UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
COMMISSION FILE NUMBER:
State of Organization: | IRS Employer Identification No. |
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 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 the Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☐ ☒
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one): | Large accelerated filer ☐ | Accelerated filer ☐ | |
Smaller reporting company | Emerging growth company |
If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
No established market exists for the Registrant’s membership interests, so there is no market value for such membership interests. There are no membership interests held by non-affiliates as of August 8, 2023. Issuer has
SALAMANDER INNISBROOK, LLC
QUARTERLY REPORT ON FORM 10-Q
AS OF MARCH 31, 2023
INDEX
2
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.
3
PART I
ITEM 1. Condensed Consolidated Financial Statements
SALAMANDER INNISBROOK, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
Assets |
|
|
|
| ||
Current assets: |
|
|
|
| ||
Cash | $ | | $ | | ||
Accounts receivable, net |
| |
| | ||
Inventories and supplies |
| |
| | ||
| | |||||
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 | | | ||||
| | |||||
Current portion - operating leases |
| |
| | ||
Current portion - note payable |
| |
| | ||
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 | | | ||||
|
|
| ||||
Total liabilities |
| |
| | ||
|
|
|
| |||
Member’s equity |
| |
| | ||
Total liabilities and member’s equity | $ | | $ | | ||
See notes to condensed consolidated financial statements.
4
SALAMANDER INNISBROOK, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY
(Unaudited)
Three months ended March 31, | ||||||
| 2023 |
| 2022 | |||
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 |
| |
| | ||
|
| |||||
Interest expense |
| ( |
| ( | ||
|
| |||||
Net income | | | ||||
|
| |||||
Member’s equity, beginning of period |
| |
| | ||
Member’s equity, end of period | $ | | $ | | ||
See notes to condensed consolidated financial statements.
5
SALAMANDER INNISBROOK, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31, | ||||||
| 2023 |
| 2022 | |||
Cash flows from operating activities: |
|
|
|
| ||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
| ||||
Provision for bad debts |
| |
| | ||
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 |
| ( |
| ( | ||
Net cash provided by (used in) 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 | $ | | $ | | ||
Non-cash investing and financing activities: | ||||||
Right-of-use assets obtained in exchange for new operating lease liability | $ | | $ | | ||
Operating lease termination and offset of Right-of-use asset and lease liability | $ | | $ | | ||
See notes to condensed consolidated financial statements.
6
SALAMANDER INNISBROOK, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies
Nature of business
Salamander Innisbrook, LLC (the “Company”), 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 three condominiums under Salamander Innisbrook Condominiums, LLC.
The Company controls and operates the Rental Pool Lease Operation (the “Rental Pool”), a securitized pool of condominiums owned by participating condominium owners (the “Participating Owners”) and rented as hotel rooms to guests of the Resort (an average of 247 units or 294 hotel rooms participate at any given time). Pursuant to the Innisbrook Rental Pool Master Lease Agreement, dated January 1, 2014 (the “Master Lease” or “MLA”), quarterly distributions of a percentage of room revenues are required to be made to the condominium owners participating in the Rental Pool. Other resort facilities include four 18-hole golf courses, four restaurants, three convention facilities, a health spa, fitness center, tennis and recreation facilities, themed water park and five swimming pools.
Basis of presentation
The accompanying condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Quarterly Report on Form 10-Q. Consequently, they do not include all disclosures normally provided in the audited financial statements included in the Company’s Annual Report on Form 10-K. Accordingly, these condensed financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
In the opinion of management, the condensed financial statements reflect all adjustments which are necessary for a fair presentation of the financial information. All such adjustments are of a normal recurring nature.
As a destination golf resort, open year round, the Resort’s performance is sensitive to weather conditions and seasonality as well as general trends in the economy, with economic downturns adversely affecting our operating results. Our operations are seasonal with the highest volume of revenue generated in the first two quarters of each calendar year. Due to the seasonal business of the Company, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year.
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, 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.
