
| ||
Charges to participants to establish or restore escrow balances |
| |
| | ||
Member accounts & miscellaneous |
| |
| | ||
REDUCTIONS: |
|
|
|
| ||
Carpet Carpet Care Reserve | | ( | ||||
Maintenance charges |
| ( |
| ( | ||
Change in Carpet Care Reserve | ( | ( | ||||
Refunds to participants as prescribed by the master lease agreements |
| ( |
| ( | ||
BALANCE, end of period | $ | | $ | |
See notes to financial statements
37
INNISBROOK RENTAL POOL LEASE OPERATION
SUPPLEMENTAL NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
1. Nature of the Rental Pool Lease Operation and Agreements
Overview - The Innisbrook Rental Pool Lease Operation (the “Rental Pool”) consists of condominiums located on the premises of the Innisbrook Resort and Golf Club (the “Company”, “Resort” or “Innisbrook”), which are leased by their owners (the “Participants”) to Innisbrook for the purpose of making such units available for resort accommodations. Salamander Innisbrook, LLC, as owner and operator of the Resort, administers the Rental Pool.
The Rental Pool operation is highly dependent upon the operations of the Resort, and likewise, the Resort is also dependent upon the continued participation of condominium owners in the Rental Pool. Additionally, the Rental Pool and Resort are both impacted by the general economic conditions related to the destination resort industry.
Rental Pool Agreements - The Rental Pool operates under the provisions of a Master Lease Agreement (the “MLA” or “Agreement”) approved by Company management and the Lessors Advisory Committee (“LAC”). The Agreement commenced on January 1, 2014 for a period of years, replacing all lease agreements previously in existence. Under the Agreement, the Resort pays the Participant a quarterly distribution equal to
Under the terms of the Agreement, each owner may elect to participate in the Rental Pool for the following year by signing and executing an Annual Lease Agreement (the “ALA”). In 2022 and 2021, amounts available to Participants under the Agreement approximated $
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 to be paid by the Company 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 December 31, 2022 and 2021, totaled $
On June 13, 2019, the Third Addendum to the Master Lease Agreement became effective. The addendum provided with two options for funding of the cost overruns created by the default of the AMH contractor. The first option provided for the Company to fund the cost overruns in exchange for the participant’s dedication of the 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 equal to the cost overrun amount in the form of quarterly payments, adjusted annually, resulting in a reimbursement of
Nature of Accounts and Fund Balances - The Rental Pool consists of the Distribution Fund and the Maintenance Escrow Fund. The Distribution Fund’s balance sheet primarily reflects amounts receivable from the Company for the Rental Pool distribution payable to Participants and amounts due to the Maintenance Escrow Fund. The operations of the Distribution Fund reflect the calculation of pooled earnings, management fees and adjustments, as defined.
The Maintenance Escrow Fund, which is managed by the LAC reflects the accounting for certain escrowed assets of the Participants and, therefore, has no operations. It consists primarily of amounts escrowed on behalf of Participants or amounts due from the Distribution Fund to meet minimum escrow requirements, fund the carpet care reserve, maintain the interior of the units, and fund renovations of the units. The Innisbrook Rental Pool Trust was established on February 1, 2002 to create a Trust, which holds certain assets maintained in such escrow accounts.
38
Maintenance Escrow Fund Accounts - The MLA provides that
The LAC invests the maintenance escrow funds on behalf of the Participants and in compliance with restrictions in the Agreements. The LAC consists of nine Participants elected to advise the Resort owner in Rental Pool matters and negotiate amendments to the lease agreement. Income earned on these investments is allocated proportionately to Participants’ Maintenance Escrow Fund accounts and paid quarterly.
2. Summary of Significant Accounting Policies
Basis of Accounting -The accounting records of the funds are maintained on the accrual basis of accounting.
Revenue - All room revenue net of any sales and other taxes collected are recognized as services are performed.
Accounts Receivable - Receivables are presented net of any allowances for uncollectible amounts. All receivable balances reflected in the accompanying financial statements as of December 31, 2022 and 2021, were collected in 2023 and 2022, respectively. As such, an allowance for doubtful accounts was not considered necessary as of December 31, 2022 or 2021.
Income Taxes - No federal or state taxes have been reflected in the accompanying financial statements as the tax effect of fund activities accrue to the Participants. The Innisbrook Rental Pool Trust files an annual tax return, which remains subject to examination by taxing authorities for years on or after 2016. The Rental Pool and related Trust have adopted the Financial Accounting Standards Board Accounting Standards Codification Topic 740-10, Accounting for Uncertainty in Income Taxes. This topic requires the Rental Pool and the related Trust to evaluate each of their tax positions and the information reported in the Trust’s tax return to determine if such information and positions are more likely than not to be sustained under examination by a taxing authority. A tax position includes an entity’s tax status, which includes considerations as to the qualifications of the Trust and the decision that all fund activities pass through to the participants of the Rental Pool.
The Rental Pool and trustees of the Trust have evaluated their tax positions and have determined that no provision or liability for income taxes is necessary. Conclusions regarding uncertain tax positions are evaluated on an annual basis to determine if facts or circumstances have arisen that might cause a change in judgment regarding the likelihood of a tax position’s sustainability under examination. At December 31, 2022, the Innisbrook Rental Pool Trust believes that no uncertain tax positions exist.
NOTE 3 - OTHER RELATED PARTY TRANSACTIONS
Pursuant to the terms of the Master Lease Agreement, the Rental Pool paid the Company approximately $
Salamander Innisbrook Condominium, LLC, a wholly owned subsidiary of Salamander Innisbrook, LLC, owns three condominiums. All three condominiums participate in the Rental Pool under the MLA in the same manner as other Rental Pool participants.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SALAMANDER INNISBROOK, LLC | |||
Date : June 22, 2023 | By: | /s/ Prem Devadas | |
Prem Devadas | |||
Manager (Chief Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures |
| Title(s) |
| Date |
/s/ Prem Devadas | Manager (Chief Executive Officer) | June 22, 2023 | ||
/s/ Dale Pelletier | Chief Financial Officer (Principal Financial Officer | June 22, 2023 | ||
and Principal Accounting Officer) |
41
EXHIBIT INDEX
Exhibit No. |
| Description |
10.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
Exhibit 101. | Interactive data files formatted in XBRL (eXensible Business Reporting Language): (i) the Balance Sheets, (ii)the Statement of Operations, (iii) the Statements of Cash Flows, and (iv) the Notes to the Financial Statements. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Scheme 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 |
42