Recent Accounting Pronouncement - In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which replaces the current incurred loss impairment methodology for most financial assets with the current expected credit loss, or CECL, methodology. The series of new guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. The Company adopted the new standard effective January 1, 2023, which did not have a material impact to the consolidated financial statements.
7
2. Property, Buildings and Equipment
Property, buildings, and equipment consist of the following as of March 31, 2023 and December 31, 2022:
| March 31, 2023 |
| December 31, 2022 | |||
Land and land improvements | $ | | $ | | ||
Buildings |
| |
| | ||
Furniture, fixtures and equipment |
| |
| | ||
Construction in progress |
| |
| | ||
| |
| | |||
Less accumulated depreciation and amortization |
| ( |
| ( | ||
$ | | $ | | |||
Depreciation expense was $
3. Leases
Operating Leases
On December 20, 2018, we entered into a master lease agreement with DLL Finance, LLC under which we had
On November 8, 2022, we entered into another lease agreement with DLL Finance, LLC, for golf carts. Total monthly payments under the lease of $
As of March 31, 2023, the remaining lease terms in years approximated
Future minimum lease payments under operating leases for the remaining nine months ended December 31, 2023 and the year ended December 31, 2024 through 2026 are as follows:
Periods Ending December 31, |
| ||
2023 (Remaining 9 months) | $ | | |
2024 |
| | |
2025 |
| | |
2026 | |||
Total future minimum lease payments |
| | |
Less imputed interest | ( | ||
Total present value of future minimum lease payments | $ | |
Operating lease expense approximated $
8
4. 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 $
5. Retirement Plan
We sponsor a defined contribution retirement plan, which provides retirement benefits for all eligible employees. Employees must fulfill a
6. Rental Pool Operations
In December 2013, we entered a Master Lease Agreement (“Agreement”) with the Rental Pool’s Lessors Advisory Committee (“LAC”). The Agreement commenced on January 1, 2014 for a period of
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 March 31, 2023 and December 31, 2022 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
The remaining balance of these costs as of March 31, 2023 was $
9
7. Other Related Party Transactions
We incurred management fees to Salamander Hospitality, LLC, an entity related to us by virtue of common ownership, of $
At March 31, 2023 and December 31, 2022, we owed our affiliates $
Pursuant to terms of the Agreement, the Innisbrook Rental Pool Lease Operation reimbursed us approximately $
At March 31, 2023 and December 31, 2022, we were owed $
All
8. 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 March 31, 2023:
Year ending December 31, |
|
| |
2023 (Remaining 9 months) |
| $ | |
2024 |
| ||
2025 |
| ||
2026 | |||
2027 |
| ||
2028-2034 | |||
|
| ||
Less unamortized deferred financing costs | ( | ||
$ |
10
9. 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
10. Other Subsequent Events
None.
11
SUPPLEMENTAL SCHEDULES OF RENTAL POOL LEASE OPERATION
HISTORICAL SUMMARY
The operation of the Rental Pool is tied closely to the Resort operations. The Rental Pool Master Lease Agreement provides for a quarterly distribution of a percentage of the room revenues to participating condominium owners (“Participants”), as defined in the agreements (see Note 1 of the Rental Pool Lease Operation financial statements). Because the Rental Pool participants share in a percentage of the room revenues, the condominium units allowing Rental Pool participation are deemed to be securities. However, there is no market for such securities other than through sales of the normal real estate market. Since the security is related to real estate, no dividends have been paid or will be paid.
12
INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS – DISTRIBUTION FUND
(Unaudited)
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
ASSETS |
|
|
|
| ||
$ | | $ | | |||
INTEREST RECEIVABLE FROM MAINTENANCE ESCROW FUND | | | ||||
$ | $ | |||||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES |
|
| ||||
$ | | $ | | |||
$ | | $ | | |||
See notes to financial statements.
13
INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS - MAINTENANCE ESCROW FUND
(Unaudited)
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
ASSETS |
|
|
|
| ||
CASH | $ | | $ | | ||
$ | | $ | | |||
|
|
|
| |||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES |
|
|
|
| ||
|
|
|
| |||
ACCOUNTS PAYABLE | $ | | $ | | ||
TOTAL LIABILITIES |
| |
| | ||
|
|
|
| |||
CARPET CARE RESERVE |
| |
| | ||
PARTICIPANTS’ FUND BALANCES |
| |
| | ||
$ | | $ | | |||
See notes to financial statements.
14
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF OPERATIONS - DISTRIBUTION FUND
(Unaudited)
Three months ended March 31, | ||||||
| 2023 |
| 2022 | |||
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 |
| ( |
| ( | ||
Occupancy fees |
| ( |
| ( | ||
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.
15
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES - DISTRIBUTION FUND
(Unaudited)
Three months ended March 31, | ||||||
| 2023 |
| 2022 | |||
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.
16
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES - MAINTENANCE ESCROW FUND
(Unaudited)
Three months ended March 31, | ||||||
| 2023 |
| 2022 | |||
BALANCE, beginning of period | $ | | $ | | ||
|
|
| ||||
ADDITIONS: |
|
|
|
| ||
Charges to participants to establish or restore escrow balances |
| |
| | ||
Member accounts & miscellaneous | | | ||||
REDUCTIONS: |
|
|
|
| ||
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
17
INNISBROOK RENTAL POOL LEASE OPERATION
SUPPLEMENTAL NOTES TO FINANCIAL STATEMENTS
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
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”). As of March 31, 2023 and December 31, 2022, amounts available to Participants under the Agreement, and the incentives discussed in the next paragraph, 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 March 31, 2023 and December 31, 2022 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.
18
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.
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.
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
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Three months ended March 31, | ||||||||||||||||
| 2023 |
| % |
| 2022 |
| % |
| Inc/(dec) |
| % Chg |
| ||||
Resort revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Room revenues | $ | 3,922,796 |
| 23.4 | % | $ | 3,459,770 |
| 23.3 | % | $ | 463,026 |
| 13.4 | % | |
Other revenues |
| 12,829,083 |
| 76.6 | % |
| 11,418,717 |
| 76.7 | % |
| 1,410,366 |
| 12.4 | % | |
Total revenues |
| 16,751,879 |
| 100.0 | % |
| 14,878,487 |
| 100.0 | % |
| 1,873,392 |
| 12.6 | % | |
Costs and expenses: |
|
|
|
|
|
| ||||||||||
Operating costs and expenses |
| 6,290,946 |
| 37.6 | % |
| 4,921,626 |
| 33.1 | % |
| 1,369,320 |
| 27.8 | % | |
General and administrative |
| 7,414,536 |
| 44.3 | % |
| 6,353,378 |
| 42.7 | % |
| 1,061,158 |
| 16.7 | % | |
Depreciation and amortization |
| 647,682 |
| 3.9 | % |
| 644,902 |
| 4.3 | % |
| 2,780 |
| 0.4 | % | |
Total costs and expenses |
| 14,353,164 |
| 85.7 | % |
| 11,919,906 |
| 80.1 | % |
| 2,433,258 |
| 20.4 | % | |
Operating income (loss) |
| 2,398,715 |
| 14.3 | % |
| 2,958,581 |
| 19.9 | % |
| (559,866) |
| -18.9 | % | |
Interest expense | (224,767) | -1.5 | % | (83,671) | -0.6 | % | (141,096) | 168.6 | % | |||||||
Net income | $ | 2,173,948 |
| 13.0 | % | $ | 2,874,910 |
| 19.3 | % | $ | (700,962) |
| -24.4 | % | |
Overall resort revenues increased by $1,873,392 or 12.6% during the quarter ended March 31, 2023 compared with the quarter ended March 31, 2022. The increase in revenues was primarily driven by the Valspar Tournament, as the prior year tournament was held in April 2022. In addition, activity at the Resort increased due to certain restrictions imposed by the COVID 19 pandemic being relaxed. Total costs and expenses increased year-over-year by $2,433,258 or 20% which is attributable to inflation and the increase in revenues across the same period.
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.
Liquidity and Capital Resources
Cash generated from operating activities approximated $1,823,000 and $3,124,000 during the quarters ended March 31, 2023 and 2022, respectively, a decrease of approximately $1,301,000. The decrease resulted substantially from the following:
| ● | A decline in net income of approximately $770,000. |
| ● | An increase in account receivables of approximately $1,060,000. |
We used cash of approximately $444,000 and $231,000 for investing activities during the quarters ended March 31, 2023 and 2022, respectively. The increase of approximately $213,000 resulted from increased equipment purchases in 2023 compared to 2022.
We used cash for financing activities of approximately $227,000 and $232,000 during the quarters ended March 31, 2023 and 2022, respectively. The funds were used to pay monthly principal payments under our note payable with Truist bank.
Environmental Matters
None.
20
Off Balance Sheet Arrangements
We do not have any unconsolidated subsidiaries.
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 March 31, 2023:
Remaining 9 months | Years Ending December 31, | ||||||||||||||||||||
Contractual Obligations |
| Total |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 - 2034 | |||||||
Operating lease obligation (1) | $ | 859,026 | $ | 161,252 | $ | 222,982 | $ | 232,457 | $ | 242,335 | $ | — | $ | — | |||||||
Interest payments on outstanding lease obligation (2) |
| 70,382 |
| 24,630 |
| 24,860 |
| 15,385 |
| 5,507 |
| — |
| — | |||||||
|
|
|
|
|
|
|
| ||||||||||||||
Total | $ | 929,408 | $ | 185,882 | $ | 247,842 | $ | 247,842 | $ | 247,842 | $ | — | $ | — | |||||||
|
|
|
|
|
|
|
| ||||||||||||||
Long term debt obligation (1) | $ | 9,934,900 | $ | 657,456 | $ | 876,609 | $ | 876,609 | $ | 876,609 | $ | 876,609 | $ | 5,771,007 | |||||||
Interest payments on outstanding debt obligation (2) |
| 2,662,822 |
| 340,694 |
| 417,350 |
| 375,071 |
| 333,965 |
| 292,859 |
| 902,883 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total | $ | 12,597,722 | $ | 998,150 | $ | 1,293,959 | $ | 1,251,680 | $ | 1,210,574 | $ | 1,169,468 | $ | 6,673,890 | |||||||
| (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 3. 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 March 31, 2023, 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 2.3% per annum adjusted monthly. The loan is collateralized by our real and personal property and guarantees of certain affiliates. As of March 31, 2023, the note payable consisted of the following:
| Principal as of |
| Interest Rate as of |
| Principal as of |
| Interest Rate as of |
| |||||
Mortgage Loan | March 31, 2023 | March 31, 2023 | December 31, 2022 | December 31, 2022 | Maturity Date | ||||||||
Truist Bank (formerly known as Branch Banking and Trust Company (BB&T)) | $ | 9,934,900 |
| 7.0000 | % | $ | 10,154,049 |
| 6.5000 | % | July 5, 2034 | ||
Less unamortized debt issuance costs |
| (64,749) |
|
| (57,917) |
|
|
| |||||
|
|
| |||||||||||
Total | $ | 9,870,151 | $ | 10,096,132 |
|
|
| ||||||
Item 4. 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,
21
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 March 31, 2023, 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 March 31, 2023, 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 March 31, 2023, 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 March 31, 2023, the Company’s internal controls over financial reporting were effective.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the current quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
22
PART II — OTHER INFORMATION
Item 1. 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 1A. RISK FACTORS
Not required for Smaller Reporting Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other information
Not applicable
Item 6. Exhibits
(a). See page 23 for the Exhibit Index.
23
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 : August 8, 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) | August 8, 2023 | ||
/s/ Dale Pelletier | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | August 8, 2023 |
24
EXHIBIT INDEX
Exhibit No. |
| Description |
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 | |
104 | Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
25